Slip (Insurance)

Example

“The marine insurance broker prepared a slip detailing the $2 million cargo coverage before presenting it to various Lloyd's underwriters for their signatures.”

Memory Tip

Remember 'slip' as a 'small lightweight insurance paper' - it's the quick, temporary document that slips between brokers and underwriters before the heavy policy is born.

Why It Matters

Slips are crucial in complex commercial insurance transactions because they allow multiple insurers to participate in covering large risks. Understanding slips helps business owners navigate the underwriting process and know what documentation to expect when securing specialized or high-value coverage.

Common Misconception

Many people think a slip is the same as a finalized insurance policy and provides immediate, permanent coverage. However, slips are preliminary documents that may be modified or withdrawn before the actual policy is issued, and coverage terms can still change during final underwriting.

In Practice

A shipping company seeking $10 million cargo insurance receives a slip from their broker showing coverage terms: $10M limit, $25,000 deductible, and $50,000 annual premium. Three different insurers sign the slip for 40%, 35%, and 25% shares respectively. This means Insurer A covers $4M of any loss, Insurer B covers $3.5M, and Insurer C covers $2.5M, but the formal policies haven't been issued yet.

Etymology

The term 'slip' comes from the historical practice at Lloyd's of London where underwriters would write their acceptance of risk on small slips of paper that were passed around the marketplace.

Common Misspellings

Related Terms

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Other insurance terms you should know

See Also