To help you better understand your policy and your claim, we’ve put together a glossary of frequently used insurance phrases. *Please note that insurance terms and definitions may vary based on the specific policy and insurance company.
Actual Cash Value (ACV):
Actual Cash Value is the current worth of an insured item or piece of property after depreciation, wear, and age are all taken into consideration. It is the amount the insurance company would pay to replace or repair the item, minus any deductible and depreciation.
Optional insurance protections you can add to your policy to extend your coverage beyond the basic protection. These coverages can include things like personal property endorsements, umbrella liability coverage, or special riders for specific items.
Someone other than the policyholder who is covered under the insurance policy.
Additional Living Expense (ALE):
The coverage provided by an insurance policy to assist the policyholder in paying for temporary living arrangements if their home becomes uninhabitable due to a covered loss. It can cover expenses such as hotel stays, rental accommodations, meals, and other related costs.
An adjuster is a person who works on behalf of the insurance company to assess and evaluate insurance claims. They investigate the details of the claim, review policy coverage, determine the extent of the loss or damage, and negotiate settlements with the policyholders or their representatives.
Agency refers to a company or organization that acts as an intermediary between insurance companies and policyholders. They facilitate the sale, purchase, and servicing of insurance policies, including providing advice, handling paperwork, and processing claims on behalf of the insurance company.
Agreed Value Policy:
An insurance policy where the insured and the insurance company agree upon the value of the insured item or property upfront. In the event of a covered loss, the agreed value is the amount that will be paid out, regardless of the item’s actual cash value or replacement cost.
Appraisals are used to determine the value of a property or the extent of damage. It involves an assessment conducted by a qualified appraiser to provide an unbiased opinion regarding the value or scope of the loss.
A method used to resolve disputes between the insured and the insurance company outside of the court system. It involves both parties presenting their case to an impartial third party, known as an arbitrator, who then makes a binding decision to settle the dispute.
Bad faith refers to an action or behavior by an insurance company that violates its duty of good faith towards the insured. It typically involves unfair or dishonest practices such as unreasonably denying or delaying claim payments, failing to investigate claims properly, or intentionally misinterpreting policy terms.
A temporary insurance contract that provides immediate coverage until a formal policy is issued. It serves as proof of insurance until the policy is finalized and includes essential details such as the insured property, coverage limits, and policy period.
Multiple items or categories of property under a single insurance policy. Instead of specifying individual limits for each item, a blanket limit combines the total value of all covered items, providing a collective limit for all the insured property.
An intermediary who represents the policyholder or the insured and works independently from insurance companies. They help individuals or businesses find insurance policies that suit their needs by assessing their requirements and comparing different options from various insurance providers.
Building Ordinance Insurance:
Also known as an ordinance or law coverage, this is a type of insurance that covers the additional costs associated with complying with building codes or ordinances when repairing or rebuilding damaged property. It helps cover expenses that may arise due to changes in building codes, such as demolition costs, upgrades, or modifications required by local regulations
Cancellation refers to the termination of an insurance policy before its scheduled expiration date. This can occur at the request of the policyholder or the insurance company.
A catastrophe in insurance terms refers to a severe and often widespread event that causes significant damage or loss. Examples of catastrophes include natural disasters like hurricanes, earthquakes, floods, or large-scale fires.
Cause and Origin:
Cause and origin refer to determining the reason (cause) and the specific location (origin) of a loss or damage to insured property. It is an investigation process carried out by experts, such as insurance adjusters, to determine how a loss or damage occurred.
Civil Authority Clause:
A provision in an insurance policy that provides coverage when access to insured property is prohibited by a civil authority due to a covered event. If a government authority, such as the police or fire department, restricts access to your property due to a nearby danger (such as a fire or natural disaster), the civil authority clause may provide coverage for resulting losses.
Civil Authority Prohibits Use:
A situation where a government authority issues an order that restricts or prevents the use of a property or location due to a covered event or imminent danger. In insurance terms, this can trigger coverage under the civil authority clause, allowing the policyholder to potentially claim for losses resulting from the restricted use of their property.
A claim is a formal request made by the policyholder to the insurance company to seek compensation for a loss or damage covered by the insurance policy.
The person or entity that submits a claim to an insurance company. The claimant can be the policyholder themselves or someone else who has suffered a loss or damage covered by the insurance policy.
- For example, if a car accident occurs, the driver who files a claim for the damages would be considered the claimant.
Coinsurance is a clause found in some insurance policies that requires the policyholder to share a percentage of the covered losses. It specifies that the policyholder must maintain insurance coverage at a certain percentage of the property’s actual cash value or replacement cost.
