Insurance Glossary

Knowing what the terms on a quote actually mean makes it far easier to weigh your coverage options.

A B C D E F G HIJKL M N O PQR S T UVWXYZ

A

Actual Cash Value (ACV): A method of settling a claim that pays the cost to replace damaged property minus depreciation for its age, wear and condition. A ten year old roof settled at actual cash value pays less than what a new roof costs to install, and the difference is the policyholder's to cover. Policies written on an actual cash value basis generally cost less than replacement cost policies, and some insurers apply it only to specific items such as roof surfaces or older personal property.
Adjuster: The person an insurer assigns to investigate a claim, determine what the policy covers, and estimate the amount of the loss. Staff adjusters are employees of the insurer and independent adjusters are contracted by it, but both represent the insurer's interest. A public adjuster is a separate role, hired and paid by the policyholder to handle a claim on their behalf, and licensed by the state.

B

Bodily Injury Liability: The part of an auto policy that pays for other people's medical costs, lost wages and related expenses when the insured driver is at fault in a crash. It also pays the cost of legal defense if the injured party sues. Limits are usually written as a per person amount and a per accident amount, and nearly every state sets a minimum that drivers must carry.

C

Cancellation: The termination of a policy before the end of its term, by either the insurer or the policyholder. State law limits when an insurer may cancel, commonly restricting it after the first 30 or 60 days to reasons such as non-payment, fraud, or a material misrepresentation on the application. A policyholder who cancels early is usually refunded the unused premium, sometimes reduced by a short rate penalty.
Collision Coverage: Coverage that pays to repair or replace the insured vehicle after it hits another vehicle or an object, or rolls over, regardless of who was at fault. A deductible applies to each collision claim, and the payment is capped at the value of the vehicle rather than the cost of the repairs. Lenders and leasing companies normally require it for as long as there is a loan on the car.
Comprehensive Coverage: Auto coverage for damage to the insured vehicle from causes other than a collision, such as theft, fire, hail, vandalism and animal strikes. Many policies call it other than collision coverage, and it carries its own deductible separate from the collision deductible. Glass claims are sometimes handled under a lower or waived deductible depending on the state and the policy.
Credit-Based Insurance Score: A rating factor built from information in a consumer credit report, used to help predict how likely a policyholder is to file a claim. It is not the same as a lending credit score, and it is not a judgment about whether someone can afford the policy. A few states prohibit or sharply restrict its use, and the rules differ by state and by line of insurance, so whether it affects a quote depends on where the policy is written.

D

Declarations Page: The page at the front of a policy that lists the named insured, the covered property, each coverage with its limits and deductibles, and the premium charged. It also shows the policy number, the policy period and any endorsements attached to the contract. Often shortened to dec page, it is the quickest way to confirm what a policy actually covers before a claim happens.
Deductible: The amount a policyholder pays out of pocket on a covered claim before the insurer pays the rest. Raising a deductible lowers the premium and lowers what the insurer owes on each claim. Auto policies usually apply a flat dollar deductible per claim, while home policies may apply a percentage of the dwelling limit for wind, hail or hurricane losses.
Diminished Value: The resale value a vehicle loses because an accident appears on its history, even after repairs restore it to working condition. Insurers call this inherent diminished value, and a claim for it is separate from the cost of the repairs themselves. Nearly every state allows a claim against the at-fault driver's insurer, claims against a policyholder's own insurer are permitted in only a few, and deadlines and proof requirements vary.
Dwelling Coverage (Coverage A): The part of a homeowners policy that covers the house itself, including structures attached to it such as a garage, deck or porch. The limit is meant to reflect what it would cost to rebuild at current construction prices, which is not the same as the market value or the purchase price. Several other coverages are set as a percentage of it, so the Coverage A limit drives much of the rest of the policy.

E

Endorsement: A written amendment attached to a policy that adds, removes or changes coverage from the standard form. Water backup, scheduled jewelry, ordinance or law and named driver exclusions are all typically added by endorsement. Some carry an extra premium and some do not, and which endorsements are offered varies by insurer and by state.
Exclusion: A provision that states what a policy does not cover, whether a cause of loss, a type of property or a specific circumstance. Standard homeowners policies exclude flood, earthquake, ordinary wear and tear, and damage caused by lack of maintenance. Certain exclusions can be bought back by endorsement or covered by a separate policy, while others cannot.

