Insurance terms, explained

Plain definitions of the terms that appear on a policy, grouped by the kind of policy they show up on. Each one describes what the term means, not what to do about it.

Auto insurance

20 terms

Bodily injury liability: Pays for injuries you cause to other people in an at-fault accident, up to your policy limits. It does not pay for your own injuries.
Claim: A request you make to your insurance company to pay for a covered loss.
Collision: Pays to repair or replace your own vehicle after a crash, regardless of fault, minus your deductible.
Comprehensive: Pays for damage to your vehicle from non-crash events like theft, fire, hail, or a fallen tree, minus your deductible.
Coverage: A part of your policy that pays for a specific kind of loss, up to a limit.
Deductible: The amount you pay out of your own pocket on a claim before your insurance starts paying.
Endorsement: An add-on or change to your policy that adds, removes, or adjusts coverage. Also called a rider.
Exclusion: Something your policy specifically does not cover.
In force: Active and providing coverage, because the policy is current and paid.
Insured: A person or thing your policy protects.
Liability: Coverage that pays for injury or damage you are responsible for causing to someone else.
Limit: The most your policy will pay for a covered loss.
Med-pay: Medical payments coverage: pays medical bills for you and your passengers after an accident, regardless of fault, up to a set limit.
Out-of-pocket: Money you pay yourself, that your insurance does not cover.
Policyholder: The person who owns the insurance policy.
Premium: The amount you pay for your insurance, usually each month or once a year.
Sub-limit: A smaller, separate cap inside a coverage that applies to certain items or losses.
Sublimit: A smaller, separate cap inside a coverage that applies to certain items or losses.
Underwriting: How an insurer decides whether to cover you and at what price, based on the risk.
Uninsured motorist: Covers your injuries when the at-fault driver has no insurance. Many policies also cover an underinsured driver whose limits are too low.

Home insurance

21 terms

Actual cash value: Pays replacement cost minus depreciation for age and wear, so older items are paid at less than what it costs to replace them.
Claim: A request you make to your insurance company to pay for a covered loss.
Coverage: A part of your policy that pays for a specific kind of loss, up to a limit.
Coverage A: The dwelling limit: the most your policy will pay to rebuild the main structure of your home.
Deductible: The amount you pay out of your own pocket on a claim before your insurance starts paying.
Endorsement: An add-on or change to your policy that adds, removes, or adjusts coverage. Also called a rider.
Exclusion: Something your policy specifically does not cover.
Hurricane deductible: A separate, usually percentage-based deductible that applies to hurricane damage, often larger than your standard deductible.
In force: Active and providing coverage, because the policy is current and paid.
Insured: A person or thing your policy protects.
Law and ordinance: Helps pay the extra cost of rebuilding to current building codes after a covered loss, which a basic policy may exclude.
Liability: Coverage that pays for injury or damage you are responsible for causing to someone else.
Limit: The most your policy will pay for a covered loss.
Out-of-pocket: Money you pay yourself, that your insurance does not cover.
Policyholder: The person who owns the insurance policy.
Premium: The amount you pay for your insurance, usually each month or once a year.
Replacement cost: Pays to repair or replace damaged property with new materials of like kind, without subtracting for age or wear.
Sub-limit: A smaller, separate cap inside a coverage that applies to certain items or losses.
Sublimit: A smaller, separate cap inside a coverage that applies to certain items or losses.
Underwriting: How an insurer decides whether to cover you and at what price, based on the risk.
Water backup: Coverage for water that backs up through sewers or drains, or overflows from a sump pump. It is a small add-on with its own limit, separate from flood.

