Insurance Glossary | Insurance Terms beginning with 'O'

A condition in an occupation that increases the peril of accident, sickness, or death. It usually will mean higher premiums.

The offer may be made by the applicant signing the application, paying the first premium and, if necessary, submitting to physical examination. Policy issuance, as applied for, constitutes acceptance by the company. Or the offer may be made by the company when no premium payment is submitted with the application. Premium payment on the offered policy then constitutes acceptance by the applicant.

A term rider covering a family member other than the insured that is attached to the base policy covering the insured.

All rights, benefits and privileges under life insurance policies are controlled by
their owners. Policy owners may or may not be the insured. Ownership may be assigned or
transferred by written request of current owner.

This term means an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured.

Pays for the loss of value of an undamaged portion of the existing building which must be demolished and/or removed to conform with municipal ordinance, code, etc.
(2) Demolition Cost

Pays for the cost of demolition of the undamaged portions of the building necessitated by the enforcement of building, zoning or land use ordinance or law.
(3) Increased Cost of Construction

Pays for any increased expenses incurred to replace the building with one conforming to building laws or ordinances, or to repair the damaged building so that it meets the specifications of current building laws or ordinances.

Most communities have building or zoning laws to regulate the standards for type of construction, fire protection, electrical wiring, and plumbing, and to regulate the type of occupancy allowed in the city and certain other areas. Under "grandfather" provisions usually included in these laws, buildings that do not meet the standards generally are permitted to remain only because they were erected before the laws in question were passed.

Most laws, however, provide that if a nonconforming building is damaged or destroyed, it must be brought up to code before it can be reoccupied. Many laws also provide that if a building is damaged beyond a certain proportion of its value -- 50% is a common measure -- it may not be repaired, but must be demolished and, if replaced, replaced by a structure that meets the building or zoning requirement.

Although there are almost countless situations where the operation of such laws is applicable, some common examples are high-rise buildings that must be equipped with automatic sprinkler systems, buildings with electrical wiring meeting less than minimum code, and frame buildings in congested areas zoned for brick or fireproof construction. The effect of the operation of building laws is to almost always result in more costly repair than repair without such requirements.

In virtually all property insurance policies, a building owner's exposure to loss resulting from the enforcement of building or zoning laws is effectively excluded by language identical or nearly identical to that found in the Standard Fire Policy. The Standard Fire Policy specifies that recovery shall be "without allowance for any increased cost of repair or reconstruction by reason of any ordinance or law regulating construction or repair."

The effect of this exclusion is to leave the following basic exposures uninsured:

The actual expense of tearing down the undamaged portion of a building if a law or ordinance dictates demolition and disposal of the resulting debris.
The loss of the value of the undamaged portion of a building.
The difference between the value of the building as it stands -- the insurable value of the building -- and its value if rebuilt to code. Even when insurance is written on a replacement cost basis (i.e., without deduction for depreciation), this exposure exists because the replacement cost referred to in the insurance is that required to restore the original building, not an improved and more expensive version of the original building.
An extended loss of business income, extra expense, or additional living expense.

This insurance coverage provides for payment on behalf of the insured of all damages the insured becomes legally obligated to pay due to bodily injury or property damage caused by an occurrence rising from the following:

Operations performed for the named insured by independent contractors.
Acts or omissions of the named insured in connection with his/her general supervision of such operations.
This does not include maintenance and repair at premises owned by or rented to the named insured, or structural alterations at such premises that do not involve changing the size of or moving buildings or other structures.