Insurance Glossary
Insurance terminology can be confusing. Use our robust glossary to understand your policies and make informed decisions about your coverage.
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A
Actual Cash Value (ACV)
The value of your property, based on the current cost to replace it minus depreciation.
Actuary
A professional who analyzes the financial costs of risk and uncertainty using mathematics, statistics, and financial theory.
Additional Insured
A person or organization not automatically included as an insured under a policy who is added at the request of the named insured.
Adjuster
A person who investigates claims and recommends settlement options based on estimates of damage and insurance policies held.
Aggregate Limit
The maximum amount an insurer will pay for all covered losses during the policy period.
Appraisal
An evaluation of a property claim by an authorized person to determine property value or damaged property value.
Arbitration
A process of settling a dispute through an impartial third party rather than in court.
At-Fault
The party legally responsible for damages in an accident.
Auto Liability
Coverage that protects against financial loss because of legal liability for motor vehicle related injuries or damage to the property of others.
B
Binder
A temporary insurance contract that provides proof of coverage until you receive a permanent policy.
Bodily Injury Liability
Liability coverage that pays for medical expenses of others if you are at fault in an accident.
Broker
An insurance professional who represents the buyer, rather than the insurance company, and tries to find the best policy for the buyer's needs.
Business Interruption Insurance
Commercial coverage that reimburses a business owner for lost profits and continuing fixed expenses during the time that a business must stay closed while the premises are being restored because of physical damage.
Business Owners Policy (BOP)
A policy that combines property, liability and business interruption coverages for small to medium-sized businesses.
C
Cancellation
The termination of an insurance policy before its normal expiration date.
Carrier
The insurance company that issues the policy and assumes the risk.
Casualty Insurance
Insurance that is primarily concerned with the losses caused by injuries to persons and legal liability imposed on the insured.
Claim
A formal request to an insurance company asking for a payment based on the terms of the insurance policy.
Coinsurance
A provision in property insurance requiring the policyholder to carry insurance equal to a specified percentage of the value of property to receive full payment on a loss.
Collision Coverage
Auto insurance coverage that pays for damage to your car caused by physical contact with another vehicle or with another object.
Commercial Auto Coverage
Liability and physical damage protection for vehicles used for business.
Comprehensive Coverage
Auto insurance coverage that pays for damage to your car from causes other than a collision, such as fire, theft, vandalism, or falling objects.
Conditions
Provisions in the policy that qualify or place limitations on the insurer's promise to perform.
Coverage
The scope of protection provided under an insurance policy.
D
Declarations Page
The front page of a policy that specifies the named insured, address, policy period, location of premises, policy limits, and other key information.
Deductible
The amount of loss paid by the policyholder before the insurance policy benefits kick in.
Depreciation
A decrease in the value of property over time due to wear and tear or obsolescence.
E
Endorsement
A written agreement attached to an insurance policy to add or subtract insurance coverages. Also known as a rider.
Exclusion
A provision in an insurance policy that eliminates coverage for certain acts, property, types of damage or locations.
F
Fiduciary Liability
Coverage for claims arising from a breach of responsibilities, obligations, or duties imposed upon fiduciaries of employee benefit plans.
Floater
A policy that applies to movable property whatever its location, usually used to cover items like jewelry or art.
Flood Insurance
Coverage for damage to property caused by flood, typically provided by the National Flood Insurance Program (NFIP) or private insurers.
G
Gap Insurance
Coverage that pays the difference between the actual cash value of a vehicle and the current outstanding balance on your loan or lease.
General Liability Insurance
Coverage for an insured when negligent acts and/or omissions result in bodily injury or property damage on the premises of a business.
H
Hazard
A circumstance that increases the likelihood or probable severity of a loss.
I
Indemnity
Providing financial compensation for losses to restore the insured to the same financial position they were in prior to the loss.
Independent Agent
A contractor who represents different insurance companies and who can search the market for the best coverage and price for a client.
Inland Marine Insurance
Coverage for property in transit over land, certain types of moveable property, instrumentalities of transportation, and legal liability exposures of bailees.
L
Liability
Any legally enforceable obligation.
Loss of Use
A provision in homeowners and renters insurance that reimburses policyholders for the extra expenses of living elsewhere while their home is being restored after a covered disaster.
M
Medical Payments Coverage
Auto insurance coverage that pays medical expenses for you and your passengers after an accident, regardless of who is at fault.
N
Named Peril
A specific danger or cause of loss listed in an insurance policy (e.g., fire, theft, windstorm).
Negligence
Failure to use the degree of care that a reasonably prudent person would use under the same or similar circumstances.
O
Occurrence
An event that results in an insured loss.
Open Perils
Property coverage that applies to risks of loss that are not specifically excluded in the policy.
P
Peril
The specific cause of a possible loss, such as fire, windstorm, or theft.
Personal Injury Protection (PIP)
An extension of car insurance available in some states that covers medical expenses and, in some cases, lost wages and other damages.
Policy
The written contract of insurance.
Premium
The amount of money charged by an insurance company for coverage.
Property Damage Liability
Coverage in the event that the negligent acts or omissions of an insured result in damage to another's property.
Q
Quote
An estimate of the cost of insurance based on information supplied to the insurance company.
R
Replacement Cost
The amount it would cost to replace damaged property with materials of similar kind and quality, without deducting for depreciation.
Rider
An attachment to an insurance policy that alters the policy's coverage or terms.
Risk
The chance of loss or the person or entity that is insured.
S
Salvage
Damaged property an insurer takes over to reduce its loss after paying a claim.
Subrogation
The legal process by which an insurance company, after paying a loss, seeks to recover the amount of the loss from another party who is legally liable for it.
Surety Bond
A contract guaranteeing the performance of a specific obligation.
T
Term
The period of time for which a policy is in effect.
U
Umbrella Insurance
Liability coverage that goes above and beyond the limits of your standard auto, homeowners, or business insurance policies.
Underwriting
The process of evaluating a risk for the purpose of issuing insurance coverage.
Uninsured/Underinsured Motorist Coverage
Auto insurance coverage that pays for your bodily injury and, in some states, property damage if you are hit by an at-fault driver who has no insurance or not enough insurance.
W
Workers' Compensation
Insurance that covers medical and rehabilitation costs and lost wages for employees injured at work.