F

FAIR Plan: A state-created insurance pool that sells property coverage to owners who cannot obtain it in the regular market, often because of wildfire or storm exposure. FAIR stands for Fair Access to Insurance Requirements, and the plans are funded by assessments on the insurers licensed in that state rather than by taxpayers. Coverage is usually narrower than a standard homeowners policy and sometimes limited to fire and a few other perils, and many states run one under varying names.
First Notice of Loss (FNOL): The first report a policyholder makes to an insurer that a loss has occurred, which opens the claim and starts the process. It can be given by phone, app or website, and usually captures the date, the location and the basic circumstances of the loss. Policies require notice within a reasonable time or within a stated period, and a long delay can complicate or jeopardize the claim.
Flood Insurance: A separate policy covering damage from rising water, which standard homeowners and renters policies exclude everywhere. It responds to overflowing rivers, storm surge, heavy rainfall and similar surface water events, while interior plumbing leaks and sewer backup are handled by other coverages. Policies are available through the federal National Flood Insurance Program and from private insurers, and most carry a waiting period before coverage takes effect.
Full Coverage: An informal shopping term rather than an actual coverage, generally meaning liability plus collision and comprehensive on the same auto policy. No policy is labeled full coverage and the phrase appears nowhere on a declarations page, so two people who describe themselves as fully covered may carry very different limits. It does not imply unlimited protection, and it says nothing about whether uninsured motorist, medical payments or rental reimbursement are included.

G

Gap Insurance: Coverage that pays the difference between what is still owed on a vehicle loan or lease and the actual cash value the insurer pays after a total loss. Vehicles usually depreciate faster than loans are paid down, so a borrower whose car is totaled early in the term can still owe the lender after the claim settles. It is sold by insurers as an endorsement and by dealers and lenders as a separate product, and whether it also covers the deductible depends on the form.

H

HO-3 Policy: The most widely issued homeowners insurance form, covering the house on an open perils basis and personal belongings on a named perils basis. That split means damage to the structure is covered unless the policy excludes the cause, while belongings are covered only for causes specifically listed. Insurers may use the standard industry form or their own version of it, so exact wording and the list of covered perils vary.
HO-4 Policy (Renters Insurance): The standard renters insurance form, covering a tenant's belongings and personal liability but not the building itself, which the landlord insures separately. Personal property is typically written on a named perils basis, and the form includes loss of use if the unit becomes uninhabitable after a covered loss. The contents limit is chosen by the tenant rather than derived from a dwelling limit, and leases sometimes require the coverage.
HO-6 Policy (Condo Insurance): The standard condominium form, covering the interior of a unit, the owner's belongings and personal liability, while the association insures the building. How much interior coverage an owner needs depends on the association master policy, which may cover the unit only to the bare walls or may include the original fixtures. It commonly includes a small amount of loss assessment coverage, which can usually be increased by endorsement.
Hurricane Deductible: A separate deductible that applies only to hurricane damage, usually stated as a percentage of the dwelling limit rather than as a flat dollar amount. It takes effect only when conditions written into the policy are met, commonly tied to a storm being named by the National Hurricane Center or to a hurricane watch or warning, along with a time window before and after the storm. Coastal and Gulf states are where these appear, and both the trigger and the percentage vary by state and by insurer.

L

Lapse in Coverage: A period during which a driver or homeowner had no active policy, whether from cancellation, non-payment or simply letting the term expire. Insurers commonly ask about prior coverage and treat a lapse as a rating factor, which can raise the price of the next policy. In states with mandatory auto insurance a lapse can also trigger registration or license penalties separate from anything the insurer does.
Loss Assessment Coverage: Coverage that pays an association member's share of a special assessment charged to all owners after a covered loss to common property. It applies when damage to shared areas exceeds the association policy limits, and many forms also cover an assessed share of the association deductible. Standard condo and homeowners policies include only a small default limit, which is commonly raised by endorsement.
Loss of Use Coverage (Coverage D): The part of a homeowners policy that pays added living costs when a covered loss makes the home unfit to live in, such as hotel bills and restaurant meals. It reimburses the difference between normal household expenses and the higher costs during repairs, not the entire bill. Also called additional living expense, it is usually limited to a percentage of the dwelling limit, to a set number of months, or to both.