Renters insurance

22 terms

Actual cash value vs replacement cost: Two ways a policy can value covered belongings. Actual cash value subtracts depreciation for age and wear, while replacement cost uses the cost of a new item of like kind without that subtraction.
Aggregate limits: The most a policy will pay in total for a category of covered losses during the policy period, even when more than one loss occurs.
Claim: A request you make to your insurance company to pay for a covered loss.
Coverage: A part of your policy that pays for a specific kind of loss, up to a limit.
Deductible: The amount you pay out of your own pocket on a claim before your insurance starts paying.
Endorsement: An add-on or change to your policy that adds, removes, or adjusts coverage. Also called a rider.
Exclusion: Something your policy specifically does not cover.
In force: Active and providing coverage, because the policy is current and paid.
Insured: A person or thing your policy protects.
Liability: Coverage that pays for injury or damage you are responsible for causing to someone else.
Limit: The most your policy will pay for a covered loss.
Loss of use: Pays extra living costs, such as a hotel or higher rent, if a covered loss makes your rental unlivable while it is repaired.
Medical payments to others: Pays limited medical bills for a guest injured in your rental, regardless of fault, without needing a lawsuit.
Out-of-pocket: Money you pay yourself, that your insurance does not cover.
Personal liability: Pays if you are found responsible for injuring someone or damaging their property, up to your policy limit. It can also cover a legal defense.
Personal property: Coverage for your belongings, like furniture, clothing, and electronics, up to a limit you choose, if they are damaged or stolen by a covered event.
Policyholder: The person who owns the insurance policy.
Premium: The amount you pay for your insurance, usually each month or once a year.
Scheduled property endorsement: An add-on that lists specific valuable items separately and states the coverage terms and limits that apply to them.
Sub-limit: A smaller, separate cap inside a coverage that applies to certain items or losses.
Sublimit: A smaller, separate cap inside a coverage that applies to certain items or losses.
Underwriting: How an insurer decides whether to cover you and at what price, based on the risk.

Flood insurance

20 terms

Base flood elevation: The height floodwater is expected to reach in a major flood. How your home sits relative to it affects your rates.
Building coverage: Flood coverage for the physical structure of your home and its built-in systems.
Claim: A request you make to your insurance company to pay for a covered loss.
Contents coverage: Flood coverage for your personal belongings. It is purchased separately from building coverage.
Coverage: A part of your policy that pays for a specific kind of loss, up to a limit.
Deductible: The amount you pay out of your own pocket on a claim before your insurance starts paying.
Endorsement: An add-on or change to your policy that adds, removes, or adjusts coverage. Also called a rider.
Exclusion: Something your policy specifically does not cover.
Flood zone: A FEMA map designation for an area flood risk. It affects your rates and whether a lender requires flood insurance.
In force: Active and providing coverage, because the policy is current and paid.
Increased cost of compliance: Extra flood coverage that helps pay to elevate, relocate, or demolish a repeatedly flooded building to meet floodplain rules.
Insured: A person or thing your policy protects.
Liability: Coverage that pays for injury or damage you are responsible for causing to someone else.
Limit: The most your policy will pay for a covered loss.
Out-of-pocket: Money you pay yourself, that your insurance does not cover.
Policyholder: The person who owns the insurance policy.
Premium: The amount you pay for your insurance, usually each month or once a year.
Sub-limit: A smaller, separate cap inside a coverage that applies to certain items or losses.
Sublimit: A smaller, separate cap inside a coverage that applies to certain items or losses.
Underwriting: How an insurer decides whether to cover you and at what price, based on the risk.

Umbrella insurance

17 terms

Attachment point: The dollar level where your umbrella policy starts paying, which sits at the top of your underlying home or auto liability limit.
Claim: A request you make to your insurance company to pay for a covered loss.
Coverage: A part of your policy that pays for a specific kind of loss, up to a limit.
Deductible: The amount you pay out of your own pocket on a claim before your insurance starts paying.
Endorsement: An add-on or change to your policy that adds, removes, or adjusts coverage. Also called a rider.
Exclusion: Something your policy specifically does not cover.
In force: Active and providing coverage, because the policy is current and paid.
Insured: A person or thing your policy protects.
Liability: Coverage that pays for injury or damage you are responsible for causing to someone else.
Limit: The most your policy will pay for a covered loss.
Out-of-pocket: Money you pay yourself, that your insurance does not cover.
Policyholder: The person who owns the insurance policy.
Premium: The amount you pay for your insurance, usually each month or once a year.
Sub-limit: A smaller, separate cap inside a coverage that applies to certain items or losses.
Sublimit: A smaller, separate cap inside a coverage that applies to certain items or losses.
Underlying limit: The liability limit your home or auto policy must carry before the umbrella applies. Falling below it can leave a gap.
Underwriting: How an insurer decides whether to cover you and at what price, based on the risk.

