Insurance Terms Explained
Complete Insurance Glossary (Simple, Clear Definitions)
Insurance can be confusing—we make it simple. Below is a comprehensive list of common insurance terms explained in simple, easy-to-understand language.
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A
Accident
An unexpected event that causes damage, injury, or loss.
An unexpected event that causes damage, injury, or loss.
Actual Cash Value (ACV)
The value of your property after depreciation (wear and tear).
The value of your property after depreciation (wear and tear).
Additional Insured
A person or organization added to a policy for coverage.
A person or organization added to a policy for coverage.
Additional Living Expenses (ALE)
Covers temporary housing and living costs if your home is uninhabitable.
Covers temporary housing and living costs if your home is uninhabitable.
Adjuster
A person who evaluates claims and determines payouts.
A person who evaluates claims and determines payouts.
Agent
A licensed professional who helps you purchase insurance.
A licensed professional who helps you purchase insurance.
Aggregate Limit
The maximum amount an insurer will pay during a policy period.
The maximum amount an insurer will pay during a policy period.
Appraisal
An estimate of the value of property.
An estimate of the value of property.
At-Fault
The person responsible for causing an accident.
The person responsible for causing an accident.
B
Binder
Temporary proof of insurance coverage until a policy is issued.
Temporary proof of insurance coverage until a policy is issued.
Bodily Injury Liability
Coverage for injuries you cause to others.
Coverage for injuries you cause to others.
Bundle (Bundling)
Combining multiple policies (like home and auto) for a discount.
Combining multiple policies (like home and auto) for a discount.
Business Insurance
Coverage that protects businesses from financial losses.
Coverage that protects businesses from financial losses.
C
Cancellation
Ending a policy before its expiration date.
Ending a policy before its expiration date.
Carrier
The insurance company providing coverage.
The insurance company providing coverage.
Certificate of Insurance (COI)
A document that proves you have insurance coverage.
A document that proves you have insurance coverage.
Claim
Request for payment after loss.
Request for payment after loss.
Claims History
A record of past claims.
A record of past claims.
Collision Coverage
Pays for damage to your vehicle from an accident.
Pays for damage to your vehicle from an accident.
Coinsurance
Sharing of costs between insurer and policyholder.
Sharing of costs between insurer and policyholder.
Comprehensive Coverage
Covers damage from non-accidents like theft or weather.
Covers damage from non-accidents like theft or weather.
Coverage Limit
The maximum amount your policy will pay.
The maximum amount your policy will pay.
D
Damage Waiver
Agreement where insurer waives right to recover damages.
Agreement where insurer waives right to recover damages.
Declarations Page (Dec Page)
Summary of your policy’s key details.
Summary of your policy’s key details.
Deductible
Amount you pay before insurance covers a loss.
👉 Not sure what deductible is right? Talk to an Agent
Amount you pay before insurance covers a loss.
👉 Not sure what deductible is right? Talk to an Agent
Deductible Waiver
A provision that removes your deductible in certain cases.
A provision that removes your deductible in certain cases.
Depreciation
Decrease in value over time.
Decrease in value over time.
Direct Writer
An insurance company that sells directly to consumers.
An insurance company that sells directly to consumers.
Dwelling Coverage
Protects the structure of your home.
Protects the structure of your home.
E
Earned Premium
The portion of premium already used during the policy period.
The portion of premium already used during the policy period.
Effective Date
When coverage begins.
When coverage begins.
Endorsement (Rider)
A change or addition to your policy.
A change or addition to your policy.
Endorsement Schedule
A list of all policy modifications.
A list of all policy modifications.
Exclusion
What your policy does not cover.
What your policy does not cover.
Expiration Date
When coverage ends.
When coverage ends.
Exposure
The potential for loss.
The potential for loss.
F
First Party
The policyholder.
The policyholder.
Flood Insurance
Coverage for flood-related damage (not included in standard home policies).
Coverage for flood-related damage (not included in standard home policies).
Frequency
How often claims occur.
How often claims occur.
Full Coverage
Informal term for broad auto coverage (liability + comp + collision).
Informal term for broad auto coverage (liability + comp + collision).
G
Gap Insurance
Covers the difference between a car’s value and loan balance.
Covers the difference between a car’s value and loan balance.
Grace Period
Extra time to make a payment before coverage lapses.
Extra time to make a payment before coverage lapses.
Grace Period Extension
An extended payment period beyond the standard grace period.
An extended payment period beyond the standard grace period.
H
Hazard
Something that increases the risk of loss.
Something that increases the risk of loss.
Homeowners Insurance
Coverage for your home, belongings, and liability.
Coverage for your home, belongings, and liability.
I
Indemnification
Compensation for a loss.
