Insurance Terms Glossary

A

Actual Cash
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.

Insured
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.