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Insurance Terms

Below is a helpful list of insurance terms that can aid you in your understanding of policies, industry standards, and other information.

  • Actual Cash Value

    Repayment value for indemnification due to loss or damage of property; in most cases it is replacement cost minus depreciation

  • Adjuster

    A person who investigates claims and recommends settlement options based on estimates of damage and insurance policies held.

  • Agent

    An individual who sells, services, or negotiates insurance policies either on behalf of a company or independently.

  • Aggregate

    The maximum dollar amount or total amount of coverage payable for a single loss, or multiple losses, during a policy period, or on a single project.

  • ALAE

    An estimate of the claims settlement associated with a particular claim or claims.

  • All-Risk

    Also known as open peril, this type of policy covers a broad range of losses. The policy covers risks not explicitly excluded in the policy contract.

  • Appraisal

    An estimate of value.

  • Assessed Value

    Estimated value for real or personal property established by a taxing entity

  • Assumed Reinsurance

    The assumption of risk from another insurance entity within a reinsurance agreement or treaty.

  • Authorized Reinsurance

    Reinsurance placed with a reinsurer who is licensed or otherwise allowed to conduct reinsurance within a state.

  • Bodily Injury

    Physical injury including sickness or disease to a person.

  • Burglary and Theft

    Coverage for property taken or destroyed by breaking and entering the insured’s premises, burglary or theft, forgery or counterfeiting, fraud, kidnap and ransom, and off-premises exposure.

  • Catastrophe Loss

    A large magnitude loss with little ability to forecast.

  • Claim

    A request made by the insured for insurer remittance of payment due to loss incurred and covered under the policy agreement.

  • Conditions

    Requirements specified in the insurance contract that must be upheld by the insured to qualify for indemnification.

  • Date of Issue

    Date when an insurance company issues a policy.

  • Declarations

    Policy statements regarding the applicant and property covered such as demographic and occupational information, property specifications and expected mileage per year.

  • Deductible

    Portion of the insured loss (in dollars) paid by the policyholder

  • Direct Incurred Loss

    Loss whereby the proximate cause is equivalent to the insured peril.

  • Direct Loss

    Damage to covered real or personal property caused by a covered peril.

  • Dwelling Property/Personal Liability

    A special form of package policy composed of dwelling fire and/or allied lines, and personal liability insurance.

  • Earthquake

    Property coverages for losses resulting from a sudden trembling or shaking of the earth,  including that caused by volcanic eruption. Excluded are losses resulting from fire, explosion, flood or tidal wave following the covered event.

  • Effective Date

    Date at which an insurance policy goes into force.

  • Endorsement

    An amendment or rider to a policy adjusting the coverages and taking precedence over the general contract.

  • Exposure

    Risk of possible loss.

  • FAIR Plan - Fair Access to Insurance Requirements

    Physical injury including sickness or disease to a person.

  • Federal Flood Insurance

    Coverage for property taken or destroyed by breaking and entering the insured’s premises, burglary or theft, forgery or counterfeiting, fraud, kidnap and ransom, and off-premises exposure.

  • FEMA - Federal Emergency Management Agency

    An independent agency, tasked with responding to, planning for, mitigating and recovery efforts of natural disasters.

  • Financial Reporting

    Insurance companies are required to maintain records and file annual and quarterly financial statements with regulators in accordance with statutory accounting principles (SAP). Statutory rules also govern how insurers should establish reserves for invested assets and claims and the conditions under which they can claim credit for reinsurance ceded.

  • Fire

    Coverage protecting the insured against the loss to real or personal property from damage caused by the peril of fire or lightning, including business interruption, loss of rents, etc.

  • Flood

    Coverage protecting the insured against loss or damage to real or personal property from flood. Notice: flood insurance is a separate policy from your homeowners/dwelling policy.

  • Hazard

    Circumstance which tends to increase the probability or severity of a loss.

  • Homeowners Insurance

    A package policy combining real and personal property coverage with personal liability coverage. Coverage applicable to the dwelling, appurtenant structures, unscheduled personal property and additional living expense are typical.

  • Indemnity, Principle of

    A general legal principle related to insurance that holds that the individual recovering under an insurance policy should be restored to the approximate financial position he or she was in prior to the loss. Legal principle limiting compensation for damages be equivalent to the losses incurred.

  • Independent Adjuster

    Freelance contractor paid a fee for adjusting losses on behalf of companies.

  • Independent Agent

    A representative of multiple insurance companies who sells and services policies for records which they own and operate under the American Agency System.

  • Independent Contractor

    An individual who is not employed for a company but instead works for themselves providing goods or services to clients for a fee.

  • Insurable Interest

    A right or relationship in regard to the subject matter of the insured contract such that the insured can suffer a financial loss from damage, loss or destruction to it.

  • Insurance

    An economic device transferring risk from an individual to a company and reducing the uncertainty of risk via pooling.

  • Insurance Regulatory Information System (IRIS)

    A baseline solvency screening system for the National Association of Insurance Commissioners (NAIC) and state insurance regulators established in the mid-1970s.

  • Insurance to Value

    Amount of insurance purchased vs. the actual replacement cost of the insured property expressed as a ratio.

  • Insured

    Party(ies) covered by an insurance policy.

  • Insurer

    An insurer or reinsurer authorized to write property and/or casualty insurance under the laws of any state.

  • Lapse

    Termination of a policy due to failure to pay the required renewal premium.

  • Liability

    The state of being responsible for something, especially by law.

  • Limits

    Maximum value to be derived from a policy.

  • Lloyd’s of London

    Association offering membership in various syndicates of wealthy individuals organized for the purpose of writing insurance for a particular hazard.