Pet insurance

18 terms

Annual limit: The most your pet plan will reimburse in a policy year.
Claim: A request you make to your insurance company to pay for a covered loss.
Coverage: A part of your policy that pays for a specific kind of loss, up to a limit.
Deductible: The amount you pay out of your own pocket on a claim before your insurance starts paying.
Endorsement: An add-on or change to your policy that adds, removes, or adjusts coverage. Also called a rider.
Exclusion: Something your policy specifically does not cover.
In force: Active and providing coverage, because the policy is current and paid.
Insured: A person or thing your policy protects.
Liability: Coverage that pays for injury or damage you are responsible for causing to someone else.
Limit: The most your policy will pay for a covered loss.
Out-of-pocket: Money you pay yourself, that your insurance does not cover.
Policyholder: The person who owns the insurance policy.
Pre-existing condition: A health issue that showed signs before coverage began. These are typically not covered.
Premium: The amount you pay for your insurance, usually each month or once a year.
Reimbursement percentage: The share of covered vet bills the plan pays back after your deductible, such as 70%, 80%, or 90%.
Sub-limit: A smaller, separate cap inside a coverage that applies to certain items or losses.
Sublimit: A smaller, separate cap inside a coverage that applies to certain items or losses.
Underwriting: How an insurer decides whether to cover you and at what price, based on the risk.

Life insurance

21 terms

Beneficiary: The person or entity you name to receive the death benefit.
Cash value: A savings component in some permanent policies that grows over time and can be borrowed against. Term policies have none.
Claim: A request you make to your insurance company to pay for a covered loss.
Contestability period: An early window, often two years, during which the insurer can investigate and deny a claim for misstatements on the application.
Coverage: A part of your policy that pays for a specific kind of loss, up to a limit.
Death benefit: The amount paid to your beneficiaries when the insured person dies, as long as the policy is in force.
Deductible: The amount you pay out of your own pocket on a claim before your insurance starts paying.
Endorsement: An add-on or change to your policy that adds, removes, or adjusts coverage. Also called a rider.
Exclusion: Something your policy specifically does not cover.
In force: Active and providing coverage, because the policy is current and paid.
Insured: A person or thing your policy protects.
Level term: A period during which your premium and death benefit stay the same. Premiums often rise sharply after it ends.
Liability: Coverage that pays for injury or damage you are responsible for causing to someone else.
Limit: The most your policy will pay for a covered loss.
Out-of-pocket: Money you pay yourself, that your insurance does not cover.
Policyholder: The person who owns the insurance policy.
Premium: The amount you pay for your insurance, usually each month or once a year.
Rider: An optional add-on that changes or extends coverage, such as a waiver of premium or an accelerated death benefit.
Sub-limit: A smaller, separate cap inside a coverage that applies to certain items or losses.
Sublimit: A smaller, separate cap inside a coverage that applies to certain items or losses.
Underwriting: How an insurer decides whether to cover you and at what price, based on the risk.

Business insurance

22 terms

Building coverage: Commercial property coverage for the insured building, up to the limit shown in the policy.
Business personal property: Commercial property coverage for items the business owns or uses, such as furniture, equipment, inventory, and supplies.
Claim: A request you make to your insurance company to pay for a covered loss.
Coinsurance: A commercial property condition that can reduce a payment when the insured value is below the percentage stated in the policy.
Coverage: A part of your policy that pays for a specific kind of loss, up to a limit.
Deductible: The amount you pay out of your own pocket on a claim before your insurance starts paying.
Employers liability: Coverage for certain employee injury or illness lawsuits that fall outside workers compensation benefits, subject to stated limits.
Endorsement: An add-on or change to your policy that adds, removes, or adjusts coverage. Also called a rider.
Exclusion: Something your policy specifically does not cover.
General liability aggregate limit: The most the policy will pay for covered general liability during the policy period, even when more than one occurrence takes place.
General liability per-occurrence limit: The most the policy will pay for covered general liability arising from one occurrence, subject to the policy terms and aggregate limit.
In force: Active and providing coverage, because the policy is current and paid.
Insured: A person or thing your policy protects.
Liability: Coverage that pays for injury or damage you are responsible for causing to someone else.
Limit: The most your policy will pay for a covered loss.
Out-of-pocket: Money you pay yourself, that your insurance does not cover.
Policyholder: The person who owns the insurance policy.
Premium: The amount you pay for your insurance, usually each month or once a year.
Sub-limit: A smaller, separate cap inside a coverage that applies to certain items or losses.
Sublimit: A smaller, separate cap inside a coverage that applies to certain items or losses.
Underwriting: How an insurer decides whether to cover you and at what price, based on the risk.
Workers compensation: Coverage for benefits required by law when an employee has a covered work-related injury or illness.

These are general definitions. Your own policy is what governs your coverage, and the same term can be defined differently from one policy to the next. Read your own policy to see what these terms say in your document, cited to the page.