Insurance terms glossary

Understanding insurance lingo doesn't have to be hard. Browse through our handy insurance terms glossary to brush up on key definitions.

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Terms by letter

  • A
    Actual cash value
    For payment of a loss on a policy with an actual cash value valuation, the insurer will deduct depreciation from the cost to replace property after a loss.
    Additional insured
    A person or organization who can be added to an insurance contract, but who is not the insurance contract’s named insured.
    Additional interest
    A person or entity that has a financial interest in your property but who is not an owner.
    Agreed value insurance
    A type of coverage that’s based on a previously agreed-upon value of your vehicle.
    Auto insurance
    Coverage for injury to other persons and damage to other vehicles or property caused by you. Optional coverages will pay for damage to your vehicle, regardless of fault.
  • B
    Blanket insurance
    A policy that covers more than one type of property at the same location or the same kind of property at multiple locations as well as possessions.
    Bodily injury liability
    Coverage for third-party bodily injury resulting from your negligence, including death.
    Broker fee
    The fee that an insurance broker charges carriers for bringing in new customers.
  • C
    Car rental and travel expenses
    Coverage for the cost of rental cars and other travel expenses accrued after an accident renders your vehicle unusable.
    A company that sells insurance policies and fulfills the terms of the contracts.
    Collateral protection insurance (CPI)
    Insures property held as collateral for loans made by lending institutions.
    Collision coverage
    Protection against damage to your vehicle resulting from a collision.
    Comprehensive coverage
    Auto insurance coverage for non-collision damage to a vehicle caused by events such as vandalism, natural disasters and vehicle theft.
    Contents insurance
    Coverage for repair and replacement of personal property that is damaged by a covered peril.
    Co-op insurance
    Coverage for owners of co-op apartments for their individual units.
    The extent of loss or liability damages which can be reimbursed by your insurance policy.
    Coverages and limits
    All the protection included in an insurance policy and the maximum amount an insurer will pay out for a claim.
  • D
    The amount of money you pay out-of-pocket towards an expense covered by your insurance.
    A decrease in an asset's value over time.
    Dwelling coverage
    A type of coverage for your home’s physical structure in the event that it needs to be repaired or replaced.
    Dwelling limit
    The maximum amount of money that your homeowners insurance policy will cover to rebuild your home.
  • E
    Effective date
    The date that an insurance policy officially becomes active.
    An endorsement is an amendment to an existing insurance contract that changes the terms of the original policy.
    Types of losses or damages that are specifically not covered by an insurance policy.
  • H
    Hazard insurance
    A type of coverage that protects your home's structure, other structures on your property and your personal belongings from hazards.
    HO-2 vs HO-3
    HO-2 provides coverage for named perils whereas HO-3 provides open peril coverage.
    HO-4 policy
    A policy also known as renters insurance, which provides coverage for personal belongings in the event of damage.
    HO-5 insurance
    A type of homeowners insurance that is written on an open-perils basis.
    Home replacement cost
    The price of rebuilding your home based on its location, construction type and structural features.
  • I
    Inflation Guard
    An Inflation Guard policy provision gradually and continuously increases the limit of property insurance by a specified percentage over a specified time period.
    Insurance binder
    Temporary proof of insurance until your formal policy is issued.
    Insurance broker
    An insurance professional that helps you choose the best policies for your unique needs.
    Insurance premium
    The amount of money you pay for your insurance coverage.
    Insured driver
    A driver that is insured under a personal or commercial auto policy.
    Insured location
    Insured location is the premises, building or area owned or occupied by the insured and listed on the policy.
    Insured vehicle
    A car owned or leased by the policyholder and listed on the personal auto insurance policy.
  • L
    Liability insurance
    Protection against damages or injuries that happen on your property or that you are responsible for in the event of an accident.
    Limit of liability
    The maximum amount of money your insurance company is responsible for in the event an accident, unexpected hazard or theft.
    Loss Assessment coverage
    This pays for your share of special assessments made by your homeowners association for damages that are not covered by the association's master policy, or exceed the HOA’s policy limits.