  • Loss

    Physical damage to property or bodily injury, Including loss of use or loss of income.

  • Loss Frequency

    Incidence of claims on a policy during a premium period.

  • Loss of Use Insurance

    Policy providing protection against loss of use due to damage or destruction of property.

  • Market Value

    Fair value or the price that could be derived from current sale of an asset.

  • Morale Hazard

    Negligence or disregard on the part of the insured which could lead to probable loss.

  • Mortgage

    A note used to secure a loan for real property.

  • Named Insured

    The individual defined as the insured in the policy contract.

  • Named Peril Coverage

    Insurance for losses explicitly defined in the policy contract.

  • National Association of Insurance Commissioners (NAIC)

    The U.S. standard-setting and regulatory support organization created and governed by the chief insurance regulators from the 50 states, the District of Columbia and five U.S. territories. Through the NAIC, state insurance regulators establish standards and best practices, conduct peer review, and coordinate their regulatory oversight. NAIC staff supports these efforts and represents the collective views of state regulators domestically and internationally. NAIC members, together with the central resources of the NAIC, form the national system of state-based insurance regulation in the U.S.

  • Negligence

    Failure to exercise reasonable consideration resulting in loss or damage to oneself or others.

  • NFIP - National Flood Insurance Program

    Flood insurance and floodplain management for personal and business property administered under the National Flood Act of 1968. Encourages participation by private insurers through a flood insurance pool. Notice: flood insurance is a separate policy from your homeowners/dwelling policy.

  • Occurrence

    An accident, including injurious exposure to conditions, which results, during the policy period in bodily injury or property damage neither expected or intended from the standpoint of the insured.

  • Owner Occupied

    Homeowners insurance sold to owners occupying the described property.

  • Peril

    The cause of property damage or personal injury, origin of desire for insurance. “Cause of Loss”

  • Personal Earthquake

    Earthquake property coverage for personal, family or household purposes.

  • Personal Flood

    Separate flood insurance policy sold for personal, family or household purposes. Notice: flood insurance is a separate policy from your homeowners/dwelling policy.

  • Personal Injury Liability

    Liability coverage for those who have been discriminated against, falsely arrested, illegally detained, libeled, maliciously prosecuted, slandered, suffered from identity theft, mental anguish or alienation of affections, or have had their right of privacy violated.

  • Personal Property

    Property owned or used by an insured

  • Policy

    A written contract ratifying the legality of an insurance agreement.

  • Policy Period

    Time period during which insurance coverage is in effect.

  • Preferred Risk

    Insured, or applicant for insurance, who presents likelihood of risk lower than that of the standard applicant.

  • Premium

    Money charged for the insurance coverage reflecting expectation of loss.

  • Producer

    An individual who sells, services, or negotiates insurance policies either on behalf of a company or independently.

  • Property

    Coverage protecting the insured against loss or damage to real or personal property from a variety of perils, including but not limited to fire, lightening, business interruption, loss of rents, glass breakage, tornado, windstorm, hail, water damage, explosion, riot, civil commotion, rain, or damage from aircraft or vehicles.

  • Provisions

    Contingencies outlined in an insurance policy.

  • Rate

    Value of insured losses expressed as a cost per unit of insurance.

  • Rebate

    A refund of part or all of a premium payment.

  • Reinsurance

    A transaction between a primary insurer and another licensed (re) insurer where the reinsurer agrees to cover all or part of the losses and/or loss adjustment expenses of the primary insurer. The assumption is in exchange for a premium. Indemnification is on a proportional or non-proportional basis.

  • Reinsurer

    Company assuming reinsurance risk.

  • Replacement Cost

    The cost of replacing property without a reduction for depreciation due to normal wear and tear.

  • Reported Losses

    Includes both expected payments for losses relating to insured events that have occurred and have been reported to the insurance company, but not yet paid.

  • Rider

    An amendment to a policy agreement.

  • Risk

    Uncertainty concerning the possibility of loss by a peril for which insurance is pursued.

  • Salvage

    Value recoverable after a loss.

  • Standard Risk

    A person who, according to a company’s underwriting standards, is considered a normal risk and insurable at standard rates. High or low risk candidates may qualify for extra or discounted rates based on their deviation from the standard.

  • Subrogation

    Situation where an insurer, on behalf of the insured, has a legal right to bring a liability suit against a third party who caused losses to the insured. Insurer maintains the right to seek reimbursement for losses incurred by the insurer at the fault of a third party.

  • Subrogation Clause

    Section of insurance policies giving an insurer the right to take legal action against a third party responsible for a loss to an insured for which a claim has been paid.

  • Tenants

    Homeowners insurance sold to tenants occupying the described property.

  • Term

    Period of time for which policy is in effect.

  • Underwriter

    Person who identifies, examines and classifies the degree of risk represented by a proposed insured in order to determine whether or not coverage should be provided and, if so, at what rate.

  • Underwriting

    The process by which an insurance company examines risk and determines whether the insurer will accept the risk or not, classifies those accepted and determines the appropriate rate for coverage provided.

  • Unpaid Losses

    Claims that are in the course of settlement. The term may also include claims that have been incurred but not reported.

  • Written Premium

    the contractually determined amount charged by the reporting entity to the policyholder for the effective period of the contract based on the expectation of risk, policy benefits, and expenses associated with the coverage provided by the terms of the insurance contract.

Disclaimer
Terms

Any descriptions of products or coverages stated on our website and social media are intended as general information and are meant for educational purposes only. Please refer to your policy and/or reach out to your local agent for an explanation of coverages.