A measure used by insurance companies to assess their profitability and financial health. It is the sum of an insurer’s loss ratio (claims paid out as a percentage of premiums earned) and expense ratio (operating expenses as a percentage of premiums earned).
Constructive Total Loss:
A situation where the cost of repairing or recovering a damaged property would exceed its insured value or market value. In such cases, the insurance company may consider the property to be a total loss and pay the policyholder the full insured value of the property, rather than covering the repair or recovery costs.
Contents refer to the personal belongings or property inside a dwelling or building. This can include furniture, electronics, appliances, clothing, and other items owned by the policyholder. Contents are typically covered under a separate section of an insurance policy, which provides protection against loss or damage caused by covered perils.
Condominium Owners Insurance:
Also known as condo insurance or HO-6 insurance, this type of insurance is specifically designed for condo unit owners. It provides coverage for the owner’s personal belongings, liability protection, and coverage for improvements made to the unit.
The scope of protection provided by an insurance policy. It specifies the types of risks, perils, or events for which the insurance company will provide financial compensation or benefits. The coverage outlined in an insurance policy may include property damage, liability, personal injury, medical expenses, and other specific areas of protection, depending on the type of insurance policy.
Damage refers to the harm, loss, or destruction caused to property, belongings, or individuals due to a covered event.
Damages (plural) refer to the monetary compensation sought by the policyholder or claimant for the losses or harm suffered due to a covered event. It represents the financial amount claimed to cover the costs of repair, replacement, medical expenses, or other losses resulting from the incident.
Date of Issue:
The specific date when an insurance policy is issued by the insurance company to the policyholder. It marks the beginning of the policy term and is an important reference point for coverage, premiums, and other policy details.
Also known as the policy declarations or policy information page, this is a section of an insurance policy that provides essential information about the policyholder, insured property, coverage limits, deductibles, and other key details.
A deductible is the portion of a covered loss that the policyholder is responsible for paying out of pocket before the insurance coverage kicks in. It is a predetermined amount stated in the insurance policy.
- For example, if a policy has a $500 deductible and the insured suffers a covered loss of $2,000, the policyholder would be responsible for paying the first $500, and the insurance company would cover the remaining $1,500.
Also known as debris removal insurance, this is a type of coverage that protects against the costs associated with removing debris and clearing the site after a covered loss or damage. It helps cover expenses related to the demolition, disposal, and cleanup of damaged property or debris resulting from a covered event, such as a fire or natural disaster.
The decrease in value of an insured item or property over time due to factors such as age, wear and tear, or obsolescence.
Direct Incurred Loss:
A loss whereby the proximate cause is equivalent to the insured peril.
The physical damage or loss of property caused directly by a covered event. It is the immediate and tangible damage to the insured property resulting from perils covered under the insurance policy.
- For example, if a fire causes damage to a house, the direct loss would include the cost of repairing or rebuilding the damaged structure.
Duties After a Loss:
The responsibilities and obligations of the insured after experiencing a covered loss or damage. These duties typically include promptly notifying the insurance company, cooperating in the claims process, providing necessary documentation or evidence of the loss, and taking reasonable steps to prevent further damage or mitigate the loss.
The physical structure or building where the policyholder resides. It includes the main residential structure, such as a house or apartment building, along with any attached structures, such as garages or decks.
A type of insurance policy that provides coverage for residential structures that are not occupied by the owner. It is commonly used for rental properties or vacation homes. Dwelling policies typically cover the physical structure of the property, as well as liability protection for the property owner. The coverage may vary depending on the specific policy and insurance company.
The immediate actions taken to protect life, and property, or prevent further damage in the event of an emergency or covered loss. These measures can include things like calling emergency services, shutting off utilities, boarding up windows, or taking temporary measures to prevent further damage or injury.
Also known as a rider or a policy endorsement, this is a modification or addition to an existing insurance policy that adjusts or extends its terms and conditions. It is used to customize the policy to meet specific needs or provide additional coverage beyond what is included in the standard policy. Endorsements can be added during the policy term or at the time of renewal.
Examination Under Oath (EUO):
A formal questioning process in which the insured or other involved parties are required to provide sworn testimony regarding a claim. It is conducted by the insurance company’s representative and is used to gather information, investigate the claim, and ensure accuracy and honesty in the claims process.
An exclusion is a provision in an insurance policy that specifies certain perils, circumstances, or conditions for which coverage is not provided. It identifies specific events or situations that are not covered by the insurance policy.
Fair Rental Value:
Also known as loss of use coverage, this is a provision in an insurance policy that covers the loss of rental income or additional living expenses when a covered loss makes the insured property uninhabitable.
