Actual Cash Value (ACV)
The value of your property, based on the current cost to replace it minus depreciation. Also known as "market value."
Additional Living Expenses
Charges covered by homeowner policies that exceed your normal living expenses. This kicks in when your home is uninhabitable due to a covered loss (e.g., hotel bills, restaurant meals).
Adjuster
A representative of the insurer who seeks to determine the extent of the firm's liability for loss when a claim is submitted.
Agent
An individual who sells and services insurance policies. Agents must be licensed by the state in which they do business.
Application
A signed statement of facts requested by the insurance company on the basis of which the insurer decides whether or not to issue a policy.
Appraisal
A survey of the value of property, or the extent of damage, usually performed by an impartial expert.
Arson
The willful and malicious burning of property, sometimes with the intent of defrauding the insurance company.
Assignment
The transfer of a legal right or interest in an insurance policy to another party.
Basic Coverage
Insurance that covers only a limited number of perils, such as fire, lightning, and explosion.
Beneficiary
The person or entity designated to receive the proceeds of a life insurance policy upon the death of the insured.
Binder
A temporary or preliminary agreement which provides coverage until a policy can be written or delivered.
Bodily Injury
Physical injury to a person, including sickness, disease, and death.
Cancellation
Termination of an insurance policy by the company or insured before the renewal date.
Carrier
The insurance company or insurer.
Casualty Insurance
Insurance concerned primarily with the legal liability for losses caused by injury to persons or damage to the property of others.
Catastrophe
A severe disaster (such as a hurricane or tornado) involving many policyholders and resulting in a large number of claims.
Claim
A demand made by the insured, or the insured's beneficiary, for payment of the benefits provided by the contract.
Coinsurance Clause
A provision stating that the insured must carry an amount of insurance equal to a specified percentage (usually 80%) of the property's value to receive full payment for a loss.
Collision Coverage
Pays for damage to your car caused by physical contact with another vehicle or an object, such as a tree or fence.
Comprehensive Coverage
Pays for damage to your car caused by events other than collision, such as fire, theft, vandalism, hail, or flood.
Conditions
The portion of the insurance contract which sets forth the rights and duties of the insured and the insurance company.
Condominium Insurance
Owner's insurance that covers personal property and improvements to the unit. The building structure is usually covered by the condo association.
Contract
An agreement between two or more parties that creates an obligation to do or not do a particular thing. The insurance policy is a contract.
Coverage
The scope of protection provided under an insurance policy. In property insurance, coverage lists perils insured against, properties covered, locations covered, individuals insured, and the limits of indemnification.
Damage
Loss or harm to a person or property.
Declarations Page
The part of the policy that provides detailed information about the insured, the insurer, and the coverage details (limits, premiums, dates).
Deductible
The amount of loss paid by the policyholder. Either a specified dollar amount, a percentage of the claim amount, or a specified amount of time that must elapse before benefits are paid.
Depreciation
A decrease in the value of property due to wear and tear or obsolescence.
Endorsement
A written form attached to an insurance policy that alters the policy's coverage, terms, or conditions. Also known as a "rider."
Exclusion
A provision in an insurance policy that denies coverage for certain perils, persons, property, or locations.
Exposure
The state of being subject to loss because of some hazard or contingency. Also used as a measure of the rating units or the premium base of a risk.
Fire Insurance
Coverage for loss of or damage to a building and/or contents due to fire.
Flood Insurance
Coverage for damage caused by flood. Usually offered through the National Flood Insurance Program (NFIP).
Fraud
Intentional lying or concealment by policyholders to obtain payment of an insurance claim that would otherwise not be paid.
Hazard
A circumstance that increases the likelihood or probable severity of a loss. For example, storing explosives in a home basement is a hazard.
Homeowner Policy
A package policy that combines (1) coverage against the perils of fire, theft, and other risks to the dwelling and contents, with (2) personal liability coverage.
Indemnification
Compensation to the victim of a loss, in whole or in part, by payment, repair, or replacement.
Inflation Protection
A provision in a policy that automatically adjusts the coverage limits to account for inflation, ensuring the property remains adequately insured.
Insurable Interest
Any interest a person has in a possible subject of insurance, such as a car or home, of such a nature that a certain happening might cause him financial loss.
Insurance
A system under which individuals, businesses, and other organizations or entities, in exchange for payment of a sum of money (a premium), are guaranteed compensation for losses resulting from certain perils.
Insurance Policy
The contract between the insurance company and the insured.
Insured
The person(s) protected by the insurance policy.
Insurer
The insurance company that issues the policy.
Liability
Responsibility to another for one's negligence that results in injury or damage.
Liability Insurance
Insurance that pays and renders service on behalf of an insured for loss arising out of his responsibility, due to negligence, to others.
Limits
The maximum amount of insurance the insurance company will pay for a particular loss, or for a loss during a period of time.
Loss
The occurrence of an event for which insurance pays.
Loss of Use
Compensation for the inability to use property due to a covered loss (e.g., rental car coverage while your car is being repaired).
Market Value
The price that a willing buyer would pay a willing seller for a property.
Medical Payments
Coverage that pays for medical or funeral expenses for you or others injured or killed in an accident, regardless of fault.
Negligence
Failure to exercise the care that a reasonably prudent person would exercise in like circumstances.
Peril
The cause of a possible loss, such as fire, windstorm, theft, explosion, or riot.
Personal Property
All tangible property not classified as real property (real estate).
Policy
The written contract effecting insurance.
Premium
The price of insurance protection for a specified risk for a specified period of time.
Property Damage
Physical injury to, destruction of, or loss of use of tangible property.
Replacement Cost
The cost to replace damaged property with materials of like kind and quality, without deduction for depreciation.
Rider
See Endorsement.
Risk
The chance of loss. Also used to refer to the insured or to property covered by a policy.
Robbery
The taking of property from a person by force or threat of force.
Salvage
The remaining value of property after severe damage. The insurer often takes ownership of the damaged property after paying a total loss claim.
Schedule
A list of individual items covered under a single policy, usually with specific values assigned to each item (e.g., jewelry, art).
Subrogation
The legal right of an insurance company to recover the amount it has paid for a loss from the party responsible for the loss.
Surcharge
An extra charge applied to a premium, usually due to a claim or traffic violation.
Tenant's Policy
A homeowner policy form (HO-4) designed for tenants/renters. It covers personal property and liability but not the building structure.
Theft
Any act of stealing. Theft includes larceny, burglary, and robbery.
Total Loss
A condition of a property (vehicle or home) when the cost of repair exceeds the value of the property or a certain percentage of the value.
Umbrella Liability Policy
A policy that pays for losses in excess of the limits of other liability policies (such as homeowner or auto) and may cover some liabilities not covered by other policies.
Underwriting
The process of selecting risks for insurance and determining in what amounts and on what terms the insurance company will accept the risk.
Vandalism
Willful and malicious destruction of or damage to the property of others.