Insurance Glossary A–Z

Insurance is full of jargon. Here’s what the most common terms actually mean, in plain English — with links to learn more or get a quote.

A

Actual Cash Value (ACV): What property is worth at the time of a loss — replacement cost minus depreciation. It pays what the item is worth now, not what a new one costs.
Additional Insured: An endorsement that extends your liability policy’s coverage to another party (like a client or landlord) named in a contract. COI vs. additional insured →
Aggregate Limit: The most your policy will pay for all covered claims during the policy period, no matter how many claims you file.
Agreed Value: A value you and the insurer set up front; on a covered total loss it’s paid in full, with no depreciation argument. Common on classic cars and valuables. Classic car insurance →

Beneficiary: The person or people who receive a life insurance policy’s death benefit. Term life →
Binder: Temporary proof of coverage that’s in force while the formal policy is issued.
Bodily Injury: Physical injury to another person that your liability coverage can respond to.
Business Owner’s Policy (BOP): A package that bundles general liability with commercial property (and often business interruption) for small businesses. Small business insurance →

Certificate Holder: The party who receives your certificate of insurance as proof of coverage — not the same as being an additional insured. COI vs. additional insured →
Certificate of Insurance (COI): A one-page document proving you have active coverage and showing your limits. It documents your policy; it doesn’t change it. Get a COI fast →
Claim: A request to your insurer to pay for a covered loss.
Coinsurance: A share of covered costs you pay after the deductible (in health plans), or a property clause requiring you to insure to a set percentage of value.
Collision: Auto coverage for damage to your vehicle from hitting another car or object.
Comprehensive: Auto coverage for damage to your vehicle from non-collision events — theft, fire, hail, vandalism, or hitting an animal.

Deductible: The amount you pay out of pocket on a covered claim before insurance pays the rest.
Dwelling Coverage: The part of a home policy that pays to repair or rebuild the structure of your home itself. Homeowners insurance →

Endorsement: A documented change or add-on to your policy. Also called a rider.
Errors & Omissions (E&O): Another name for professional liability — it covers financial losses caused by mistakes in your professional work or advice. GL vs. E&O →
Exclusion: Something a policy specifically does not cover.

Flood Insurance: Separate coverage for flood damage, which standard home and business policies exclude. Flood insurance →

Gap Insurance: Pays the difference between what you owe on a financed vehicle and its value if it’s totaled. Auto insurance →
General Liability: Coverage for third-party bodily injury and property damage — the foundation policy for most businesses. Small business insurance →

Inland Marine: Coverage for movable business property — the tools, equipment, and gear you take to job sites.

Liability Insurance: Coverage that pays when you’re legally responsible for injuring someone or damaging their property.
Limit: The maximum amount your policy will pay for a covered loss.
Liquor Liability: Coverage for alcohol-related claims when you serve or sell alcohol. Event insurance →
Loss Assessment: Condo coverage that helps pay your share when the HOA assesses owners after a covered loss. Condo insurance →
Loss of Use: Coverage for extra living costs (like a hotel) when a covered loss makes your home unlivable. Renters insurance →
Loss Run: A report of your past claims that insurers use when quoting your coverage.

Medical Payments: Small, no-fault coverage for medical bills if a guest is hurt on your property or in your vehicle.

Named Insured: The person or business named on the policy as the primary insured.

Occurrence: An event that causes a covered loss; a “per-occurrence” limit applies to each one.

Peril: A cause of loss, such as fire, theft, or wind.
Personal Property: Your belongings — furniture, electronics, clothing — covered under home or renters policies. Renters insurance →
Premium: The amount you pay for your insurance policy.
Professional Liability: Coverage for claims that your professional work or advice caused a client a financial loss. Also called E&O. GL vs. E&O →

Replacement Cost: Pays to replace damaged property with new, without subtracting depreciation.
Rider: An add-on that changes your coverage. Also called an endorsement.

Scheduled Personal Property: Specific high-value items (jewelry, collectibles) listed and insured for agreed amounts. Collectibles →
Subrogation: When your insurer, after paying your claim, pursues the at-fault party to recover the cost.
Surety Bond: A guarantee that you’ll fulfill an obligation (common for contractors and licenses). It isn’t insurance, but it’s often required alongside it.
Surplus Lines: Coverage placed with specialty, non-standard insurers for hard-to-place or unusual risks. We insure weird things →

Term Life: Life insurance that covers a set period (the term) with level premiums. Term life →
Total Loss: When repairing damaged property would cost more than it’s worth, so the insurer pays its value instead.

Umbrella Insurance: Extra liability coverage that sits above your auto and home limits. Umbrella insurance →
Underwriting: The insurer’s process of evaluating risk to decide whether and how to cover you, and at what price.

Whole Life: Permanent life insurance that stays in force for life and can build cash value. Term life →
Workers’ Compensation: Coverage for employees’ medical bills and lost wages from job-related injuries. Required in most states once you have employees. Small business insurance →

Definitions are general explanations, not legal or policy language. Exact coverage depends on your policy, carrier, and state.

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