Insurance can be confusing, especially when hearing all the jargon and terminology. To help make your insurance experience easier, we’ve put together an A-Z guide of the most common insurance terms. Whether you are a young adult just beginning to think about your first auto policy or a long-time shopper looking for home coverage, understanding these basic terms is sure to save you time, money and headaches down the road! Keep reading to learn more about what each term means and how it affects your insurance policies and coverage options.
A
All-risk: An insurance policy that provides coverage for a wide range of perils or risks, unless specifically excluded in the policy. This type of policy is often more expensive but provides more comprehensive coverage.
Agreed value: The value of an insured item or property, as agreed upon by the insurer and policyholder when the policy is issued. This value is used to determine the amount of compensation in case of a covered loss.
Actual cash value (ACV): The current value of an insured item, taking into consideration depreciation and wear and tear. This value is typically used to calculate compensation in case of a covered loss.
Additional living expenses coverage: A type of insurance coverage that provides compensation for additional living expenses incurred by a policyholder who cannot live in their home due to a covered loss. These expenses may include temporary housing, meals, and transportation.
Appraisal: An assessment of the value of an item or property, often conducted by a professional appraiser. This can be used to determine the value of an item for insurance purposes.
Additional insured: An individual or entity added to an insurance policy as an additional beneficiary, typically with limited coverage. This is often used in commercial policies, where contractors and other third-party entities may need additional coverage.
Additional living expenses (property): Coverage that provides a specified amount per day for additional expenses in the event that you cannot live in your insured residence.
Agreed value policy: Coverage that will pay the full insured amount of the vehicle or other property in case of a covered total loss, in contrast to stated amount.
Antique automobile: A vehicle that is over a certain age, typically 25 years or older, and considered to have significant historical or cultural value. These vehicles may require specialized insurance coverage.
Arson: The act of intentionally setting fire to property, often for criminal purposes. This is typically considered a serious crime and may not be covered by insurance policies.
B
Beneficiary: The individual or entity named in an insurance policy to receive compensation in case of a loss. This may be the policyholder themselves or another individual or entity.
Bodily injury liability coverage: A type of insurance coverage that provides compensation for injuries or damages caused by the policyholder to another person or entity. This may include medical expenses, lost wages, and other costs.
Building/additions/alterations coverage: A type of insurance coverage that specifically covers additional construction or renovations to a property. This coverage may be required for policyholders who are making significant changes to their properties.
C
Cancellation: The act of terminating an insurance policy before the end of its term.
Claim: A formal request by a policyholder for compensation from an insurance policy for a covered loss.
Claimant: The individual or entity making a claim against an insurance policy for a covered loss.
Classic car insurance: A type of automobile insurance designed to provide specialized coverage for classic and antique vehicles that meet certain qualifications.
Coastal area: A geographical region located near a body of water, such as an ocean or lake. Properties located in coastal areas may require specialized insurance coverage due to increased risk of loss from storms, flooding, and other natural disasters.
Collision coverage: A type of insurance coverage that provides compensation for damage to a vehicle resulting from a collision with another object or vehicle.
Comprehensive coverage: A type of insurance coverage that provides compensation for damage to a vehicle resulting from non-collision events, such as theft, vandalism, or weather-related damage.
Conditions: Specific terms and requirements outlined in an insurance policy that must be met in order for coverage to apply. These may include limitations on coverage, requirements for reporting losses, and other terms.
Condominium owners policy: A type of insurance policy that provides coverage for owners of condominium units. This may include protection for personal belongings, liability coverage, and other types of coverage specific to condominium ownership.
Construction type: A classification used by insurers to determine the level of risk associated with a property based on its construction materials and methods. This may affect the type of coverage and premium required for the property.
Continuous insurance: A requirement for policyholders to maintain a certain level of insurance coverage without interruption. This may be required by lenders or other entities with an interest in the insured property.
Customization: The act of modifying an insurance policy to fit the specific needs of a policyholder. This may include adding or removing coverage, changing deductible amounts, or other modifications.
D
Declarations page: The first page of an insurance policy, which typically outlines basic information about the policyholder, insured property, and coverage levels.
Deductible: The amount the policyholder is responsible for paying in case of a covered loss before the insurance policy provides compensation.
Depreciation: The decrease in value of an asset over time due to wear and tear, age, or other factors. In insurance, depreciation may be factored into the settlement of a claim for a damaged or destroyed item.
Dwelling: A building or structure in which someone resides or lives. In homeowners insurance, the dwelling is one of the main components of coverage and refers to the physical structure of the insured’s home.
Dwelling replacement cost: The estimated cost to rebuild or repair the insured’s home in the event of damage or destruction. This is an important factor in determining the proper amount of homeowners insurance coverage.
E
Endorsement: A modification or addition to an insurance policy that changes its terms and conditions. Endorsements may add or remove coverage, increase or decrease limits, or make other adjustments.
Exclusion: A provision in an insurance policy that specifically excludes certain types of losses, events, or situations from coverage.
G
Garaging location: The location where a vehicle is normally parked or stored, as reported to the insurance company. This can affect auto insurance rates due to differences in risk and exposure.
H
Hazard: A condition, activity, or situation that creates a potential for loss or damage. Hazards may be physical, chemical, environmental, or other types.
Homeowners insurance: A type of insurance policy that provides coverage for losses or damages to a person’s home, personal property, and liability. Homeowners insurance may also include additional coverage for specific perils, such as floods or earthquakes.