M

Medical Payments Coverage (MedPay): Auto coverage that pays medical expenses for the policyholder and passengers after a crash regardless of fault, usually in relatively small limits. It sits alongside health insurance and can absorb deductibles and copays, and unlike personal injury protection it generally does not pay lost wages or replacement services. Availability varies by state, and in some places it is offered alongside personal injury protection rather than instead of it.

N

Named Insured: The person or people listed by name on the declarations page as the policyholder, who hold the rights and obligations under the contract. Only a named insured can change coverage, cancel the policy or receive the claim payment, though others such as household residents may still be covered. Adding or removing a spouse, a driver or a co-owner changes who is named, and can change the price.
Named Perils: A coverage basis under which only the causes of loss specifically listed in the policy are covered, and anything not on the list is not. Standard homeowners forms use it for personal property, listing causes such as fire, lightning, windstorm, theft and vandalism. Under this basis the policyholder has to show the loss came from a listed cause, which is the reverse of how an open perils basis works.
National Flood Insurance Program (NFIP): The federal flood insurance program run by FEMA, which offers flood policies through participating insurers in communities that adopt floodplain management rules. For one to four family homes it caps building coverage at $250,000 and contents coverage at $100,000, and contents are settled at actual cash value rather than replacement cost. Homeowners who need more than those limits can look to private flood insurers or to excess flood policies.
No-Fault Insurance: An auto insurance system in which each driver's own policy pays their medical costs after a crash, regardless of who caused it. It is paid through personal injury protection, and in exchange the right to sue the other driver is limited unless the injuries pass a threshold set by state law. Only a minority of states use the system, the thresholds differ among them, and states have both adopted and repealed no-fault requirements over time.
Non-Renewal: An insurer declining to continue a policy when the current term ends, rather than ending it mid-term. Unlike a cancellation it takes effect on the renewal date, and states require advance written notice, commonly 30 to 60 days, so the policyholder has time to arrange replacement coverage. Claims history, property condition, and an insurer withdrawing from a region are common reasons.

O

Open Perils: A coverage basis under which every cause of loss is covered except those the policy specifically excludes. Standard homeowners forms use it for the dwelling and other structures, with exclusions for flood, earth movement, and ordinary wear and tear. Sometimes called all risk, it puts the burden on the insurer to point to an exclusion in order to deny a claim, which is the reverse of a named perils basis.
Ordinance or Law Coverage: Coverage for the added cost of rebuilding to current building codes after a covered loss, which a standard policy does not otherwise pay. When an older home is damaged, code upgrades to wiring, plumbing or roof fastening can add substantially to the rebuild, and the policy would otherwise pay only to restore what was there. It can also pay to demolish and clear undamaged portions that a code requires to be torn down, and it is usually added by endorsement as a percentage of the dwelling limit.
Other Structures Coverage (Coverage B): The part of a homeowners policy covering structures on the property that are not attached to the house, such as a detached garage, shed, fence or in-ground pool. The limit is usually set as a percentage of the dwelling limit rather than chosen separately, and it can often be raised by endorsement. Structures used for business purposes or rented to others are commonly excluded or limited.

