Insurance terms that connect to something, not a glossary that ends at the definition.

Actual cash value, often shortened to ACV, is a method of valuing a covered loss that pays the replacement cost of the damaged item minus depreciation for its age, wear, and condition at the time of the loss. ACV is common in property coverage and is also commonly used to value totaled vehicles. Replacement cost coverage is widely used for homes and personal property, while standard auto policies generally do not promise to replace an older vehicle with a new equivalent unless special coverage applies. ACV generally pays less than replacement cost because it accounts for value the item had already lost before the loss.

A nonrenewal is an insurer's decision not to continue a policy when its term ends. Unlike a cancellation, which ends coverage mid-term, a nonrenewal takes effect at expiration. State laws set required notice periods and, in many states, require the insurer to give a reason.

Renewal is the process by which an insurance policy continues for another term, usually six or twelve months, after its current term expires. Renewal typically involves the insurer reviewing updated risk information, such as claims filed during the prior term, changes to the insured property, or broader rate changes, and issuing new terms that may include a different premium, adjusted coverage limits, or new exclusions. Policyholders generally have the option to accept the renewal terms, shop for a different insurer, or let the policy lapse.

Replacement cost value, often shortened to RCV, is a method of valuing a covered loss based on what it would cost to repair or replace the damaged property with a similar new item, without subtracting depreciation for age or wear. It generally results in a higher payout than actual cash value for anything that isn't brand new, and it typically costs more in premium since the insurer is agreeing to pay a larger amount for the same underlying loss.

Subrogation is the legal process by which an insurer, after paying a policyholder's claim, seeks to recover that payment from the party actually responsible for the loss, or from that party's insurer. Subrogation lets the insurer reimburse the policyholder quickly without waiting to determine fault, and then pursue reimbursement separately behind the scenes. If the insurer successfully recovers funds, the policyholder may also get back some or all of their deductible, depending on the outcome and the insurer's process.

An aggregate limit is the most a policy will pay in total for all covered claims during the policy period, regardless of how many claims there are. The NAIC glossary defines it as "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." It's common on business liability policies, alongside a per-occurrence limit that caps any single claim.

Agreed value is a method of valuing property in which the insured and the insurer agree in advance on the amount to be paid for a covered loss. In commercial property insurance, an agreed value option typically suspends the coinsurance clause for a set period, as long as the agreed amount is carried.

A business owners policy, commonly called a BOP, bundles general liability insurance and commercial property insurance into a single package policy designed for small and midsize businesses, and it typically includes business income (business interruption) coverage as well. It's typically priced and issued more efficiently than buying each coverage separately, and many insurers offer optional add-ons, such as equipment breakdown or cyber liability, that can be layered onto the base package. BOPs are generally available to lower-risk businesses like retail shops, offices, and small restaurants, while higher-risk or specialized operations often need coverage built individually instead.

Business personal property is the part of a commercial property policy that covers the movable things a business owns and uses, such as furniture, fixtures, machinery, equipment that isn't permanently installed, and inventory. It is separate from coverage for the building.

In commercial property insurance, coinsurance is a clause that reduces a claim payment when the property is insured for less than a required percentage of its value. The insurer pays in proportion to the amount of insurance carried divided by the amount required. It differs from coinsurance in health insurance, which is a cost-sharing percentage.

Commercial auto insurance, also called business vehicle or fleet insurance, covers vehicles owned and used by a business, including liability for injuries and damage the business's drivers cause. Personal auto policies typically exclude driving for business purposes, so business vehicles generally need commercial coverage.

Cyber insurance covers a business's costs and liability from cyber incidents such as data breaches and ransomware. First-party coverage pays the business's own costs, such as notification, legal fees, extortion payments and business interruption; third-party coverage pays for lawsuits and related costs from customers and others affected.

Debris removal coverage pays to remove debris left by a covered loss, such as the remains of a fire-damaged building, so repairs can begin. Property policies typically include it, often with a limit tied to the loss or an added amount.

Equipment breakdown coverage, historically called boiler and machinery insurance, pays for sudden mechanical or electrical breakdown of equipment such as boilers, refrigeration and HVAC systems, and electrical machines, which standard property policies often exclude.