    Loss of use coverage
    Loss of use coverage pays for temporary additional living expenses you incur if your home is not suitable to live in due to a covered loss.
  • M
    Master policy
    An insurance policy purchased by the homeowners association on behalf of all the unit owners. It typically covers the building exterior and common areas.
    Medical payment limit
    The maximum amount of money that your insurance will pay towards medical bills in the event of an accident covered under your policy.
    Medical payments coverage
    Coverage for medical bills resulting from an accident, regardless of who is at fault.
    Medical payments to others
    The amount of money a policy covers for medical payments to others in the event of an insured incident.
    Moral hazard
    This occurs when someone with insurance takes more risks than they would otherwise because they assume their losses will be covered.
  • N
    Named peril
    A specific type of hazard that is listed by name on your insurance policy.
    Negligence is an act or omission involving failure to use a degree of care considered reasonable under a given set of circumstances.
  • O
    Open peril
    A policy that covers all hazards, with the exception of perils that are specifically excluded.
    Ordinance or Law coverage
    This coverage pays for additional expenses incurred to comply with local building codes or ordinances following a covered loss.
    Other structures
    Structures associated with a home, such as a fence, detached garage or gazebo, that are covered under a homeowners policy.
    Other structures limit
    The maximum amount of money an insurer will pay out for other structures covered by your policy.
  • P
    Permissive use
    Use of your vehicle by infrequent drivers that are not already named as drivers in your auto policy.
    Personal injury protection
    Medical costs and lost wages expense coverage in states that have no-fault auto insurance laws.
    Personal liability coverage
    Protection against damages and injuries you may cause to another person or to another person’s property.
    Personal property coverage limit
    The maximum amount of money an insurer will pay out for loss or damage to your personal property.
    Policy number
    A unique identifier that insurance companies assign to policies.
    The termination of an insurance contract prior to the insurer's assumption of obligation.
    Property damage liability
    A type of coverage against damage you may cause to another person’s vehicle or property.
    Property protection insurance (PPI)
    A type of auto insurance that covers damages to other’s property if you’re at fault in an accident.
  • R
    Reconstruction Cost Estimate (RCE)
    The estimated cost to rebuild your house based on current costs of construction.
    Replacement cost
    The cost to replace damaged or destroyed property with new items of similar quality, without factoring in depreciation.
    An insurance rider is a policy form that is used to add coverage for specific items to your policy.
  • S
    Scheduled Personal Property coverage
    An optional coverage on a standard property insurance policy that provides specific limits on high value items such as jewelry, collectibles, firearms or high-end electronics.
    Sewer Backup coverage
    A type of endorsement that can be added to a property insurance policy to pay for damages caused by a backup of the sewer or sump pump.
    Special assessment
    A fee imposed by the homeowners association (HOA) to cover unexpected or unbudgeted expenses.
    Stated value insurance
    A type of coverage that allows you to insure assets for a specified amount.
    Structure limit
    The maximum amount an insurer will pay out to repair or replace an insured structure.
  • T
    A peril covered in different types of insurance policies like homeowners and auto that replaces items stolen from your home or vehicle.
  • U
    Umbrella insurance
    Provides additional liability limits above and beyond the limits of a standard auto or homeowners insurance policy.
    Underinsured Motorist (UIM)
    Underinsured Motorist (UIM) coverage pays for your or your passengers' medical bills caused by a driver who doesn't have enough insurance to cover the costs.
    Uninsured motorist coverage
    Protection against accidents involving an uninsured, at-fault driver.
    Uninsured Motorist Property Damage (UMPD)
    Uninsured Motorist Property Damage (UMPD) coverage pays for damages caused by a driver who doesn't have insurance or is underinsured.
  • W
    Wind and hail coverage
    Coverage that can be added to homeowners policies to cover damage caused by wind and hail.


All insurance coverage is subject to the terms and conditions of the insurance policy as applicable to the claim made.  This glossary is intended for your general reference and does not make legal statements about any of your insurance policies.