Insurance Glossary

The amount it would cost to replace your property, minus depreciation. For example, if your 5-year-old TV is damaged, ACV pays what it's worth today—not what you originally paid or what a new one costs.

A licensed professional who helps you compare insurance policies and find coverage that fits your needs and budget. Independent agents represent multiple carriers, giving you more options.

The maximum amount your policy will pay for all claims during your policy period (usually one year). Once you hit this limit, you're responsible for any additional costs.

Coverage that pays for injuries you cause to others in an accident. This includes medical bills, lost wages, and legal fees if you're sued. Required in most states for auto insurance.

Similar to an agent, a broker helps you shop for insurance. The key difference: brokers typically work for you (the buyer) rather than the insurance company.

A formal request to your insurance company for payment after a covered loss—like a car accident, house fire, or medical expense. Your insurer reviews the claim and decides whether to approve it.

Auto insurance that pays to repair or replace your vehicle after you hit (or are hit by) another car or object, regardless of who's at fault.

Auto insurance that covers damage to your vehicle from events other than collisions—like theft, vandalism, fire, hail, or hitting an animal.

A fixed amount you pay for a covered service, usually at the time of service. For example, you might pay a $30 co-pay when you visit your doctor.

The maximum amount your insurance company will pay for a covered loss. Limits can apply per incident, per person, or for the entire policy period.

The amount you pay out-of-pocket before your insurance kicks in. For example, with a $1,000 deductible, you pay the first $1,000 of a claim, and your insurer covers the rest (up to your policy limits).

The decrease in your property's value over time due to age, wear, and tear. Insurance companies use depreciation when calculating actual cash value payouts.

The part of homeowners insurance that pays to repair or rebuild your home's structure if it's damaged by covered events like fire, wind, or lightning.

Something your insurance policy specifically doesn't cover. Common exclusions include flood damage (in standard homeowners policies), intentional damage, and normal wear and tear.

An addition or change to your insurance policy that modifies coverage. Also called a rider. For example, you might add an endorsement to cover expensive jewelry beyond your standard limits.

Coverage for damage caused by flooding. Not included in standard homeowners policies—you need a separate flood policy, typically through the National Flood Insurance Program (NFIP).

Extra time (usually 10-30 days) after your payment due date to pay your premium without losing coverage. Policies vary, so check yours to avoid a lapse.

Any condition or situation that increases the chance of a loss occurring. For insurance purposes, hazards can be physical (like a damaged roof) or related to behavior.

Insurance that protects you if you're responsible for injuring someone or damaging their property. Covers legal defense costs and settlements up to your policy limits.

When your insurance policy ends because you didn't pay your premium. A lapse leaves you without coverage and can make future insurance more expensive.

Homeowners insurance coverage that pays for additional living expenses (like hotel bills and restaurant meals) if your home becomes uninhabitable due to a covered loss.

Auto or homeowners insurance that pays medical expenses for you or others injured on your property or in your vehicle, regardless of who's at fault. Usually has lower limits than liability coverage.

A policy that only covers specific events (perils) listed in your policy—like fire, theft, or windstorm. If it's not named, it's not covered.

The most you'll pay for covered services in a policy period (common in health insurance). After you hit this limit, your insurance pays 100% of covered expenses.

An event that causes damage or loss, like fire, theft, windstorm, or vandalism. Insurance policies specify which perils are covered.

Homeowners or renters insurance that protects your belongings—furniture, electronics, clothing, etc.—from covered events like theft or fire.

The written contract between you and your insurance company that details what's covered, what's excluded, your limits, deductibles, and premiums.

The length of time your insurance policy is in effect, typically six months or one year. Your coverage renews (or ends) at the end of each period.

The amount you pay for your insurance coverage, usually monthly or annually. Your premium depends on factors like coverage limits, deductibles, your risk profile, and location.

Auto insurance coverage that pays for damage you cause to someone else's property (like their car, fence, or building). Required in most states.

When your insurance policy continues for another term. Your insurer may adjust your rates or coverage at renewal based on claims, risk factors, or market conditions.

The amount it would cost to replace your property with new items of similar quality—no deduction for depreciation. Usually costs more in premiums than actual cash value coverage but provides better protection.

An add-on to your insurance policy that provides extra coverage for specific items or situations. Same as an endorsement. Common riders cover jewelry, collectibles, or home-based businesses.

When your insurance company recovers money from the at-fault party after paying your claim. For example, if someone hits your car, your insurer may pay you first, then seek reimbursement from the other driver's insurance.

The length of time your insurance policy is active. Life insurance terms typically run 10, 20, or 30 years. Auto and home policies usually have 6 or 12-month terms.

Extra liability coverage that kicks in after your auto or homeowners liability limits are exhausted. Provides additional protection (often $1-5 million) against major claims and lawsuits.

Auto insurance that pays when you're hit by a driver whose insurance isn't enough to cover your damages. Fills the gap between their limits and your actual costs.

The process insurance companies use to evaluate your risk and decide whether to offer you coverage (and at what price). They look at factors like your driving record, credit score, claims history, and property condition.

Auto insurance that protects you when you're hit by a driver with no insurance or in a hit-and-run. Covers medical bills and vehicle damage you'd otherwise have to pay yourself.

When your insurance company agrees to give up a right or requirement, like waiving your deductible under certain conditions.