P

Permissive Use: The principle that auto coverage generally follows the car, so a licensed driver who borrows it with the owner's permission is usually covered. The owner's policy responds first, and a claim is charged against that policy rather than the borrower's. Drivers who live in the household, who are excluded by name, or who use the car for delivery or ride-hailing are treated differently, and the rules vary by policy and by state.
Personal Injury Protection (PIP): Auto coverage that pays medical expenses, and often lost wages, for the policyholder and passengers after a crash regardless of who was at fault. It is the core of no-fault auto systems, in which each driver's own policy handles their injuries first. Whether PIP is required, optional or unavailable depends on the state, and both the required limits and the list of covered expenses vary widely.
Personal Liability Coverage (Coverage E): The part of a homeowners policy that pays when a member of the household is legally responsible for injuring someone or damaging their property. It applies to incidents away from the home as well as on the premises, and it pays legal defense costs in addition to any settlement or judgment. Business activities and auto accidents are excluded and handled by other policies.
Personal Property Coverage (Coverage C): The part of a homeowners policy that covers belongings such as furniture, clothing, electronics and appliances, wherever they are kept. The limit is commonly set as a percentage of the dwelling limit rather than chosen directly. Categories such as jewelry, firearms, cash and collectibles are capped by internal sublimits, which can often be raised by scheduling the items individually.
Policy Limit: The maximum amount an insurer will pay under a coverage, stated per person, per claim, per occurrence or for the entire policy period. Costs above the limit fall to the policyholder. Auto liability is often written as split limits with separate caps for injuries per person, injuries per accident and property damage, while some policies use a single combined limit instead.
Premium: The amount charged for an insurance policy, billed monthly, every six months or annually depending on the insurer and the policy term. It is calculated from the coverages and limits selected, the deductibles chosen, and rating factors such as location, claims history and the vehicle or property being insured. Paying it keeps the policy in force, and missing it can lead to a lapse in coverage.
Proof of Loss: A sworn statement a policyholder gives the insurer detailing what was damaged or lost, when it happened, and what it was worth. Property policies commonly require it within a set number of days after the insurer asks for it, supported by documents such as receipts, photographs or repair estimates. Missing the deadline can delay payment and, in some states, jeopardize the claim entirely.
Property Damage Liability: The part of an auto policy that pays for damage the insured driver causes to someone else's property, most often another vehicle. It also applies to fences, buildings, guardrails and other fixed objects, and it covers legal defense if a claim turns into a lawsuit. It never pays for damage to the insured's own car, which is what collision coverage is for.

R

Recoverable Depreciation: The portion of a claim payment an insurer holds back for depreciation and releases once the repair or replacement is finished and documented. It applies on replacement cost policies, where the first payment covers the depreciated value and the balance follows after the work is done. Policies set a deadline for completing repairs and submitting receipts, and depreciation is not recoverable at all under an actual cash value policy.
Rental Reimbursement Coverage: Optional auto coverage that pays for a rental car or other transportation while a covered vehicle is being repaired after a claim. It is normally written as a daily allowance with a maximum number of days or a total cap, so a long repair can outlast the coverage. It applies only when the vehicle is out of service because of a covered loss, not for routine maintenance or mechanical breakdown.
Replacement Cost Value (RCV): A claim settlement method that pays what it costs to replace damaged property with new items of similar kind and quality, with no deduction for depreciation. Insurers commonly pay the depreciated amount first and release the remaining recoverable depreciation once the repair or replacement is finished and documented. Replacement cost policies cost more than actual cash value policies, and some still apply depreciation to roof surfaces or to specific categories of property.
Rideshare Coverage: An endorsement that extends a personal auto policy to driving for a ride-hailing or delivery platform, which the policy would otherwise exclude. Personal policies contain a livery exclusion that removes coverage while carrying passengers or goods for pay, and the platform's own insurance is thinnest while the app is on but no ride has been accepted. That gap is what the endorsement is meant to close, and availability and terms vary by insurer and by state.