Errors and omissions insurance, often shortened to E&O, is a form of professional liability coverage that protects a business or individual professional against claims that a mistake, oversight, or failure to perform professional services caused a client financial harm. Unlike general liability, which addresses physical injury or property damage, E&O specifically addresses financial losses tied to the quality or outcome of professional advice, services, or work product. It's commonly carried by consultants, accountants, real estate agents, insurance agents, and technology service providers, and is usually written as a claims-made policy.

Hired and non-owned auto coverage (HNOA) is business liability coverage for accidents involving vehicles the business doesn't own, such as employees' personal cars driven for work and cars the business rents. It generally pays for injuries and damage to others, not damage to the vehicle itself.

Inland marine insurance covers property that moves or is away from a fixed location, such as equipment taken to job sites, goods in transit over land, and property temporarily stored with others. Despite the name, it has nothing to do with the sea; it's the usual coverage for mobile business property.

An occurrence policy covers claims for events that happened during the policy period, even if the claim or lawsuit is filed after the policy has ended. It's the counterpart to a claims-made policy, which generally must be in force both when the event happened and when the claim is made.

Utility services coverage, often added by endorsement, extends property and business income coverage to losses caused by an interruption of utility service, such as electricity, gas or water, that originates away from the insured premises. Without it, many commercial property policies limit or exclude off-premises power failure.

Workers' compensation insurance covers medical expenses and a portion of lost wages for employees who are injured or become ill as a direct result of their job, regardless of who was at fault for the injury. In exchange for this coverage, employees generally give up the right to sue their employer directly over most workplace injuries, a legal trade-off often called the "compensation bargain." Requirements vary substantially by state, employer type, industry, and number of employees. Most states require many employers to provide coverage, but exemptions and thresholds differ, and Texas does not require most private employers to carry it.

An appraisal clause is a policy provision for settling disagreements about the amount of a covered loss. Each side hires an appraiser, the appraisers choose an umpire, and the umpire decides any difference. Appraisal resolves how much, not whether the policy covers the loss.

The duty to mitigate is a policyholder's obligation after a loss to take reasonable steps to protect property from further damage, such as temporary repairs. Policies typically include it among the duties after loss, and damage caused by failing to mitigate may not be covered.

A proof of loss is a formal statement a policyholder gives the insurer setting out the amount being claimed, usually signed and sworn to, with documents that support it. Policies set when one is required and by when. Under the National Flood Insurance Program, for example, FEMA describes it as "the policyholder's statement of the amount of money being requested, signed and sworn to by the policyholder."

A public adjuster is a licensed professional who represents the policyholder, not the insurance company, in negotiating and settling an insurance claim. Public adjusters typically inspect the damage, prepare or review the claim documentation, and negotiate directly with the insurer's own adjuster on the policyholder's behalf, usually in exchange for a percentage of the final claim settlement. This differs from the insurer's staff or independent adjuster, who works for and is paid by the insurance company, even though that adjuster is generally expected to evaluate the claim fairly.

Recoverable depreciation is the amount an insurer holds back from a replacement cost claim at first, and pays later once the damaged property has been repaired or replaced. The first payment is generally the repair cost minus depreciation and the deductible; the held-back depreciation is paid after the policyholder shows the work is done, usually within a time limit the policy sets.

A statute of limitations is a state law that sets a maximum time limit for filing a lawsuit or, in some contexts, a claim, after an incident occurs. Once that time limit passes, a court will generally refuse to hear the case regardless of its merits. In insurance, statutes of limitations can affect both a policyholder's ability to sue their own insurer over a denied or underpaid claim, and an injured party's ability to bring a claim against someone else whose liability insurance might otherwise respond. Time limits vary significantly by state and by the type of claim involved.

A binder is a temporary insurance agreement that provides coverage until the insurer writes or delivers the full policy. It is commonly used when coverage needs to start right away, such as at a home closing or when buying a car, and it lasts for a specified period.