Compensation for a loss.
Indemnity
Financial protection after a loss.
Financial protection after a loss.
Independent Agent
An agent who works with multiple insurance companies.
An agent who works with multiple insurance companies.
Insurable Interest
A financial stake in what’s being insured.
A financial stake in what’s being insured.
Insured
The person covered by the policy.
The person covered by the policy.
Insurer
The insurance company.
The insurance company.
J
Joint Policy
A policy that covers more than one person.
A policy that covers more than one person.
L
Lapse
A break in coverage due to missed payments.
A break in coverage due to missed payments.
Liability Coverage
Protection if you cause injury or damage to others.
Protection if you cause injury or damage to others.
Liability Limit Split
Separate coverage limits for different types of claims.
Separate coverage limits for different types of claims.
Limits of Liability
The maximum your policy will pay.
The maximum your policy will pay.
Loss
Damage or financial harm.
Damage or financial harm.
Loss Ratio
The ratio of claims paid to premiums collected.
The ratio of claims paid to premiums collected.
Loss of Use
Covers living expenses if your home is uninhabitable.
Covers living expenses if your home is uninhabitable.
M
Medical Payments Coverage (MedPay)
Pays medical expenses regardless of fault.
Pays medical expenses regardless of fault.
Minimum Coverage
The minimum insurance required by law.
The minimum insurance required by law.
Moral Hazard
Risk caused by dishonest behavior.
Risk caused by dishonest behavior.
N
Named Insured
The primary person listed on a policy.
The primary person listed on a policy.
Negligence
Failure to act with reasonable care.
Failure to act with reasonable care.
Non-Renewal
When an insurer chooses not to renew your policy.
When an insurer chooses not to renew your policy.
O
Occurrence
An event that results in a claim.
An event that results in a claim.
Occurrence Limit
Maximum payout per incident.
Maximum payout per incident.
Out-of-Pocket Cost
Expenses you pay yourself.
Expenses you pay yourself.
P
Peril
Cause of damage (fire, theft, etc.).
Cause of damage (fire, theft, etc.).
Personal Liability
Responsibility for injury or damage caused to others.
Responsibility for injury or damage caused to others.
Personal Property Coverage
Covers your belongings.
Covers your belongings.
Policy
The insurance contract.
The insurance contract.
Policy Limit
Maximum payout amount.
Maximum payout amount.
Policy Period
Length of coverage.
Length of coverage.
Primary Insurance
The first policy that pays in a claim.
The first policy that pays in a claim.
Property Damage Liability
Covers damage to someone else’s property.
Covers damage to someone else’s property.
Q
Quote
An estimate of insurance cost.
An estimate of insurance cost.
R
Rated Policy
A policy with higher premiums due to increased risk.
A policy with higher premiums due to increased risk.
Reinstatement
Restoring a canceled policy.
Restoring a canceled policy.
Reinsurance
Insurance for insurance companies.
Insurance for insurance companies.
Renewal
Continuing a policy after expiration.
Continuing a policy after expiration.
Replacement Cost
Cost to replace with new items (no depreciation).
Cost to replace with new items (no depreciation).
Replacement Value
Current cost to replace property.
Current cost to replace property.
Rider
Additional coverage added to a policy.
Additional coverage added to a policy.
Risk
The chance of loss.
The chance of loss.
S
Secondary Coverage
Backup insurance after primary coverage.
Backup insurance after primary coverage.
Settlement
The amount paid on a claim.
The amount paid on a claim.
Subrogation
When your insurer seeks reimbursement from the at-fault party.
When your insurer seeks reimbursement from the at-fault party.
Surcharge
An increase in premium due to risk factors.
An increase in premium due to risk factors.
T
Term
The length of a policy.
The length of a policy.
Third Party
Someone not directly involved in the policy.
Someone not directly involved in the policy.
U
Umbrella Insurance
Extra liability coverage beyond standard limits.
Extra liability coverage beyond standard limits.
Underinsured Motorist Coverage
Protects you if the other driver lacks enough insurance.
Protects you if the other driver lacks enough insurance.
Underwriting
The process of evaluating risk and setting rates.
The process of evaluating risk and setting rates.
Unearned Premium
The unused portion of a premium that may be refunded.
The unused portion of a premium that may be refunded.
Uninsured Motorist Coverage
Coverage if you're hit by an uninsured driver.
Coverage if you're hit by an uninsured driver.
V
Valuation
Determining the value of property.
Determining the value of property.
Vehicle Identification Number (VIN)
A unique number used to identify your vehicle.
A unique number used to identify your vehicle.
W
Waiver
Giving up a right in a policy.
Giving up a right in a policy.
Written Premium
The total premium before adjustments.
The total premium before adjustments.
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