Landlord Insurance Glossary With Terms | Steadily

Our Complete Insurance Glossary with Terms and Definitions

The purpose of this glossary is for educational purposes only. We have compiled a list of common insurance terms and provided definitions. Insurance terms can be complicated and overwhelming since there are quite many. Our goal is to simplify your life.

A

Actual Cash Value (ACV)

The cost to repairing or replacing an item of property during the time of loss, less depreciation; ACV is often used to determine the amount of reimbursement for a loss.

Additional coverages

Add-on insurance coverages that apply only in certain situations. Additional coverages have reduced or separate limits of liability. They require the insured to meet specific requirements before they become applicable. Additional coverages are also known as coverage extensions, other coverages, and extended coverages.

Additional insured

Within an insurance policy, an additional insured is an individual or company who receives the insured’s benefits under the insurance policy. They will be listed in the declarations. For example, a mortgage company that insured property and has an insurable interest.

Admitted Insurer

An insurer is licensed to conduct business in the state or country. The insurer is a fully licensed carrier, and they are approved to provide specific lines of insurance coverage in the state the insurance exposure is located.

Aggregate Limit

Type of policy limit found in liability policies that place a ceiling on coverage to a specified total amount for all losses (property damage, bodily injury, etc.) that occurred within the policy period.

Agreed Value Method

This method involves assigning a value for a property in which the insured and insurer agree, at the beginning of the policy period, on the maximum amount paid in the event of a total loss.

All Risk Policy

Insurance coverage, unless explicitly omits, covers any risk. For example, if the policy does not expressly exclude flood insurance, then the house would be covered in the event of a flood. See Open peril policy.

A.M. Best Company

An organization that provides ratings on insurance companies’ financial stability that do business in the United States. They are headquartered in Oldwick, New Jersey, and were founded by Alfred M. Best.

Authorized insurer

An individual or company that meets a state insurance department’s standard and is approved by the responsible authority to do business in the given state, also known as admitted insurer.

Automatic increase

An add-on to an insurance policy where the coverage for a property automatically increases over time, considering changing construction costs, protecting the insured from facing losses.

B

Basic named Peril

A basic named-peril is a term that is used to label specific losses or damages that are “named” or written in your insurance policy.  Here are the basic named perils: fire, lightning, explosion, windstorm or hail, smoke, aircraft or vehicles, riot or civil commotion, vandalism or malicious mischief, sprinkler leakage, sinkhole collapse, and volcanic action.

Binder

Provides immediate but temporary insurance for some time until a formal policy has been issued or denied.

Broad named perils

This type of named-peril relates, particularly to property coverage. Includes an additional six areas of protection on top of the 11 of the basic form policies. Added areas include burglary, fallen objects, ice or snow, frozen plumbing, accidental water damage, and electricity.

Broad theft coverage endorsement

A dwelling policy covering theft attempted theft and vandalism, and malicious mischief resulting from theft, and applies to theft on and off the premises.

Builders risk coverage form

Also known as a builder’s risk policy covering residential, commercial, and farm structures that are being renovated or under construction.

Burglary

Covers losses resulting from a person unlawfully entering premises evident from forced entry.

Businessowners policy (BOP)

A type of insurance coverage businesses typically for liability, property, and coverage on business interruptions.

C

Cancellation

Ending or terminating an insurance policy before the confirmed end date.

Casualty insurance

A broad type of insurance coverage for employers, businesses, and individuals against property damage and other liabilities. It’s also an umbrella term for different types of insurance like aviation, surety bonds, and workers’ compensation.

Certificate of insurance

A certificate provided by an insurance company that authenticates the existence of a policy; includes a brief description of the type of coverage under the policy.

Coinsurance clause

A requirement set out in a policy stating the insured pay part of a loss to an insurance company- usually at least 80%.

Coinsurance penalty

The amount the insurance company will not pay if the policyholder fails to adhere to the coinsurance clause.

Common policy declarations

A form located in a different section of an insurance policy; containing critical information about the policy, such as the name of the insured, policy terms, and the amount of coverage included.

Coverage extensions

An insurance cover offering more than what a standard policy provides; usually purchased separately from a standard policy and works as an extension.

Coverage form

A regulated insurance form is used to issue an insurance contract. Generally contains insuring agreements, coverages, exclusions, and conditions.

Coverage trigger

This must occur before a liability policy can apply to a given loss. The coverage trigger is the occurrence of injury or property damage that takes place during the policy period.

D

Damages

A financial grant is awarded by a court to compensate an injured party for their pain/suffering.