A CLUE report, from the Comprehensive Loss Underwriting Exchange, is a record of insurance claims tied to a person or property, which many insurers check when deciding whether to offer a policy and what to charge. Consumers can request their own report once a year at no cost.

A coverage limit is the maximum amount an insurer will pay out under a specific part of a policy, whether for a single claim, a policy period, or the lifetime of the policy, depending on how the policy is structured. Limits can apply to an entire policy or separately to specific coverage types within it, such as a distinct limit for liability and a different one for medical payments. Once a covered loss exceeds the applicable limit, the policyholder is generally responsible for the remaining amount.

The declarations page is the summary page of an insurance policy, usually the first page. It lists who and what is insured, the policy period, each coverage with its limit, the deductibles, the premium, and the forms and endorsements that make up the policy. It summarizes the policy; the full policy wording, including its definitions, conditions and exclusions, decides how a claim is handled.

A deductible is the amount a policyholder must pay out of pocket toward a covered loss before the insurer pays the remaining amount, up to the policy's coverage limit. Deductibles can be a flat dollar amount, like $500 or $1,000, or a percentage of the insured value, common on some homeowners policies for certain perils. Choosing a higher deductible generally lowers the premium, since the policyholder is absorbing more of the small-to-moderate losses themselves.

An endorsement is a written change to an insurance policy that adds, removes or adjusts coverage. The NAIC's glossary defines it as "an amendment or rider to a policy adjusting the coverages and taking precedence over the general contract." Endorsements are attached to the policy and listed by form number on the declarations page, and they can broaden coverage, narrow it, or change a limit or deductible.

An exclusion is a specific situation, cause of loss, or type of property that a policy explicitly states it will not cover, even if the loss otherwise resembles something the policy generally protects against. Exclusions are written into the policy document itself and are one of the main reasons a claim can be denied even when the policyholder believed they were covered. Common categories include flood, earthquake, normal wear and tear, intentional acts, and business activities conducted from a personal policy.

Medical payments coverage pays medical bills after an accident, without needing to prove fault, up to a small limit. On an auto policy it generally pays medical bills for you and your passengers. On a homeowners policy it generally pays medical bills for guests hurt on your property, and some injuries your household causes elsewhere.

The named insured is the person or entity specifically identified on a policy's declarations page as the party the insurer has agreed to cover. Being the named insured typically carries broader rights under the policy than being an "additional insured" or a household member covered incidentally, including the right to make changes to the policy, receive official notices, and, on many policies, file claims directly. A policy can have more than one named insured, such as spouses jointly named on a homeowners policy.

A peril is a cause of loss, such as fire, theft or wind. A named perils policy covers only the causes of loss it lists. An open perils policy, also called all-risk, covers any cause of loss the policy doesn't specifically exclude. The difference decides who has to point to the policy wording: under named perils, the loss has to match a listed peril; under open perils, it's covered unless an exclusion applies.

A premium is the amount a policyholder pays an insurer, usually monthly, quarterly, or annually, to keep a policy active. It is set by the insurer based on assessed risk factors specific to the person or property being insured, and it is one of two central prices in any policy, the other being the deductible owed if a claim is filed. Premiums can stay fixed for a policy term and then be recalculated at renewal based on updated risk information, claims history, and broader pricing trends across the insurer's book of business.

A sublimit is a smaller cap inside a coverage's overall limit that applies to a particular type of property or loss. On homeowners and renters policies, sublimits, often called special limits, commonly apply to jewelry, art, cash and similar items. The sublimit is the most the policy pays for that category, even when the overall limit has plenty of room left.

Underwriting is the process an insurer uses to evaluate the risk of insuring a person, property, or business, and to decide whether to offer coverage and at what price. Underwriters review factors relevant to the type of insurance, such as driving history, a home's age and condition, claims history, credit history where state law allows it, health history for life insurance, or business operations, and use that information to set premiums, apply exclusions, or in some cases decline coverage entirely. Underwriting can happen when a policy is first issued and again at renewal.

A waiting period is the time between buying a policy, or a coverage, and when it starts to apply. Flood insurance through the National Flood Insurance Program generally has a 30-day waiting period, with exceptions, so it can't be bought at the last minute before a storm.

