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Insurance Terms Glossary



A

Actual Cash Value

The value of property that is lost or damaged; usually determined as replacement cost minus depreciation.

Agent

An individual who sells insurance policies either independently or on behalf of an insurance company. Independent agents have relationships with multiple companies; captive agents represent only one company.

Appraisal

An estimate, usually performed by an impartial expert, of the value of property or the extent of property damage.

At-Fault

The party that is legally liable for damages resulting from an accident or incident.

Assets

Items that, in total, create the value of an individual’s owned property.

B

Beneficiary

The individual or entity that is intended to receive the benefit of a life insurance policy, annuity, will, trust, or another contract.

Binder

A temporary form of agreement that declares there is an insurance policy in effect. Binders can be employed when the policy is not immediately able to be issued or endorsed. The intended insured is still protected.

Bodily Injury

A physical injury to a person, including disease or sickness.

C

Cancellation

Termination of an insurance contract before the date the policy is supposed to end.

Captive Agent

An individual who is only able to sell and service insurance for a specific company.

Carrier

An insurance company. See insurer.

Catastrophic Event

A disastrous event (such as a tornado, hurricane, flood, hailstorm, or airplane crash) that affects a specific geographic area and causes significant loss, including property damage, injury, and/or death, to a number of people.

Claim

A policyholder’s request for the insurance company to provide compensation for covered losses.

Claimant

The individual submitting a claim.

Commercial Lines

Insurance policies for businesses and business professionals.

Conditions

In the insurance contract, the outline of the duties and responsibilities of the insured and the insurer.

Coverage

In the insurance contract, the benefits and protection that are provided to the insured.

D

Damage

Harm or loss to a person or property.

Damages

Money that one party has a legal obligation to pay to another.

Date of Issue

The date when an insurance policy is issued and coverage begins.

Declarations

In the insurance policy, statements that identify the policyholder, the property covered by the policy, the policy period, the amount of coverage, and the premium amount.

Deductible

The portion of a claim that the insured must pay out of pocket before the insurer will pay.

Depreciation

Property’s decrease in value due to wear and tear, time, or other causes. Typically not considered an insurable loss.

Direct Loss

Loss that is caused by a covered peril.

Discount

A reduction to a policyholder’s premium amount if they maintain certain practices or fulfill certain conditions that result in reduced risk for the insurer.

E

Endorsement

In the insurance policy contract, any addition or amendment that adjusts the coverage or changes the policy’s terms.

Exclusion

In the insurance policy contract, a provision that indicates the terms in which coverage may be limited or denied.

Expiration Date

The date when an insurance policy’s coverage runs out.

Exposure

The policyholder’s risk of possible loss.

H

Hazard

Any condition or circumstance that increases the chance of a loss occurring.

I

Independent Agent

An individual who sells and services insurance policies on behalf of multiple companies.

Indirect Loss

Loss that results from but is not directly caused by a covered peril.

Insurance

A system in which risk is transferred from an individual or business to an insurance company, which pools the risks of multiple people or businesses together. The insurance company agrees to reimburse policyholders for losses in exchange for the payment of a premium.

Insured

The person(s) or parties covered by an insurance policy. See policyholder.

Insurer

A company that provides insurance coverage and pays for losses in the event of a claim.

L

Liability

A person or party’s possibility of financial responsibility.

Limit

Defined in the insurance policy, the maximum amount an insurer will pay for a covered loss.

Loss

Any property damage or bodily injury that is unplanned and undesired and results in measurable financial loss.

M

Market Value

The price that property could be sold for in the open market.

Mitigation

Practices intended to reduce the amount of possible loss or prevent of the likelihood of loss.

N

Named Insured

In the insurance contract, the person or entity listed on the declarations page. See policyholder.

Named Perils

In the insurance contract, hazards that are explicitly listed as covered.

O

Occurrence

An event, accident, or exposure to harmful conditions which results in unexpected bodily injury or property damage.

P

P&C

Property and Casualty Insurance. A broad term to encompass types of insurance that protect the things you own (such as a home or vehicle) and offer liability protection if you’re found legally responsible for damage or injury to another person’s property or body.

Peril

A hazard that can cause loss such as property damage or bodily injury.

Personal property

Property that does not fall under the category of real property and can be easily moved, such as furniture and other household items.

Physical damage

Visible damage to a vehicle, residential property, or personal property.

Policy

A written contract that makes an insurance agreement legal.

Policy Change

Any change made to your insurance contract during the policy period.

Policyholder

See named insured.

Preferred Risk

An insured person or entity, or an applicant for insurance, who presents a lower likelihood of risk than the standard insurance applicant.

Premium

The money that an insurance company charges in exchange for providing coverage.

Property

Anything that can be valued. Includes real property and personal property.

Proximate Cause

Events covered under the insurance policy that are the immediate cause of loss or damage.

R

Real property

Property that consists of land and the permanent structures and items on it, including buildings, equipment, and machinery.

Replacement cost (RC)

The cost of replacing damaged or destroyed property without depreciation factored in.

Risk

The possibility of loss due to a peril.

Risk Management

Identifying exposures to loss and treating those exposures.

Risk Transfer

The act of transferring the possible financial consequences of loss to another party, like an insurance company.

S

SR-22

A certificate required by the state that verifies that a person maintains auto liability coverage.

Standard Risk

An insured person or entity, or an applicant for insurance, who presents a normal level of risk and is deemed insurable at standard rates.

U

Underwriting

An insurer’s process of examining risk and determining whether or not it will provide coverage for an insurance applicant.

V

Vandalism

Property defacement or destruction.

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