Declarations (dec page)

The part of an insurance contract showing who is insured, when and where the coverage is adequate, what property or risk is covered, and how much coverage applies.

Deductible

The amount of money you- the insured individual- are expected to pay towards an insured loss before the insurance company starts to pay.

Defense costs

The expenses incurred by the insurer from a legal matter after defending a case against insured persons. 

Dwelling policy

Part of a homeowner’s policy that may help repair or rebuild your home’s physical structure, flat, or place of residence if damaged by a covered peril such as lightning strikes or fires; some versions can cover additional living expenses.

There are different coverages in the tier of policy that you choose. Note: DP stands for “dwelling policy”.

  • DP-1: for very limited coverage
  • DP-2: for moderate coverage
  • DP-3: for comprehensive coverage.

DP-1

A DP1 policy is a type of home insurance that protects rental or vacant homes from nine named perils. It covers the property for its actual cash value, not replacement cost.

Dwelling under construction endorsement

This coverage protects your home against things like burst pipes, theft, and other perils for dwellings under construction; the limits of liability increase as construction of the building progress.

E

Earned premium

Represents any premiums an insurance company has accumulated on the part of the insurance contract that has expired.

Earthquake insurance

Protection against damage to a structure, its contents, or both after an earthquake. Type of insurance is available as an additional policy and backing to homeowners, commercial properties, and dwelling policies.

Elevated building

A building without a basement with its lowest elevated floor above ground level by shear walls, post, foundation walls, piers, columns, or pilings.

Equipment breakdown protection coverage form

Covers insured for loss of equipment due to electrical or mechanical breakdown of most types of equipment.

Excess coverage

Insurance that covers a claim when the primary insurance limit has been used up or exhausted. 

Exclusions

A list of perils, persons, or situations not covered under the insurance policy.

Extended coverages

Extended cover of the casualty insurance policy; supplies insurance against risks unprotected under the primary policy

F

Fair Credit Reporting Act

FCRA is a federal law that monitors the gathering and reporting of credit information about consumers; allows consumers to obtain information in credit reports for free.

Flat cancellation

When a policy is canceled by the insurance company or the insured on its effective date.

Functional replacement cost

The procedure used to figure out the amount it would cost to replace or repair a damaged property with less costly typical constructions methods and materials.

H

Hazard

Anything that makes risk more probable or a loss more likely to occur due to the peril. There are five types of hazards: Physical Hazard, Moral Hazard, Morale Hazard, Legal Hazard & Information Hazard.

Homeowner’s policy

A policy that integrates both personal liability cover and personal property coverage. Depending on the policy chosen by the insurer, the property coverage can vary, whereas liability coverage remains the same. 

Human Perils

This type of peril is caused directly by a person/s such as vandalism, regulation, poor design or production, theft, negligence, etc.

I

Incidental occupancy

Part of the homeowner’s policy that authorizes cover on the insured individuals’ business activities conducted on the residence premises. 

Indemnify

The measures of compensating the insured, as close to the same financial condition preceding the incident, for the loss or damage that has occurred.

Indemnity

The insurance protections provided when damage or loss is sustained, insured needs to be restored to the approximate financial condition preceding the incident.

Inflation guard protection

An insurance system that gradually increases property coverage to match the effects of inflation.

Insurable interest

The realistic concern of a person acquiring insurance for any individual or estate against unforeseen events, such as death or losses.

Insurance to value

The total amount of insurance purchases vs. the actual replacement cost of the insured property is usually expressed as a ratio.

L

A common law that states any person or entity is accountable for the financial damage suffered by another group, entity, or person.

Liability insurance

Transfers the weight of financial loss- because of a liability claim- from the insured to the insurer

Liability loss exposure

The possibility that a person or business will sustain a loss from a claim made against them stating they are legally responsible for injuries or damages sustained.

Libel/Slander

When an untrue statement is broadcasted about an individual as a fact rather than an opinion. If the statement can be proven to be broadcasted maliciously, the harmed person can sue for damages- typically classed as Defamation.

Limited Liability Company (LLC)

A legal entity allowed when forming a business; offers a sophisticated business structure and provides personal liability protection for debts incurred by the company.

Lloyd’s Association

A voluntary group of individuals is set up to write insurance policies; everyone is accountable for the amount of policy they write.

Loss

A disadvantage or physical damage to a property that causes a loss of use or a loss of income.

M

Market value

A neutral price that could be achieved from a property sale at the time of loss/damage.