Bodily injury refers to physical harm, sickness, or death suffered by another person as a result of an accident or incident for which a policyholder may be held legally responsible. In liability insurance, bodily injury coverage typically pays for the injured party's medical expenses, lost income, pain and suffering, and related legal costs, up to the policy's stated limit. Auto policies commonly express this as a bodily injury liability limit, often shown as two numbers, such as $100,000 per person and $300,000 per accident.

A claims-made policy provides coverage for claims that are both first made against the policyholder and reported to the insurer while the policy is active, regardless of when the underlying incident actually occurred, as long as that incident happened on or after the policy's retroactive date. This differs from an occurrence policy, which covers an incident based on when it happened rather than when the claim was filed. Claims-made policies are common in professional liability and errors and omissions coverage, where problems often surface well after the work was done.

General liability insurance covers claims that a business's operations, products, or premises caused bodily injury, property damage, or certain types of advertising or personal injury to a third party. It typically pays for the injured party's medical bills or property repair costs, as well as the business's legal defense costs, up to the policy's limits, even if the claim is ultimately found to be without merit. It's often the foundational liability coverage for a small business, frequently bundled with property coverage into a business owners policy.

Umbrella insurance is a separate policy that provides additional liability coverage above the limits of an underlying policy, such as auto, homeowners, or a business's general liability policy, once that underlying limit is exhausted. It typically also covers some liability claims not covered by the underlying policies at all, within its own terms. Umbrella policies are usually sold in increments, often starting around $1 million, and are relatively inexpensive relative to the amount of added protection they provide.

Cash value is the savings component of some permanent life insurance policies, such as whole life. Part of each premium goes into an account that grows over time at a fixed or variable rate. The policyholder may be able to borrow against it, withdraw from it, or receive it, less loans and fees, if they surrender the policy.

The contestability period is the time, usually the first two years of a life insurance policy, during which the insurer can review the application and challenge or deny a claim if it finds material misstatements. After it ends, the insurer generally can't contest the policy's validity, except for nonpayment of premiums.

A free look period is a short window after a new life insurance policy or annuity is delivered during which the buyer can cancel it for any reason and get a full refund of premiums paid. The length is set by state law; in Texas it is at least 10 to 20 days, depending on the policy.

A grace period is a set time after a premium's due date during which you can still pay and keep the policy in force without interruption. For life insurance it is commonly 31 days. If the premium isn't paid by the end of the grace period, the policy can lapse.

Reinstatement is the process of restoring a life insurance policy that lapsed for nonpayment. It generally requires paying the overdue premiums with interest, and the insurer may ask for evidence that the insured is still insurable. Many insurers allow reinstatement within a set period, often up to five years.

Term life insurance pays a death benefit if the insured person dies during a set period, such as 10, 20 or 30 years. Premiums generally stay level for the term and rise if the policy is renewed at the end of it. It has no cash value, which is why it typically costs less than permanent life insurance.

Collision coverage is the part of an auto policy that pays to repair or replace your own car after it hits another vehicle or an object, or overturns, generally regardless of who was at fault, less your deductible. It's optional under state law, though lenders and lessors usually require it on a financed or leased car.

A combined single limit (CSL) is one total liability limit per accident that applies to bodily injury and property damage together, instead of separate split limits. Several states accept a CSL in place of their split minimums, such as $125,000 in Maine or $75,000 in Rhode Island.

Comprehensive coverage is an optional part of an auto policy that pays for damage to a policyholder's own vehicle from causes other than a collision with another vehicle or object. Common covered events include theft, vandalism, fire, falling objects, hail and other weather damage, and hitting an animal. It's typically subject to its own deductible, separate from collision coverage. Collision and comprehensive generally aren't required by state law, but a lender or lessor may contractually require them while a vehicle is financed or leased.

A financial responsibility law requires drivers to be able to pay for damage or injuries they cause in a car accident, up to set minimum amounts. Most states meet this through compulsory liability insurance; some allow alternatives such as bonds or deposits, and New Hampshire does not require insurance but requires proof of ability to pay.

