No matter the industry, there is always vocabulary and phrases that make it seem more complicated than it is. The insurance industry is no exception. Insurance policies are filled with complex terminology as if to intentionally make the coverage difficult to comprehend. But once you gain a basic understanding of some key insurance terms, most of the concepts are actually quite simple.
Weed Ross has tons of experience and extensive history in the insurance world. As a local insurance agency, we work with all sorts of insurance companies, underwriters, businesses, clients, and more—so we have to understand the fine print. We wouldn’t be able to do our job sufficiently if we didn’t. So below, we’ve thrown together a glossary of key insurance terms that everyone should be familiar with, especially if you’re looking into quotes for home insurance, business insurance, renters insurance, or any other type of policy.
Actual Cash Value (ACV)
In contrast to replacement cost (RC), actual cash value (ACV) is the worth, or value, of any property at the time of the incident or loss.
In the insurance world, an adjuster, or claim examiner, is the individual responsible for investigating a claim.
An appraisal is the estimate of a property or vehicle’s value provided by an authorized individual. Appraisals can be used to assess the damage and ascertain the ACV.
Arson is the intentional damage of someone else’s property.
Auto insurance, or car insurance, is a type of coverage that provides protection for a vehicle in the event of an accident.
Boat insurance, or watercraft insurance, is a type of coverage that offers protection in the event that a boat or watercraft is damaged or destroyed.
Business insurance is a type of coverage that helps protect companies, their owners, their employees, and even their customers from incidents that occur during day-to-day business operations.
An insurance claim is a request for compensation for losses covered by insurance made by a policyholder.
Classic Car Insurance
Classic car insurance is a type of auto insurance designed specifically to protect classic or antique vehicles.
This term applies to a scenario in which a policy holder maintains coverage while switching insurance companies without a lapse to ensure constant protection.
Coverage refers to the protection and benefits that an insurance contract provides for a given scenario. For instance, a basic auto insurance policy will offer “coverage” for accidents that aren’t your fault.
Damages in the insurance world refer to the financial obligation between one party and another after an incident and an insurance claim.
In an insurance policy, declarations include your name and address, the insured property and its location and description, the policy period, the amount of coverage, and the relevant premiums.
A deductible is the amount of a claim that the insured party will pay out of pocket until the insurance policy starts to provide reimbursement. Often, a higher deductible means lower monthly premiums on a policy.
Depreciation is defined by the decrease in value of a piece of property, typically due to general wear and tear or simply the passing of time. In most insurance policies, depreciation is not something that is covered.
Endorsement is an insurance amendment or an addition to a contract that alters the policy in one way or another.
An exclusion in an insurance policy is something that is omitted so as to not be covered by the policy. An insurance policy will often exclude certain risks, persons, or property, so it’s important to read through it thoroughly.
Farmowners insurance, sometimes just shortened to farm insurance, is a type of protection specifically designed to cover farms, ranches, and agricultural properties. Farm insurance is a lot like home insurance but is more easily tailored to insure day-to-day farming operations.
A field adjuster is an insurance representative who works primarily outside a brick and mortar establishment. These individuals meet with clients in-person to conduct assessments, negotiations, investigations and inspections for insurance-related purposes.
A first-party claim in the insurance business refers to a claim for a loss, injury, or damage made by someone who is insured.
Gap insurance is an option on auto insurance policies that cover the “gap,” or the difference between your car’s actual cash value (ACV) and what you might still owe on it. Not all policies provide gap insurance, so be sure to ask an insurance professional if it’s available to you.
A danger or a risk, a hazard is pretty much anything that increases the likelihood of damage.
Homeowners insurance, or home insurance, is a type of property coverage that protects residents and sometimes visitors from losses and damages that result from incidents in and around the property. Home insurance is different from mortgage insurance, renters insurance, or even secondary home insurance.
Indemnification simply refers to the act of providing compensation for damages or a loss in an effort to bring the individual or entity back to where they were before the loss, financially.
The insured is the individual or entity that is covered by an insurance policy. If you have insurance, then you are the insured.
The insurer is the organization that provides insurance, unlike an insurance agency, which acts as a medium between clients and insurers.
A lessee is an individual to whom a lease was given. If you lease an apartment, you are a lessee.
Liability refers to any legally enforceable responsibility or obligation that results from injury, loss, or damage experienced by another person.
Lien is simply the right to keep possession of someone else’s property until a debt is repaid or discharged.
Life insurance is a type of insurance that offers an exchange of monthly premiums for a lump-sum payment to pre-selected beneficiaries in the event of someone’s passing. This lump-sum payment is designed to provide compensation to family or loved ones after a death to allow them to continue on without worrying about financial troubles.
About exactly as it sounds, malicious mischief is intentional and/or premeditated damage to someone’s property.
Mitigation in the insurance industry refers to preventative steps or measures that one takes to reduce hazards, or the likelihood of damage.
Motorcycle insurance, often part of ATV/UTV or recreational vehicle insurance, is a type of automobile insurance that covers accidents and incidents related to motorcycles, ATVs, UTVs, golf carts, dune buggies, dirt bikes, snowmobiles, etc.
Negligence, in terms of insurance policies and claims, refers to the failure to exercise adequate care or precaution that is expected of a reasonable person under the given situation.
Original Equipment Manufacturer (OEM)
An original equipment manufacturer (OEM) is the individual or entity that supplied, developed, designed, or manufactured the components of a finished product.
Personal property is an item or several items that are not real estate of any kind. Personal property often is synonymous with belongings.
An insurance policy is a contract between an individual and an insurance organization.
A premium is the price that the insured pays in exchange for coverage and protection that is outlined in an insurance policy.
An insurance quote is a drafted statement of the premium that will be charged by the insurance carrier to the insured based on the information provided. The quote is basically like an estimate of what the insurance policy is expected to look like for the involved parties.
Renters insurance is a type of insurance policy that provides coverage to an individual who is renting or leasing a property, such as an apartment. This type of insurance covers personal property, injuries, theft, and other incidents that can occur at or in a rental property.
Replacement Cost (RC)
Unlike actual cash value (ACV), replacement cost is the actual cost of replacing property that has been damaged or destroyed with brand new items.
In the insurance world, salvage refers to the damaged property that is taken over by the insurance organization after the payment of a claim.
Second or Vacation Home Insurance
Much like home insurance, second home insurance is a type of policy that protects homes that aren’t occupied year round. This makes them more susceptible to break-ins and negligence, so they need a more specific set of coverages.
A third party is not what happens after the after-party. In insurance terms, a third party is a person or entity that is not part of the original policy, but one that has interest in the agreement, incident, or claim.
A tort is a civil wrong or injury that violates an individual’s legally protected right or rights. Torts are also subject to compensation in the form of money damages.
Underwriting is the process that an insurer takes on to determine whether or not coverage is feasible for the applicant, depending on the information they provide.
Still have questions about your insurance policy? Did we skip a few letters? Are there still big words that need deciphering? No matter what it is, Weed Ross is here to help. Get in touch with us today.