Insurance jargon is intentionally complex. This glossary defines every term you will encounter when comparing policies, reading your declarations page, or filing a claim. Bookmark this page for reference throughout the insurance shopping process.
A Through D Insurance Terms
Actual Cash Value is the replacement cost of your property minus depreciation and is the default for most policies unless replacement cost is specified. Additional Living Expenses coverage pays for hotel, meals, and other costs if you cannot live in your home due to a covered loss. An Agent is a licensed professional who sells insurance policies and can be captive working for one insurer or independent representing multiple insurers. A Beneficiary is the person who receives the death benefit from a life insurance policy. A Claim is a formal request to your insurance company for payment based on a covered loss. Coinsurance is your percentage share of costs after meeting your deductible, typically 20 percent. A Copay is a fixed dollar amount you pay for a covered health care service. A Deductible is the amount you pay out-of-pocket before your insurance coverage begins paying.
E Through L Insurance Terms
An Endorsement is an amendment to your insurance policy that changes the terms or coverage, also called a rider. An Exclusion is a provision that eliminates coverage for specific perils, losses, or people. A Floater is a separate policy or endorsement covering personal property beyond standard homeowners limits. Gap Insurance pays the difference between your car's actual cash value and what you owe on your loan. A Grace Period is typically 30 days after your payment due date during which you can pay without losing coverage. Indemnity is compensation for damage or loss that restores you to your pre-loss financial position. Liability Coverage is insurance that covers your legal responsibility for injuries or property damage to others. Policy Limits are the maximum amount your insurer will pay for a covered claim.
M Through R Insurance Terms
A Material Misrepresentation is providing false information on an insurance application and can void your policy entirely. Named Peril coverage only covers losses specifically listed in the policy versus open peril which covers all risks not excluded. No-Fault Insurance is a system where each driver's own insurance pays for their own injuries regardless of who caused the accident. The Out-of-Pocket Maximum is the most you will pay for covered services in a plan year before your insurer pays 100 percent. A Peril is a specific cause of loss such as fire, theft, or wind. A Premium is your regular payment to the insurance company for coverage. Property Damage Liability covers damage you cause to someone else's property.
S Through Z Insurance Terms
Salvage is what remains of your property after a total loss and insurers often take ownership of salvage after paying a total loss claim. SR-22 is a certificate your insurer files with the DMV confirming you have minimum required liability coverage, typically required after a DUI or serious violation for 3 years. Subrogation is your insurer's right to pursue a third party that caused the loss to recover money paid on your claim. A Total Loss occurs when the cost to repair your vehicle exceeds its actual cash value. An Umbrella Policy provides additional liability coverage above the limits of your auto, home, and other policies. Underwriting is the process insurers use to evaluate risk and determine whether to issue a policy and at what premium. A Waiting Period is the time after purchasing a policy before certain coverage becomes effective.