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
- AActual cash valueFor 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 insuredA person or organization who can be added to an insurance contract, but who is not the insurance contract’s named insured.Additional interestA person or entity that has a financial interest in your property but who is not an owner.Agreed value insuranceA type of coverage that’s based on a previously agreed-upon value of your vehicle.Auto insuranceCoverage 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.
- BBlanket insuranceA 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 liabilityCoverage for third-party bodily injury resulting from your negligence, including death.Broker feeThe fee that an insurance broker charges carriers for bringing in new customers.
- CCar rental and travel expensesCoverage for the cost of rental cars and other travel expenses accrued after an accident renders your vehicle unusable.CarrierA 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 coverageProtection against damage to your vehicle resulting from a collision.Comprehensive coverageAuto insurance coverage for non-collision damage to a vehicle caused by events such as vandalism, natural disasters and vehicle theft.Contents insuranceCoverage for repair and replacement of personal property that is damaged by a covered peril.Co-op insuranceCoverage for owners of co-op apartments for their individual units.CoverageThe extent of loss or liability damages which can be reimbursed by your insurance policy.Coverages and limitsAll the protection included in an insurance policy and the maximum amount an insurer will pay out for a claim.
- DDeductibleThe amount of money you pay out-of-pocket towards an expense covered by your insurance.DepreciationA decrease in an asset's value over time.Dwelling coverageA type of coverage for your home’s physical structure in the event that it needs to be repaired or replaced.Dwelling limitThe maximum amount of money that your homeowners insurance policy will cover to rebuild your home.
- EEffective dateThe date that an insurance policy officially becomes active.EndorsementAn endorsement is an amendment to an existing insurance contract that changes the terms of the original policy.ExclusionsTypes of losses or damages that are specifically not covered by an insurance policy.
- HHazard insuranceA type of coverage that protects your home's structure, other structures on your property and your personal belongings from hazards.HO-2 vs HO-3HO-2 provides coverage for named perils whereas HO-3 provides open peril coverage.HO-4 policyA policy also known as renters insurance, which provides coverage for personal belongings in the event of damage.HO-5 insuranceA type of homeowners insurance that is written on an open-perils basis.Home replacement costThe price of rebuilding your home based on its location, construction type and structural features.
- IInflation GuardAn Inflation Guard policy provision gradually and continuously increases the limit of property insurance by a specified percentage over a specified time period.Insurance binderTemporary proof of insurance until your formal policy is issued.Insurance brokerAn insurance professional that helps you choose the best policies for your unique needs.The amount of money you pay for your insurance coverage.Insured driverA driver that is insured under a personal or commercial auto policy.Insured locationInsured location is the premises, building or area owned or occupied by the insured and listed on the policy.Insured vehicleA car owned or leased by the policyholder and listed on the personal auto insurance policy.
- LLiability insuranceProtection against damages or injuries that happen on your property or that you are responsible for in the event of an accident.Limit of liabilityThe maximum amount of money your insurance company is responsible for in the event an accident, unexpected hazard or theft.Loss Assessment coverageThis 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 coverageLoss 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.
- MMaster policyAn 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 limitThe maximum amount of money that your insurance will pay towards medical bills in the event of an accident covered under your policy.Medical payments coverageCoverage for medical bills resulting from an accident, regardless of who is at fault.Medical payments to othersThe amount of money a policy covers for medical payments to others in the event of an insured incident.Moral hazardThis occurs when someone with insurance takes more risks than they would otherwise because they assume their losses will be covered.
- NNamed perilA specific type of hazard that is listed by name on your insurance policy.NegligenceNegligence is an act or omission involving failure to use a degree of care considered reasonable under a given set of circumstances.
- OOpen perilA policy that covers all hazards, with the exception of perils that are specifically excluded.Ordinance or Law coverageThis coverage pays for additional expenses incurred to comply with local building codes or ordinances following a covered loss.Other structuresStructures associated with a home, such as a fence, detached garage or gazebo, that are covered under a homeowners policy.Other structures limitThe maximum amount of money an insurer will pay out for other structures covered by your policy.
- PPermissive useUse of your vehicle by infrequent drivers that are not already named as drivers in your auto policy.Personal injury protectionMedical costs and lost wages expense coverage in states that have no-fault auto insurance laws.Personal liability coverageProtection against damages and injuries you may cause to another person or to another person’s property.Personal property coverage limitThe maximum amount of money an insurer will pay out for loss or damage to your personal property.Policy numberA unique identifier that insurance companies assign to policies.Pre-releaseThe termination of an insurance contract prior to the insurer's assumption of obligation.Property damage liabilityA 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.
- RReconstruction Cost Estimate (RCE)The estimated cost to rebuild your house based on current costs of construction.Replacement costThe cost to replace damaged or destroyed property with new items of similar quality, without factoring in depreciation.RiderAn insurance rider is a policy form that is used to add coverage for specific items to your policy.
- SScheduled Personal Property coverageAn 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 coverageA 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 assessmentA fee imposed by the homeowners association (HOA) to cover unexpected or unbudgeted expenses.Stated value insuranceA type of coverage that allows you to insure assets for a specified amount.Structure limitThe maximum amount an insurer will pay out to repair or replace an insured structure.
- TTheftA peril covered in different types of insurance policies like homeowners and auto that replaces items stolen from your home or vehicle.
- UUmbrella insuranceProvides 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 coverageProtection 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.
- WWind and hail coverageCoverage that can be added to homeowners policies to cover damage caused by wind and hail.
Disclaimer
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.
