Small Business Guide To Commercial Insurance

40 Reinstatement The restoration of a lapsed or canceled policy. Renewal The continuation of an insurance policy (offer of renewal) into a new term from the same insurance company that issued the existing policy. Replacement Cost The amount that it costs to replace lost or damaged property with new property of like kind or quality in the local market. Schedule Rating A method of pricing property and liability insurance. Schedule Rating uses debits and credits to modify a base rate figured by the special characteristics of the risk exposure. Insurers develop Schedule Rating because actuarial experience shows a direct relationship between certain physical characteristics and the possibility of loss. Most sched- ule rating plans must be filed and approved by the CDI. Second Party The insurance company in an insurance contract. Self-Insured Retention (SIR) The portion of a property or liability loss retained by a policyholder. Severity The size of a loss. Loss severity is used as a factor in establishing pre- mium rates.