Insurance Glossary
Insurance terms, explained in plain English
Speak insurance with confidence
Policies are full of jargon. Here are the terms you'll run into most, explained simply — so you always know exactly what your coverage means.
A
Actual Cash Value (ACV)
What your property is worth today — its replacement cost minus depreciation for age and wear.Example: an 8-year-old roof is paid at the value of a used roof, not the price of a brand-new one.
Additional Insured
A person or business added to your policy so they're also protected under it. Contracts often require this — a landlord or a client may ask to be named as an additional insured.
Adjuster
The person who reviews your claim, investigates what happened, estimates the damage, and determines what your policy will pay.
B
Beneficiary
The person or entity you name to receive the payout from a life insurance policy.
Binder
Temporary proof that coverage is in place while your full policy is being issued — it shows you're protected right away.
Bodily Injury Liability
The part of your policy that helps pay for injuries you cause to others, including medical bills, lost wages, and related legal costs.
C
Certificate of Insurance (COI)
A one-page document that proves you carry coverage. Clients, landlords, and general contractors often ask for one before you start work.
Claim
A formal request asking your insurance company to pay for a covered loss.
Collision Coverage
Pays to repair or replace your vehicle after a crash — whether you hit another car or an object like a fence or pole.
Comprehensive Coverage
Covers vehicle damage from causes other than a collision, such as theft, fire, hail, vandalism, or hitting an animal.
Coverage Limit
The most your policy will pay for a covered loss. Any amount above the limit comes out of your pocket.
D
Deductible
The amount you pay out of pocket on a claim before your insurance kicks in. A higher deductible usually means a lower premium.
Depreciation
The drop in an item's value over time from age and use — the gap between what something cost new and what it's worth now.
E
Endorsement (Rider)
A written change added to your policy that adds, removes, or adjusts coverage.
Exclusion
Something your policy specifically does not cover. Knowing your exclusions helps avoid surprises at claim time.
F
Flood Insurance (NFIP)
Standard home policies don't cover flood damage — that coverage is separate, often written through the National Flood Insurance Program (NFIP).
G
Grace Period
A short window after your premium's due date during which coverage stays active, giving you time to pay without a lapse.
L
Liability Coverage
Pays for injury or damage you're responsible for causing to others. It's the foundation of most auto and business policies.
Lienholder / Loss Payee
A bank or lender with a financial interest in your insured property, such as your auto or home loan. They're listed on the policy and notified of changes.
N
Named Insured
The person or business listed on the policy as the primary policyholder.
P
Peril
A specific cause of loss your policy may cover — fire, theft, windstorm, and so on.
Policy
The contract between you and your insurance company that spells out what's covered, for how much, and under what conditions.
Premium
The amount you pay for your insurance — typically monthly, every six months, or once a year.
Property Damage Liability
Pays for damage you cause to someone else's property, like their vehicle or building.
R
Replacement Cost
Coverage that pays to repair or replace damaged property with new items of similar kind and quality, without subtracting for depreciation.
S
Surety Bond
A three-party agreement that guarantees you'll fulfill an obligation, like completing a job or following regulations. If you don't, the bond covers the loss and you repay the surety.
U
Umbrella Policy
Extra liability coverage that kicks in once your auto or home limits are used up, adding another layer of protection.
Underwriting
The process an insurer uses to evaluate risk and decide whether to offer coverage — and at what price.
Uninsured / Underinsured Motorist
Protects you if you're hit by a driver who has no insurance, or not enough to cover your damages.
W
Waiver of Subrogation
A policy provision where your insurer gives up its right to recover costs from a third party — often required in commercial contracts.
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