Annual Aggregate Limit

The annual aggregate limit is the maximum amount the carrier will pay for all claims arising
from incidents that occurred and were reported for a given policy year.


It is an obligation of policyholders to pay additional money in excess of premium amounts to
cover past company losses for which reserves have proven to be inadequate. PracticeProtection
provides policies that are not assessable and members can rest assured that there is no
potential additional exposure.


Any expression of an intent to hold the insured responsible for damages arising from the
rendering or failure to render professional services by you or by someone for whom you are
legally responsible.

Claims-Made Policy

A type of policy that is very common and in which coverage is limited to liability only for those
claims that arise from incidents or events that happen after the insured’s retroactive date and
are reported while the policy is in force.


Also called “Declarations Page” or “Face Sheet,” this portion of the policy states such
information as the name and address of the insured, the policy period, the amount of insurance
coverage, premiums for the policy period and any coverage restrictions.

Loss Reserves
Amount of money set aside to pay for losses and loss expenses for reported claims as well as
claims that have been incurred but not yet reported.

Occurrence Policy

A type of policy in which the insured is covered for any incident that occurs (or occurred) while
the policy is (or was) in force, regardless of when the incident is reported or when it becomes a
claim. Occurrence insurance for medical liability coverage is not very common because of the
difficulty in projecting long-term claims costs under this type of policy.


The contract between an insurance company and its insured. The policy defines what the
company agrees to cover for what period of time and describes the obligations and
responsibilities of the insured.

Policy Term

The length of time for which a policy is written.


The amount of money a policyholder pays for insurance protection.

Premium Credits

A credit included in the premium computation that recognizes a reduction in hazard, which
makes the insured a better risk.

Premium-to- Surplus Ratio (P/S)

The ratio of net written premium to surplus. This ratio is a measure to access a company’s
financial strength and future solvency.

Prior Acts Coverage

Under a claims-made policy, coverage is provided for all claims that (a) occurred after the
insured’s retroactive date and (b) are reported while the policy is still in force.

Risk Management

A systematic “scientific method” approach used to identify, evaluate, and reduce or eliminate
the possibility of an unexpected outcome of medical treatment.


The amount by which a company’s assets exceed its liabilities. A company’s surplus allows it to
take on risk and serves as a cushion in the event that the losses from that risk exceed the
premiums intended to cover the risk. Surplus serves to provide financial strength and to
maintain fiscal integrity in the face of adverse loss experience that was not actuarially

Tail Coverage (Extended Reporting Coverage)

Coverage that protects an insured against all claims arising from professional services
performed after the insured’s retroactive date but reported after termination of the policy.

Many insurers offer this feature free of charge for retiring insureds who meet certain

Vicarious Liability

Liability for the acts of someone else for whom you are legally responsible