A floater, also known as a personal property floater or a scheduled personal property endorsement, is an additional coverage option that extends protection to valuable items that may exceed the coverage limits or have limited coverage under a standard insurance policy.
A flood exclusion is a provision in an insurance policy that explicitly states that damages or losses caused by flooding are not covered.
Coverage, principally through the federal government’s National Flood Insurance Program (NFIP)/FEMA, protecting against flood and similar water damage, excluded from most property insurance policies.
A policy feature that ensures the insurance company cannot cancel or refuse to renew the policyholder’s insurance coverage as long as the premiums are paid on time.
A type of insurance policy designed to protect homeowners against losses and damages to their property, as well as liability for injuries or damages that occur on the property. It typically includes coverage for the dwelling, personal belongings, additional living expenses, and liability protection.
Indemnity refers to the principle of restoring the policyholder to the same financial position they were in before a covered loss or damage occurred.
Also known as an insurance agent or broker, this is a licensed professional who represents multiple insurance companies. Independent agents work independently and are not tied to any specific insurance company.
A government official responsible for regulating the insurance industry within a specific jurisdiction. The insurance commissioner’s role is to oversee insurance companies, enforce insurance laws and regulations, protect consumer interests, and ensure that insurance companies operate fairly and within the law.
The act of intentionally deceiving an insurance company or filing false insurance claims to obtain financial benefits or compensation. It can involve misrepresenting information, exaggerating damages or losses, staging incidents, or providing false documentation to support a claim. Insurance fraud is illegal and can result in serious consequences, including criminal charges and denial of insurance benefits.
The person or entity that holds an insurance policy and is protected by the coverage provided by that policy. The insured can be an individual, a business, or an organization.
Also known as the insured premises, this is the specific property or location covered under an insurance policy. It can refer to a residential property, commercial building, or any other physical location that is specified in the policy.
Also known as an insurance company, this is the entity that provides insurance coverage and assumes financial risk in exchange for premiums paid by the insured.
The termination or expiration of an insurance policy due to non-payment of premiums within the specified grace period. If the policyholder fails to pay the required premiums by the due date, the insurance coverage may cease, and the policy is considered to have lapsed.
Liability refers to the legal responsibility or obligation of an individual or entity for their actions or omissions that cause harm or damage to others. In insurance terms, liability often refers to the financial responsibility or legal obligation that an insured person or entity may have to compensate others for injuries, damages, or losses caused by their negligence or actions.
A type of insurance coverage that protects individuals or businesses against financial losses or legal obligations arising from liability claims.
Physical damage to property or bodily injury, including loss of use or loss of income.
- Loss of Use: provides coverage for the additional expenses you may incur if your property becomes uninhabitable or temporarily unusable due to a covered event, such as a fire, storm, or other insured perils.
- Loss of Income: Provides financial protection to businesses that experience a loss of income or profits due to a covered event that interrupts their normal operations.
The current value of an asset or property in the open market. In insurance terms, market value often refers to the estimated value of an insured property at the time of a covered loss or damage. It is typically determined based on factors such as the property’s age, condition, location, and recent sales of comparable properties.
Mutual Insurance Company:
A privately held insurer owned by its policyholders operated as a non-profit that may or may not be incorporated.
The individual or entity specifically identified in an insurance policy as the primary policyholder.
National Association Of Public Insurance Adjusters (NAPIA):
The National Association of Public Insurance Adjusters (NAPIA) is a professional organization that represents and promotes the interests of public insurance adjusters.
An occurrence refers to an event or incident that results in property damage, bodily injury, or loss during the policy period. The occurrence can be a single event or a series of related events that cause harm or damage.
Ordinance or Law Exclusion:
The ordinance or law exclusion is a provision in an insurance policy that excludes coverage for losses or damages that result from the enforcement of building codes, ordinances, or laws.
Also known as a multi-line policy, this is an insurance policy that combines multiple coverages into a single policy. Instead of purchasing separate policies for different types of coverage, such as property insurance and liability insurance, a package policy bundles these coverages together.
A peril refers to a specific event or cause of loss that is covered by an insurance policy. Perils can include events such as fire, theft, windstorm, vandalism, or liability for bodily injury.
Also known as liability insurance or third-party liability, this is a type of insurance coverage that protects the insured person or entity against financial loss or legal obligations arising from claims of negligence or injury caused to others.
Personal property refers to the belongings, possessions, or assets that an individual owns. It can include items such as furniture, clothing, electronics, jewelry, and other personal possessions.
A physical hazard refers to a condition or characteristic of a property that increases the likelihood of loss or damage. Physical hazards can include things like faulty wiring, slippery floors, inadequate security measures, or other physical factors that pose a risk.