Hurricane or storm deductible: A special deductible that applies to losses caused by hurricanes or other severe weather events. This deductible is typically a percentage of the insured value of the property, rather than a fixed dollar amount.
I
Identity theft coverage: A type of coverage that reimburses the insured for expenses related to identity theft, such as lost wages or legal fees. Some policies may also provide assistance with credit monitoring or resolution.
Indemnification: The act of compensating someone for a loss or damage. In insurance, indemnification refers to the payment or reimbursement of losses covered by an insurance policy.
Insurable interest: A financial or legal interest in property or a person that would be affected by a loss or damage to that property or person. Insurable interest is required for an insurance policy to be valid and enforceable.
Insured: The person or entity who is covered by an insurance policy, and who is entitled to benefits or compensation in the event of a covered loss.
Insurer: The insurance company or other entity that provides coverage under an insurance policy, in exchange for a premium payment.
L
Lapse: The termination or cancellation of an insurance policy due to non-payment of premiums or other reasons. A lapsed policy may result in a loss of coverage, and may also impact future insurability.
Lease: A legal agreement in which one party (the lessor) grants another party (the lessee) the right to use or occupy property for a specified period of time, in exchange for rent or other consideration.
Lessee: The person or entity who leases or rents property from another party. In insurance, the lessee may be responsible for providing proof of insurance coverage for the leased property.
Liability coverage: Insurance coverage that protects the insured from legal liability for damages or injuries caused to other people or their property.
Lien: A legal claim or interest in property, usually as collateral for a debt or obligation. Liens may limit the transferability or use of the property.
Loss: The reduction or damage of property, or the occurrence of an event for which an insurance policy provides coverage. A loss may result in a claim for compensation or benefits.
Limits of insurance: The maximum amount of coverage provided by an insurance policy for a specific type of loss or damage. Limits may be expressed as a dollar amount, a percentage of property value, or other measures.
Loss history: The past record of losses or claims for an insured property or person. The loss history may be used to determine insurance rates or eligibility.
Loss of use: The inability to use or occupy property due to damage or destruction. Loss of use may be covered by some insurance policies, and may provide for temporary accommodations or other expenses.
M
Market value: The current market price or estimated value of a property or asset, based on the prevailing market conditions and demand.
Medical payments: Insurance coverage that pays for medical expenses incurred by others who are injured on the insured’s property or by the insured’s actions. Medical payments may be included in a homeowners or liability insurance policy.
Mitigation: The reduction or prevention of losses or damages through risk management strategies, such as safety measures, maintenance, or other actions.
N
Named insured: The policyholder who is specifically named in the insurance policy and has the right to make claims and receive benefits.
Named non-owner coverage: Coverage for individuals who do not own a vehicle but may still be liable in the event of an accident while driving a rental or borrowed vehicle.
Named perils: Specific risks or events that are covered under an insurance policy, such as natural disasters, theft, or fire.
Non-standard carrier: An insurance company that specializes in providing coverage for high-risk individuals or situations that may not be covered by traditional insurance carriers.
O
Occupancy: The use or occupancy of a property, such as whether it is used as a primary residence, rental property, or vacation home.
Ordinance: Local laws, regulations, or requirements that may impact how a property can be used or developed and may affect insurance coverage.
Other structure: Any structure on a property that is not the primary dwelling, such as a garage or shed.
P
Personal effects (RV coverage): An optional coverage to fix or replace personal property inside your RV that has been lost or damaged.
Personal injury: Bodily injury sustained by a person due to an accident or event covered by an insurance policy.
Personal umbrella policy: A policy that provides extra liability coverage beyond the limits of home and auto insurance policies.
Physical damage: Damage to a vehicle or property caused by an accident, theft, or other covered events.
Policy: A legal contract between an insurance company and a policyholder that outlines the terms, conditions, and coverage provided by the insurance policy.
Policyholder: The individual or entity that has purchased an insurance policy and is responsible for paying premiums.
Premium: The amount paid by a policyholder to an insurance company for coverage under an insurance policy.
Primary use: The intended use of a vehicle or property, such as personal use or business use.
Property: Items or assets covered under an insurance policy, such as a home, car, or personal belongings.
R
Roadside assistance: A service provided by some insurance companies that offers emergency roadside assistance in the event of a breakdown or mechanical failure.
Renters insurance: An insurance policy that covers a tenant and some of their personal possessions.
Replacement cost: The actual cost of replacing damaged or destroyed property with new property, in contrast to Actual Cash Value (ACV)
S
Scheduled personal property: Items of significant value that may require additional coverage or higher limits, such as jewelry or artwork.
T
Title: A legal document that establishes ownership of a property or vehicle.
U
Uninsured motorist: A driver who does not have insurance coverage, or whose insurance coverage is insufficient to cover damages in the event of an accident.
V
Vehicle identification number (VIN): A unique identifying number assigned to each vehicle used for tracking and identifying information.
W
Water backup: Damage to a property caused by water backup or overflow from a plumbing or drainage system.
Wind deductible: The portion of a claim that is paid by the policyholder in the event of a claim related to wind damage.
Windstorm or hail coverage: Coverage for damage to a property caused by windstorms or hailstorms.
We hope this article helped you feel more informed and empowered when it comes to understanding your policy and what coverage best meets your needs and lifestyle. For questions about your coverage, give us a call at 757-248-5973.
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