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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
Provides immediate but temporary insurance for some time until a formal policy has been issued or denied.
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.
A dwelling policy covering theft attempted theft and vandalism, and malicious mischief resulting from theft, and applies to theft on and off the premises.
Also known as a builder’s risk policy covering residential, commercial, and farm structures that are being renovated or under construction.
Covers losses resulting from a person unlawfully entering premises evident from forced entry.
A type of insurance coverage businesses typically for liability, property, and coverage on business interruptions.
Ending or terminating an insurance policy before the confirmed end date.
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.
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.
A requirement set out in a policy stating the insured pay part of a loss to an insurance company- usually at least 80%.
The amount the insurance company will not pay if the policyholder fails to adhere to the coinsurance clause.
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.
An insurance cover offering more than what a standard policy provides; usually purchased separately from a standard policy and works as an extension.
A regulated insurance form is used to issue an insurance contract. Generally contains insuring agreements, coverages, exclusions, and conditions.
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.
A financial grant is awarded by a court to compensate an injured party for their pain/suffering.
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.
The amount of money you- the insured individual- are expected to pay towards an insured loss before the insurance company starts to pay.
The expenses incurred by the insurer from a legal matter after defending a case against insured persons.
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”.
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.
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.
Represents any premiums an insurance company has accumulated on the part of the insurance contract that has expired.
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.
A building without a basement with its lowest elevated floor above ground level by shear walls, post, foundation walls, piers, columns, or pilings.
Covers insured for loss of equipment due to electrical or mechanical breakdown of most types of equipment.
Insurance that covers a claim when the primary insurance limit has been used up or exhausted.
A list of perils, persons, or situations not covered under the insurance policy.
Extended cover of the casualty insurance policy; supplies insurance against risks unprotected under the primary policy
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.
When a policy is canceled by the insurance company or the insured on its effective date.
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.
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.
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.
This type of peril is caused directly by a person/s such as vandalism, regulation, poor design or production, theft, negligence, etc.
Part of the homeowner’s policy that authorizes cover on the insured individuals’ business activities conducted on the residence premises.
The measures of compensating the insured, as close to the same financial condition preceding the incident, for the loss or damage that has occurred.
The insurance protections provided when damage or loss is sustained, insured needs to be restored to the approximate financial condition preceding the incident.
An insurance system that gradually increases property coverage to match the effects of inflation.
The realistic concern of a person acquiring insurance for any individual or estate against unforeseen events, such as death or losses.
The total amount of insurance purchases vs. the actual replacement cost of the insured property is usually expressed as a ratio.
A common law that states any person or entity is accountable for the financial damage suffered by another group, entity, or person.
Transfers the weight of financial loss- because of a liability claim- from the insured to the insurer
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.
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.
A legal entity allowed when forming a business; offers a sophisticated business structure and provides personal liability protection for debts incurred by the company.
A voluntary group of individuals is set up to write insurance policies; everyone is accountable for the amount of policy they write.
A disadvantage or physical damage to a property that causes a loss of use or a loss of income.
A neutral price that could be achieved from a property sale at the time of loss/damage.
A type of homeowners insurance that protects a mobile homes structure and its contents; some policies also included property and liability insurance
Business or person who is labeled as the insured in the policy contract.
Only insures against losses explicitly listed in the policy; if the risk is not listed, there is no coverage.
Often called specified peril policy- only insures against losses specifically defined in the policies contract.
Showing insufficient care needed to safeguard others from harm or damage to themself or others.
An organization that is not permitted or licensed to do business in a particular state.
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.
An incident that happens at a specific time and place or over a length of time.
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.
Insurance that gives part coverage for demolition costs and increased construction costs that are regulated by law or regulation.
More than two types of insurance cover combined into a single contract; also called a multi-line policy.
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.
Protects against damages that are not bodily but discriminatory like slander, libel, false arrest, violation of privacy, malicious prosecution, and wrongful entry.
A policy that validates liability cover to the dwelling policy, like the homeowner’s policy, can be purchased as a standalone policy.
Protection for individuals and their families.
Property that is not real estate can be an asset that is movable and not rooted in a fixed location.
Endorsed by the homeowner’s policy; adds relief cost cover for personal properties.
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.
The date and length of time when the coverage begins and ends.
Coverage that takes priority when more than one policy or coverage bears on the same loss.
Concerned with how the action that caused the loss to the insured happened and if it resulted from an insured peril.
The fee to repair a damaged or destroyed item that is insured.
The fee to replace a damaged or destroyed item is insured without lowering the price because of depreciation.
Attempting to steal or stealing property from an individual or place with force or a threat to force.
A policy that is customized to cover specific goods for a specific amount.
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.
See Open peril policy
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.
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.
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.
The action of unlawfully taking on stealing property includes burglary and robbery.
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.
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.
An insurer restricts the property coverage if no people are occupying the premises.
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.
An insurance company uses this technique to figure out the most convenient payment for a loss.
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.
Appears in several property insurance policies; covers any damage to the insured property caused by malice, misconduct, or destruction.
Voluntarily giving up a known right or claim.
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.
Insurance for landlords and tenants is all we do.Get started