The legal contract between the insurance company and the policyholder. It outlines the terms, conditions, coverage, exclusions, and limits of the insurance agreement.
A provision in an insurance policy that explicitly states that certain perils, events, or circumstances are not covered by the insurance policy. Exclusions specify what the insurance policy will not cover.
The maximum amount of coverage available under an insurance policy. These limits can apply to different aspects of the policy, such as property coverage, liability coverage, or specific categories of losses.
The specific timeframe during which an insurance policy provides coverage.
The amount of money that the insured pays to the insurance company in exchange for the insurance coverage provided by the policy. Premiums can be paid in various ways, such as monthly, quarterly, or annually, depending on the terms of the policy.
Proof Of Loss:
Documentation or evidence that the insured must provide to the insurance company when making a claim. It typically includes detailed information about the loss or damages suffered, such as photographs, estimates, invoices, or repair receipts.
The insurance coverage provided for physical property, such as buildings, structures, or belongings.
Provisions are specific clauses or sections within an insurance policy that outline the terms, conditions, and details of the coverage.
A licensed insurance professional who represents and advocates for policyholders during the insurance claims process. They help policyholders with the preparation, negotiation, and settlement of insurance claims to ensure a fair and proper resolution.
Rates refer to the pricing or cost of insurance coverage.
Real property refers to land and any permanent structures or improvements on that land, such as buildings or houses.
The rules and guidelines set by governmental authorities or regulatory bodies that govern the insurance industry. These regulations aim to ensure fair practices, consumer protection, and financial stability within the insurance market.
A practice in which insurance companies transfer a portion of their risk to other insurance companies. It provides a way for insurance companies to manage their exposure to large or catastrophic losses.
Also known as tenant insurance, this is a type of insurance policy designed for individuals who rent a property, such as an apartment or house. Renters’ insurance provides coverage for the personal belongings of the tenant against perils such as fire, theft, or vandalism.
Replacement Cost Value (RCV):
Replacement cost value is a method used to determine the amount of compensation for a covered loss under an insurance policy. It represents the cost of replacing or repairing damaged property with a similar item of equal quality and functionality, without considering depreciation.
A portion of the premium retained to pay future claims.
Also known as an endorsement or a floater, this is an amendment or addition to an insurance policy that modifies or expands its terms and conditions. Riders can be used to add or customize coverage for specific items, situations, or risks that may not be covered under the standard policy.
Risk refers to the potential for loss or damage that an insured person or entity faces.
Salvage refers to the remaining value of property or goods that have been damaged or deemed a total loss.
Scheduled property refers to valuable items that are specifically listed and individually insured on an insurance policy. These items are typically of high value, such as fine jewelry, artwork, or collectibles.
Scope/Scope Of Repair:
The scope or scope of repair refers to the detailed assessment and description of the damages or repairs needed to restore a property after a covered loss. It outlines the specific work required, the materials needed, and the associated costs. The scope of repair is crucial for estimating the claim value and determining the appropriate compensation from the insurance company.
Special Limits Of Liability:
Limitations set by an insurance policy on the maximum amount of coverage available for certain categories of items or losses. These special limits typically apply to specific types of property, such as cash, jewelry, firearms, or electronic equipment.
State Of Domicile:
The state in which an insurance company is incorporated or licensed
Stock Insurance Company:
A type of insurance company that is owned by shareholders. These shareholders invest in the company and share in its profits and losses.
Subrogation is a legal term referring to the process by which an insurance company seeks reimbursement from a third party responsible for causing a loss or damage to the insured property. When an insurance company pays a claim to its insured, it may have the right to “step into the shoes” of the insured and pursue legal action against the responsible party to recover the amount paid. Subrogation allows the insurance company to recover its costs and prevent the insured from benefiting twice for the same loss.
Time Element Coverage:
A type of insurance coverage that protects against losses related to time-dependent factors. It typically applies to situations where the loss is caused by the interruption or delay of business operations.
An underwriter is an insurance professional responsible for assessing and evaluating insurance risks. Underwriters analyze and categorize the level of risk that a proposed insured represents in order to decide whether or not coverage should be offered and, if so, at what cost.
When an item or property is deemed unsalvageable, it means that it is beyond repair or recovery and cannot be restored to its pre-loss condition. In the context of insurance, if an item is deemed unsalvageable, the insurance company may consider it a total loss and provide compensation to the insured based on the coverage and policy terms.
Valued Policy Law:
State laws that mandate insurers to reimburse an insured party for the full amount of the policy in the event of a total loss. The Valued Policy Law requires full payment of the policy’s stated amount regardless of the actual cash value of the insured item at the time of the loss.