Insurance Glossary
Act of God — An accident or event resulting from natural causes, without human intervention or agency, and one that could not have been prevented by reasonable foresight or care—for example, flood, lightning, tornado, earthquake, or a storm.
Actual Cash Value (ACV) – The “Actual Cash Value” of your property is calculated by subtracting any depreciation from its current replacement cost.
Adjuster – “Adjusters” are individuals employed by insurers to help evaluate losses before settling claim. “Public insurance adjusters” may be independently hired by homeowners, but the policyholder must pay out of pocket for such appraisals.
Agent/Agency – Sells, solicits, or negotiates insurance for compensation and represents or acts on the behalf of another party.
Application – Insurance companies require the filling out of a form called an “application” to gather information about you and your home. This information will be used to decide if they will issue you a policy, and if so, on what terms.
Appraisal – An “appraisal” is conducted by an authorized person who is qualified to determine property value and damaged property value.
Binder - An oral or written agreement to provide temporary insurance coverage until a form written policy is issued.
Broad Form Coverage - Coverage for causes of loss due to falling objects (trees or other objects that may fall onto a structure), sudden and accidental water damage (sudden leaks, may for example, damage carpets, floors, or ceilings).
Cancellation – If an insurance policy is terminated by either the insured or the insurer before the renewal date, this is “cancellation”.
Catastrophic Loss - Losses incurred as a result of a hurricane, earthquake, fire, or other major storm.
Claim – A “claim” is a request from the policyholder for reimbursement from an insurance company for a loss to property, according to the terms of their home insurance policy.
Claimant – The “claimant” is the person who files the insurance claim.
Damages – Money awarded to a party who has suffered bodily injury or property damage for which another party is legally responsible.
Declaration page – Insurance policy information page outlining specific details about the insured and the subject of the insurance.
Deductible – A portion of a covered loss that is subtracted from the amount the insurer would otherwise be obligated to pay the insured.
Depreciation – The allowance for physical wear and tear or technological or economic obsolescence.
Earned premium – The portion of premium that applies to the expired part of the policy period. Insurance premiums are payable in advance but the insurance company does not fully earn them until the policy period expires
Effective date – The “effective date” is when an insurance policy takes effect.
Emergency Measures – Those repairs or other actions taken to protect the insured and the insured's property from further loss when damaged or destroyed by a covered peril.
Endorsement – An “endorsement”, also called a “rider”, consists of a written agreement attached to a policy which expands or limits the payable benefits described therein.
Escrow – Money held by a third party until specified conditions are met is referred to as being in “escrow”.
Exclusion – An “exclusion” is an insurance policy provision that specifically denies coverage for certain perils, people, property, or locations.
Expiration date – The “expiration date” is when an insurance policy expires.
Field Claim Representative – An insurer employee who handles claims that cannot be handled easily by phone, mail, or e-mail.
First-party claim – A “first party claim” occurs when the primary insured files against his or her own insurance policy.
General Damages – Compensatory damages awarded for losses that do not have a specific economic value, such as pain and suffering.
Guaranty fund – A state fund that provides a system to pay the claims of insolvent insurers, generally funded by assessments collected from all insurers licensed in the state.
Grace period – The “grace period” is the number of days (usually 31) that a policy remains in force after if a premium comes due but not paid. The policy will lapse retroactively to the date the premium was originally due unless the premium is paid before the end of the grace period (or the insured dies.)
Group of companies – A “group of companies" refers to several insurance companies operating under common ownership (and often common management.)
Hazard – A condition that increases the frequency or severity of a loss
Homeowners Insurance — A "package" policy providing coverage against property and liability perils facing homeowners.
Hurricane Deductible — A percentage or dollar amount added to an insurance policy to limit an insurer’s exposure to loss from a named storm
Incurred Losses– The sum of paid losses and changes in loss reserves for a particular period.
Independent adjuster – An “independent adjuster” is a third party which charges a fee to adjust a claim.
Inflation protection – “Inflation protection” will automatically adjust your policy limits to account for increased costs of property repair or replacement.
Insurable interest – A financial or emotional interest in a property or person insured by a third party is called “insurable interest”.
Insured – The “insured” is the policyholder who is protected in case of a loss or claim.
Insurer – The insurance company is the “insurer.”
Justified complaint – A “justified complaint” is one which exposes an apparent violation of a policy provision, contract provision, rule, or statute. It may also show that a practice or service could be regarded as below customary business standards.
Lapse – A “lapse” in regard to an insurance policy means that the renewal premium was not paid by the end of the grace period, causing insurance coverage to be terminated retroactively to the premium due date.