S

SR-22: A form an insurer files with the state certifying that a driver carries at least the required liability coverage, usually after a serious violation or a lapse. It is a certificate of financial responsibility rather than a type of insurance, despite often being called SR-22 insurance. Which offenses require one, how long it must stay on file, and whether a state uses the form at all all vary, and Florida and Virginia use a similar filing called an FR-44 that requires higher limits.
Salvage Title: A title brand a state applies to a vehicle an insurer has declared a total loss, marking it as not roadworthy in its current condition. The damage threshold that triggers the brand is set by state law or by a total loss formula, so the same car can be branded in one state and not in another. A vehicle that is repaired and passes inspection usually receives a rebuilt title instead, and insurers may limit or decline collision and comprehensive coverage on either.
Scheduled Personal Property: An endorsement that insures specific high value items individually, listing each with its own limit rather than leaving it under a sublimit. Jewelry, watches, firearms, fine art, musical instruments and collectibles are the usual candidates, since standard policies cap those categories well below replacement cost. Scheduled items are commonly covered on an open perils basis and often without a deductible, and insurers may ask for an appraisal or a receipt.
Split Limits: Auto liability limits written as three separate maximums: bodily injury per person, bodily injury per accident, and property damage per accident. They appear on a declarations page in a form such as 25/50/25, where the numbers stand for thousands of dollars. The per person figure caps what any one injured party can collect and the per accident figure caps everyone combined, so a crash with several injuries can reach the second number quickly.
Sublimit: A cap inside a coverage that limits payment for a particular category of property or type of loss below the overall coverage limit. Homeowners policies apply them to jewelry, cash, firearms, business property and similar categories, so a large personal property limit does not mean each item is fully covered. Raising a sublimit generally requires scheduling the items or adding an endorsement.
Subrogation: The right of an insurer, after paying a claim, to pursue the party that caused the loss and recover what it paid out. If the recovery succeeds the insurer may return the policyholder's deductible, in whole or in part, out of the amount collected. Policies require the policyholder to cooperate and not to sign away the right to recover, which is why settling directly with an at-fault party can create problems.

T

Total Loss: A vehicle or property an insurer decides is not worth repairing, because the repair cost, sometimes combined with salvage value, meets or exceeds a threshold tied to its value. Instead of paying for repairs the insurer pays the actual cash value less the deductible. The threshold is fixed by state law in some places and left to insurer formula in others, and a totaled vehicle usually ends up with a branded or salvage title.

U

Umbrella Policy: A separate liability policy that pays after the limits on an underlying auto or homeowners policy are exhausted, usually sold in increments of one million dollars. Insurers normally require the underlying policies to carry specified minimum limits before they will write one. It covers liability rather than damage to the policyholder's own car or home, and some forms extend to claims such as libel or slander that the underlying policies exclude.
Underinsured Motorist Coverage (UIM): Auto coverage that pays the insured's remaining injury or damage costs when an at-fault driver carries liability limits too low to cover the loss. It applies after the other driver's liability limits are exhausted rather than in place of them. Availability, whether it can be rejected, and how it combines with the at-fault driver's limits all vary by state.
Underwriting: The process an insurer uses to decide whether to accept a risk, on what terms, and at what price. It draws on information such as claims history, the driving record or the condition of the property, the age and construction of the home or vehicle, and other factors permitted in that state. An application can be accepted, accepted with conditions or endorsements, or declined, and the same applicant can be underwritten differently by different insurers.
Uninsured Motorist Coverage (UM): Auto coverage that pays for the insured's injuries when the at-fault driver has no liability insurance or leaves the scene without being identified. Some states also offer an uninsured motorist property damage version that covers the vehicle itself. Many states either require this coverage or require insurers to offer it and obtain a written rejection, so the rules differ considerably from state to state.
Usage-Based Insurance (UBI): Auto insurance priced partly on driving behavior measured by a mobile app or a device in the vehicle rather than on traditional rating factors alone. Programs commonly track mileage, hard braking, rapid acceleration, speed and time of day, and some also flag phone handling while driving. What gets measured, whether a rate can rise as well as fall, and what the insurer may do with the data all vary by program and by state.

W

Water Backup Coverage: An endorsement covering damage when water or sewage backs up through drains or sewers, or when a sump pump fails, which standard policies exclude. It is separate from flood insurance and from the sudden pipe bursts a policy already covers, and it is normally sold with its own limit well below the dwelling limit. Limits, deductibles, and whether resulting mold is included vary by insurer and by state.
Wind and Hail Deductible: A separate deductible that applies to any wind or hail damage, not only to damage from a named storm, and is often stated as a percentage of the dwelling limit. Unlike a hurricane deductible it can be triggered by an ordinary thunderstorm, a tornado or a hail event with no tropical system involved. It appears in hail-prone inland regions as well as coastal ones, and in some areas wind is excluded from the homeowners policy entirely and written through a separate wind pool.