insurance

Slip (Insurance)

A preliminary contract document used in insurance, particularly in Lloyd's of London and reinsurance markets, that outlines the basic terms of coverage before the formal policy is issued. It serves as a binding agreement once signed by the lead underwriter and other participating insurers.

Example

“The marine cargo slip was completed within hours, allowing the shipping company to have immediate coverage while the formal policy was being prepared.”

Memory Tip

Think 'Slip = Quick Skip' - it's a quick way to skip the wait for a full policy by getting immediate coverage on a slip of paper.

Why It Matters

Slips provide crucial immediate coverage for time-sensitive situations like shipping cargo or aviation risks where waiting for a full policy could leave valuable assets unprotected. Understanding slips helps businesses know they have valid coverage even before receiving their formal policy documents.

Common Misconception

Many people think a slip is just a quote or proposal, but it's actually a binding insurance contract once properly executed. The slip creates legal obligations for both the insurer and insured, just like a formal policy.

In Practice

A shipping company needs to insure a $2 million cargo shipment leaving port tomorrow. The Lloyd's broker creates a slip showing the vessel name, cargo details, route, and premium of $15,000. Three syndicates sign for 40%, 35%, and 25% respectively of the risk. Once the lead underwriter signs, the company has immediate $2 million coverage, even though the formal policy won't be issued for several weeks.

Etymology

The term originated at Lloyd's of London in the 18th century, named after the physical slip of paper that was passed between underwriters at Lloyd's coffee house for them to sign and indicate their participation in the risk.

Common Misspellings

insurance slipslip covrageslip insurenceslip policy

Related Terms

underwriting reinsurance Binder

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