Insurance Terms & Definitions

Get explanations for commonly used insurance jargon

Selecting an item from the list moves focus to the definition of that item lower in the page.
A

Actual cash value (ACV)

The actual cash value of an item is the current market value, including any depreciation.

Additional interest insured

A company or person who has been named as an additional interest insured on a policy can be liable for an accident that involves an insured person or vehicle. For example, a lienholder can be an additional interest insured.

Aftermarket parts

Aftermarket parts, not made by the original manufacturer, are sometimes used to replace damaged parts in a vehicle.

Anti-theft device

There are essentially two types of anti-theft devices: passive and active. Passive devices require no action or activation and automatically arm themselves when the vehicle is turned off, the ignition key is removed or a door is shut. Active devices require some action or activation, such as pushing a button or placing a "lock" somewhere in your car. Typically with active devices, you must re-activate them every time you set them or they won’t work. Keep in mind that you could get a discount for having an anti-theft device in your car.

Appraisal

An evaluation of a home or auto insurance property claim by an authorized person to determine property value or damaged property value.

B

Bodily injury liability coverage (BI)

If an insured person is legally liable for an accident, BI coverage pays for death or injuries to people involved in the accident other than the insured driver. BI also pays for legal defense costs if you’re sued.

C

Cancellation

The termination of a home or auto insurance policy during the policy term. An insurance company can only cancel an insurance policy for reasons stated in the policy and permitted under the law of the state in which the policyholder resides.

Claim

A policyholder's request for reimbursement from an insurance company for a loss of property.

Classic car insurance

Classic car insurance covers your collectible vehicle up to an agreed value decided by you and your insurance company.

Collision coverage

If your insured vehicle collides with another object, collision coverage pays for the damage to your vehicle. Collision coverage may extend to a non-owned car or one rented for personal use that is in your custody or that you’re operating.

Comprehensive coverage

If your insured vehicle is damaged due to an event out of your control, comprehensive coverage will pay for the damage. Comprehensive covers damage from theft, vandalism, fire, glass breakage, weather-related issues and hitting an animal.

Continuously insured

Being continuously insured means your insurance coverage from one or more insurers is always in effect, without a break or lapse in coverage for any reason.

D

Declarations page (dec page)

This page is a coverage summary provided by your insurance company and lists the following:

  • Types of coverages you’ve elected
  • Limit for each coverage
  • Cost for each coverage
  • Specified properties or vehicles covered by the policy
  • Types of coverage for each property or vehicle covered by the policy
  • Other information applicable to the policy

Deductible

The amount you agree to pay out of pocket for damage resulting from a specific loss or accident. Generally, choosing a higher deductible will lower your premium. More on deductibles.

Depreciation

The estimated decrease in property value over time due to wear and tear, aging, and other related factors.

Driver improvement course

Drivers can take a voluntary driver improvement course to refresh and enhance their driving skills. Taking this course may qualify you for a discount if you meet eligibility requirements.

Driver status

People can be added to policies with the following types of driver status:

  • Rated: Actively drives vehicles on the policy
  • Excluded: Not allowed to drive vehicles on the policy and won’t be covered under your policy in the event of an accident
  • Listed: Residents of the household who don’t drive the vehicles on the policy (such as a roommate)
E

Endorsement

A provision or document added to an insurance policy that changes the original coverage offered in the policy.

Exclusion

Certain property, persons or circumstances noted in a policy as not covered by an insurance policy.

F

Full coverage

"Full coverage" is a common term used to describe how much auto insurance coverage a person has. Though there is no such thing as "full coverage", it often implies that the policy has more than just liability coverage.

G

Garaging location

A garaging location is the place you primarily park your vehicle when you're not using it. Generally, this is your primary residence.

Group policy

A home, vehicle, or health insurance policy sold through an employment-based group, association or special group insurance trust in which members are included under one master policy. Individuals receive certificates of coverage from the group policy.

I

Independent agent or producer

An insurance agent or producer who represents more than one insurer.

Individual policy

A home or vehicle insurance policy sold directly to an individual. Individual policies do not require people to be members of an employment-based group, association or special group insurance trust.

Inflation protection

Automatically adjusts your home or vehicle insurance policy limits to account for increases in costs to repair property.

Insurance

A contract in which a policyholder pays a set amount to an insurance company for protection against specified losses or perils.

L

Lapse

Occurs when a policy cancels, or expires, for any reason and replacement coverage is not obtained.

Liability coverage

Covers losses that an insured person is legally liable for due to negligence or other situations outlined in a home or vehicle insurance policy. Liability coverage applies to both home and vehicle insurance.

Life insurance

Life insurance is a financial safety net for your family. If you pass away, your life insurance policy will pay a lump sum of money to your beneficiaries. There are a few common types of life insurance: term, final expense and permanent. See more on the different types of life insurance.

Limits

An insurance coverage limit is selected by you and is the most an insurance company will pay for damages, injuries, or losses that apply to the coverage.

Loan/lease payoff coverage

Loan/lease payoff coverage, sometimes called "gap" coverage, pays the difference between what you owe on your vehicle and what your insurance pays if your vehicle is declared a total loss or stolen and not recovered, minus your comprehensive or collision deductible. Learn more about loan/lease payoff coverage.

M

Market value

The current value of your home, including the land.

Medical payments (MedPay) coverage

MedPay is an optional insurance coverage that pays for reasonable and necessary medical and funeral expenses for covered persons. These expenses must be incurred as a result of an auto accident.

N

Named insured

The person in whose name the insurance policy is issued.

Non-renew insurance

An insurance company's decision not to renew a home or auto insurance policy after the current policy term ends. Companies must appropriately notify policyholders prior to nonrenewing coverage.