Liability coverage – Losses for which an insured is legally liable require “liability coverage” – this can protect you against financial loss if you are found legally responsible for someone else’s injury or property damage.
Limited Coverage – This states special coverage limit items such as a loss of jewelry resulting from theft, may have a limit of coverage.
Limit of Liability – The maximum amount for which an insurance company may be held liable, as established in the contract.
Loss – The “loss” is the amount of the claim as determined by the adjuster; the insurance company will pay the loss less the deductible.
Loss of use – A homeowners and renters insurance policy may reimburse policyholders for “loss of use”, including housing, food, and other essentials associated with having to live elsewhere if their home has been subject to a disaster.
Loss history – The number of insurance claims previously filed by a policyholder makes up their “loss history”.
Market value – The current value of a home and land is the “market value”.
Material misrepresentation – A misstatement in an application form that is significant and could have caused the insurer to reject said application is called a “material misrepresentation.”
Named Insured – The policyholder whose name(s) appears on the declarations page of an insurance policy.
Non-renewal – A “non-renewal” decision by an insurance company is their prerogative to not renew a policy.
Ordinance of Law coverage — Coverage for the additional loss caused by the enforcement of laws that regulate building repair or construction.
Peril – A “peril” refers to any of many and varied risks or causes of loss such as a fire, windstorm, flood, or theft. A named-peril policy will provide coverage only for the risks named in the policy. An all-risk policy specifically excludes any perils not covered, and covers all other causes of loss.
Personal property – All tangible, temporary or movable property other than land is “personal property” (items such as electronics, furniture, jewelry, etc.)
Policy – The “policy” refers to the contract between the insured and insurer.
Policy owner – The “policy owner” is person or party who owns the policy; they usually pay the premiums and are the only one allowed to make changes to the policy, whether they are the insured, the beneficiary, or another person.
Policy period – The “policy period” is the effective dates of the policy from its initial approval to its expiration date.
Premium – The “premium” is the amount paid by an insured for their insurance policy.
Property damage – “Property damage” means any physical damage caused to property, normally resulting in its devaluation.
Rates —The cost of a unit of insurance as determined by insurance companies and state regulators. The rate serves as the basis for the premium.
Refund – A “refund” refers to an amount of money returned to the policyholder (for case in which the insurance company has not earned out the premium or the insured has been judged to have overpaid their premium.)
Reinsurance – A contractual agreement that transfers some or all of the potential costs of insured loss exposures from policies written by one insurer to another insurer.
Reinstatement – If an insurance policy lapses because of nonpayment of renewal premiums, the company may be willing to do a “reinstatement” upon payment of outstanding balances.
Renewal – A “renewal” is the continuation of a policy after its expiration date; this may be the same policy or changes may be made.
Renters insurance – “Renters insurance” covers a policyholder’s belongings against perils and also provides for personal liability coverage.
Replacement Cost – The cost to repair or replace property using new materials of like kind and quality with no deduction for depreciation.
Residual market – Some insurers exist to provide coverage for the “residual market” – those in need of insurance who cannot purchase it from traditional companies.
Return premium – The “return premium” is the amount which may be returned to an insured for amending a policy or canceling before the term is up.
Rider – A “rider” or “endorsement” is a written agreement attached to the policy which can expand or limit benefits otherwise payable under the policy.
Risk — This word has two meanings for insurers: (1) the chance of loss, such as from a peril; and (2) the person or entity that is insured by a policy.
Single interest insurance – “Single interest insurance” may be taken out by a mortgage company or lender, and provides protection only for the policy owner, not the homeowner.
Special Form - A policy that provides coverage for any direct loss to property unless the loss is caused by a peril specifically excluded.
Special Provisions – These state additional limits, conditions and exclusions that may apply to a policy.
Staff adjuster – A “staff adjuster” is a member of an insurance company’s claims department.
Subrogation – The right held by most insurance carriers to legally pursue a third party who caused an insurance loss. This allows recovery of the amount of the claim paid by the insurance carrier to the insured for the loss, without making the homeowner wait to have their claim handled by the third party.
Surcharge – An “surcharge” can be any one of many potential extra charges added to your premium by an insurance company.
Third-party claim – A “third party claim” is filed against another person’s insurance policy.
Underwriter – The “underwriter” is responsible for reviewing an application for insurance to decide if the applicant is acceptable and to set a premium rate.
Underwriting – The “underwriting” process determines if an insurance company will accept or reject an application for a policy.
Unearned premium – The “unearned premium” is the amount paid to the insurance company allocated to future monthly coverage premiums. If an insurance policy were to be canceled, the company would return this portion of paid funds.
Wind Deductible — A separate percentage or dollar amount higher deductible provision that applies to loss caused by wind or hail