Helpful insurance terms you should know
Sometimes, it feels like insurance companies speak a different language. There is a lot of industry-specific jargon that can make the process of purchasing insurance coverage feel intimidating. But fear not, this glossary of common insurance terms can be your translator and make you fluent fast.
General Terms:
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Actual cash value – The value of what is being insured as calculated by an insurance company.
- Agent – A professional who discusses a client’s insurance needs with them and provides pricing for insurance policies. Agents are typically contracted to represent one or more insurer.
- Appraisal – The assessed value of an insured item as determined by a third-party professional.
- Broker – A professional who identifies, negotiates for and secures insurance on behalf of a client. Compared to an insurance agent, a broker is independent and can negotiate with multiple insurers.
- Cancellation - The termination of insurance coverage before the expiration of the policy. This action can be taken by the insured or the insurer.
- Carrier - The insurance company that underwrites and provides the insurance policy. The carrier assumes the financial risk associated with the policy.
- Claim - A formal request made to the insurance company for payment involving the loss or damage of an item covered by a policy.
- Coverage – The amount of protection offered by an insurance policy.
- Declaration of Insurance – A document that includes an overview of essential policy information. Also known as declarations page(s).
- Deductible - The amount of money the insured party pays out of their own pocket before their insurance kicks in to help cover costs.
- Effective date – The date when insurance coverage starts.
- Endorsement – An amendment that customizes an insurance policy. It can result in a change in the insurance cost. Also known as a rider.
- Liability insurance - Coverage for when the insured party injures someone or damages their property.
- Premium – The cost to keep an insurance policy active. It is typically paid monthly or annually.
- Subrogation - Subrogation is the process by which an insurance company seeks reimbursement from a third party for a claim it has already paid out.
- Term – The length of time the insurance coverage will be in effect.
Homeowners Insurance Terms:
- Additional insured – People other than the policy holder who are covered by the insurance.
- Additional living expense – Insurance coverage that assists with living costs if a person is displaced from their home.
- Personal property – The belongings inside and outside of the insured party’s home such as clothing, furniture and electronics.
- Replacement Cost Value – The cost to replace an insured item currently.
Auto Insurance Terms:
- Casualty insurance – Coverage for individuals, employers and businesses for the loss of property, liabilities or damages.
- Collision coverage – The repair or replacement of a car after an accident. This may be required for leased or financed cars.
- Comprehensive coverage – Insurance for non-collision damages.
- Gap insurance – Coverage for the difference between what is owed on a vehicle and the current value if it is totaled.
- Rental reimbursement coverage – An insurance option that assists with the cost of a rental car while the insured vehicle is repaired.