Mobile home insurance

A type of homeowners insurance that protects a mobile homes structure and its contents; some policies also included property and liability insurance

N

Named insured

Business or person who is labeled as the insured in the policy contract.

Named peril

Only insures against losses explicitly listed in the policy; if the risk is not listed, there is no coverage.

Named peril policy

Often called specified peril policy- only insures against losses specifically defined in the policies contract.

Negligence

Showing insufficient care needed to safeguard others from harm or damage to themself or others.

Non-admitted insurer

An organization that is not permitted or licensed to do business in a particular state.

 Non-special flood hazard Area

An area considered a moderate-to-low threat flood zone and did not signify immediate danger. Zones B, C, or X’ are used to describe the type of flood.

O

Occurrence

An incident that happens at a specific time and place or over a length of time.

Open peril policy

Unlike a named peril policy, an open peril policy provides cover to the insured for any loss caused by any peril that is not clearly ruled out by the policy.

Ordinance or law coverage endorsement

Insurance that gives part coverage for demolition costs and increased construction costs that are regulated by law or regulation.

P

Package policy

More than two types of insurance cover combined into a single contract; also called a multi-line policy.

Peril

The source of personal injury or property damage; the cause of loss. Perils are terms used to name the risks that can cause injury or property damage. Lightening or fire are examples of perils. They are generally named in your policy.

Personal injury

Protects against damages that are not bodily but discriminatory like slander, libel, false arrest, violation of privacy, malicious prosecution, and wrongful entry. 

Personal liability and medical payments to others endorsement

A policy that validates liability cover to the dwelling policy, like the homeowner’s policy, can be purchased as a standalone policy.

Personal lines

Protection for individuals and their families.

Personal property

Property that is not real estate can be an asset that is movable and not rooted in a fixed location.

Personal property replacement cost endorsement

Endorsed by the homeowner’s policy; adds relief cost cover for personal properties.

Personal umbrella policy

Extra insurance that gives the insured further protection and cover than other policies. Can provide cover for certain lawsuits, property damage, and personal liability scenarios. 

Policy period

The date and length of time when the coverage begins and ends.

Primary insurance

Coverage that takes priority when more than one policy or coverage bears on the same loss.

Proximate cause

Concerned with how the action that caused the loss to the insured happened and if it resulted from an insured peril.

R

Repair cost

The fee to repair a damaged or destroyed item that is insured.

Replacement cost

The fee to replace a damaged or destroyed item is insured without lowering the price because of depreciation. 

Robbery

Attempting to steal or stealing property from an individual or place with force or a threat to force.  

S

Scheduled coverage

A policy that is customized to cover specific goods for a specific amount.

Scheduled personal property endorsement

An additional policy an insured individual can add to their homeowner’s policy; extends the type of coverage to protect against personal property and expensive goods such as jewelry.

Special coverage

See Open peril policy

Special flood hazard areas (SFHA)

Refers to land with roughly a 1 percent chance of a flood occurring there in any given year. The two classifications for SFHA areas are 1) “A” zones and 2) “V” zones.

Specified peril policy

Section of the insurance policy that insures against losses arising from particular events is clearly set out in the policy, such as theft or fires.

Subrogation

Provides the insured- through the insurer- the legal right to file a liability suit against the party at fault which caused a loss to the insured. Insurers are granted the right to request reimbursement for any loss incurred.

T

Theft

The action of unlawfully taking on stealing property includes burglary and robbery.

U

Umbrella policy

Extra insurance- available as personal or commercial insurance- gives the insured further protection and cover than other policies. Can provide cover for certain lawsuits, property damage, and personal liability scenarios. 

Unit property

Comprising all components that work interdependently, such as the building and its parts used to structure the build, such as exterior walls, interior walls, plumbing fixtures.

Unoccupancy

An insurer restricts the property coverage if no people are occupying the premises.

V

Vacancy

When a property or dwelling is unoccupied by people, insurers will restrict the level of coverage when the property is vacant for an extended period.

Valuation

An insurance company uses this technique to figure out the most convenient payment for a loss.

Valued policy

An agreed policy is written by the insurer and insured, listing the value of the insured property in advance and is not related to the amount of insured loss.

Vandalism and malicious mischief (V&MM)

Appears in several property insurance policies; covers any damage to the insured property caused by malice, misconduct, or destruction. 

W

Waiver

Voluntarily giving up a known right or claim.

Warranty

A distinctive agreement is set between the insurer and the insured is written within the insurance policy. Breaching the warranty agreement can void the policy.

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