P

Peril

The exposure to or cause of a possible loss, such as an injury, destroyed or lost property, etc.

Personal injury protection (PIP) coverage

PIP is a coverage in which the auto insurance company pays, within the specified limits, the medical, hospital and funeral expenses of the insured person, people in the insured vehicle and pedestrians struck by the insured vehicle. PIP coverage is typically available in no-fault automobile insurance states.

Personal property

Personal property refers to tangible property (other than land) that is movable in some way, such as furniture, jewelry, electronics, etc.

Pet insurance

Pet insurance covers veterinary bills and medication for your cat and dog by reimbursing you for all or a portion of your out of pocket costs.

Policy

A written contract for insurance between an insurer and a policyholder.

Policy expiration date

Your current insurance policy ends on your policy expiration date, which is found on your current policy documents, declarations page (dec page), insurance identification card or recent cancellation notice. This date should not be confused with payment due dates.

Policy period

The length of time your policy is active and in force.

Premium

A premium is the amount of money paid to an insurance company in return for insurance protection.

Primary residence

A primary residence is the place where you’ll live for the majority of your policy period.

Primary use

Primary use is how you mainly use your vehicle. Primary use options include to/from work, business, pleasure or farm use.

Principal driver

The person who drives the car most often is the principal driver.

Property coverage insurance

Protects your home and personal property against loss or damage, as outlined in a home insurance policy.

Property damage liability coverage (PD)

If an insured person is legally liable for an accident, PD coverage pays for damage to others' property resulting from the accident. PD also pays for legal defense costs if you’re sued.

R

Real or tangible property

Land, as well as anything permanently attached to, embedded in or growing on it.

Reimbursement level

Often associated with health and pet insurance, your level of reimbursement is the amount of money you receive from an insurer in repayment for a covered expense.

Rental reimbursement coverage

Rental reimbursement provides rental car coverage if you have a claim that is covered under comprehensive or collision coverage. Daily rental amounts are subject to the limit purchased.

Replacement cost coverage

On dwelling: Pays for the cost to replace damaged property or structures without factoring in deductions for depreciation, but payment is limited to a maximum dollar amount.

On contents: Pays for the cost to replace damaged personal property or items at current costs without factoring in deductions for depreciation.

Roadside assistance coverage

Roadside assistance provides services such as towing, flat tire change, locksmith service and battery jump-start to customers, who can elect the service for an additional premium if it’s not already included with their insurance policy.

S

Salvage titles

State laws determine if a vehicle requires a salvage title.

  • Some states base salvage titles on the extent of damage a vehicle has sustained. For example, in Louisiana, damage to a vehicle must equal or exceed 75% of the vehicle's retail value in order for it to require a salvage title, according to state law.
  • Other states, such as Florida, require a vehicle to have a salvage title if the insurance company declared the vehicle a total loss. These titles generally indicate whether the vehicle is "rebuildable" (can be repaired and driven on the road) or "not rebuildable" (must be sold for parts).
  • Other states "brand" or "notate" the vehicle's title when the estimate of damages reaches a certain percentage of the vehicle's retail value (in New York, for example, it is 75 percent), even if the vehicle hasn’t been declared a total loss and is able to be repaired.
  • Other states have no guidelines for issuing salvage titles.

Second named insured

The named insured or listed agent/broker on a policy may request to designate any other person listed on the policy as a second named insured. The second named insured has the same coverage under the policy as the named insured.

SR-22

An SR-22 is a document required by the court that demonstrates proof of financial responsibility for persons convicted of certain traffic violations.

Sub-limit

A specified amount less than the maximum limits on a home insurance policy. Sub-limits are noted for specified coverages or types of property.

T

Travel insurance

Travel insurance covers you against unexpected trip cancellations and interruptions, plus lost or delayed luggage and medical emergencies.

U

Underinsured motorist coverage (UIM)

If a driver or owner of a vehicle is legally liable for an accident but does not have enough insurance, you can use UIM coverage for injuries, including death, that you, your resident relatives, and occupants of your insured vehicle sustain, up to the limits you select.

Underwriting

The process an insurance company uses to determine if someone is eligible for insurance and, if so, how much that person should pay for insurance.

Uninsured motorist coverage (UM)

If a driver or owner of a vehicle does not have insurance and is legally liable for an accident, you can use UM coverage for injuries, including death, that you, your resident relatives, and occupants of your insured vehicle sustain, up to the limits you select.

Uninsured/underinsured motorist property damage (UMPD) coverage

If a driver or owner of a vehicle is legally liable for an accident but doesn’t have any or enough insurance, you can use UMPD to cover damage to your insured vehicle, up to the limits you select. In some states, UMPD is available as an alternative to collision coverage.

V

Vehicle identification number (VIN)

The VIN for your vehicle is usually found on the driver's side of your dashboard, the vehicle registration or the title. The VIN is a combination of 17 letters and numbers that can be used to identify the make, model and year of a car.

Please note: The above is meant as general information to help you understand the different aspects of insurance. This information is not an insurance policy, does not refer to any specific insurance policy, and does not modify any provisions, limitations, or exclusions expressly stated in any insurance policy. Descriptions of all coverages and other features on this page are necessarily brief; in order to fully understand the coverages and other features of a specific insurance policy, we encourage you to read the applicable policy and/or speak to an insurance representative. Coverages and other features vary between insurers, vary by state, and are not available in all states. Whether an accident or other loss is covered is subject to the terms and conditions of the actual insurance policy or policies involved in the claim. References to average or typical premiums, amounts of losses, deductibles, costs of coverages/repair, etc., are illustrative and may not apply to your situation. We are not responsible for the content of any third-party sites linked from this page.

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