Gap insurance covers the difference, or "gap," between what a vehicle is actually worth at the time of a total loss and what the owner still owes on their auto loan or lease. Because vehicles typically depreciate faster than most loan or lease balances shrink in the early years, a total loss can leave the owner owing more than their standard auto policy's actual cash value payout, and gap insurance is designed specifically to cover that remaining balance.

No-fault auto insurance is a system in which each driver's own policy pays for their injuries after a crash, regardless of who caused it, usually through personal injury protection (PIP). Lawsuits against the at-fault driver are restricted unless the injury meets a threshold set by state law.

Non-owner car insurance is a liability policy for someone who doesn't own a car but drives borrowed or rented cars. It pays for injuries and damage the driver causes to other people, generally after the car owner's insurance, and it doesn't pay for the driver's own injuries or for damage to the car being driven.

Personal injury protection, or PIP, is auto coverage that pays medical bills for you and your passengers after an accident, and also some non- medical losses such as lost wages, generally regardless of fault. Whether it's required, offered by default or optional depends on the state.

Property damage liability is the part of an auto policy that pays for damage you cause to other people's property, such as their car, a fence or a building, when you're at fault, up to the property damage limit. It's the third number in a split limit such as 30/60/25 and is required in most states.

Rental reimbursement coverage is an optional auto coverage that pays for a rental car, up to daily and total limits, while your car is being repaired after a covered loss or after it's stolen. Some policies also pay for taxis or ride-hailing instead.

An SR-22 is a certificate that an auto insurer files with a state to prove a driver carries the required liability insurance. States typically require one after certain violations, such as driving uninsured or some serious offenses, for a set period. It is not a type of insurance itself.

Stacking is a way of combining uninsured motorist limits across more than one insured vehicle, so the amount available for one claim is multiplied by the number of vehicles or added together across policies. Whether it's allowed depends on state law and policy wording.

Towing and labor coverage is an optional auto coverage that pays to tow a car that can't be driven and for roadside labor such as changing a flat tire or jump-starting a battery, up to a small dollar limit per occurrence.

Uninsured motorist coverage pays for a policyholder's injuries, and in some states property damage, when they're hit by a driver who has no liability insurance at all. A closely related coverage, underinsured motorist coverage, applies when the at-fault driver has some insurance but not enough to cover the full cost of the damage. Many states require or default to offering this coverage, since a meaningful share of drivers on the road carry no insurance despite legal requirements to do so.

Dwelling coverage is the part of a homeowners or landlord insurance policy that pays to repair or rebuild the physical structure of the home itself, including its walls, roof, and attached structures like a garage, after a covered loss such as fire, wind, or falling objects. It's typically set as a specific dollar limit chosen when the policy is written, ideally based on estimated rebuilding cost rather than the home's market value, since those two figures can differ significantly.

Earthquake insurance is coverage, sold as a separate policy or an endorsement, for damage caused by earthquakes, which standard homeowners and renters policies don't cover. It typically has a percentage deductible, much higher than a typical homeowners deductible: the Insurance Information Institute puts it at 5% to 15% of the policy limit, and the NAIC at 2% to 20% of the insured value, depending on location.

Extended replacement cost is homeowners coverage that pays a set percentage above the dwelling limit, such as 20% or more depending on the insurer, if rebuilding costs more than the limit. It's designed for unexpected cost increases, such as after a widespread disaster when materials and labor are scarce.

Guaranteed replacement cost is homeowners coverage, offered by some insurers, that pays whatever it costs to rebuild the home as it was before a covered loss, even if that exceeds the dwelling limit. It generally doesn't cover building code upgrades, and may not be available for older homes.

An inflation guard is a homeowners policy provision or endorsement that automatically raises the dwelling limit, typically at each renewal or annually, to keep pace with rising construction costs. It helps prevent underinsurance but may not match sharp local cost increases.

Insurance to value means insuring a home for a high enough share of its replacement cost, often at least 80%, as many insurers require. A policy that falls short of the required share can pay less on a claim, depending on its terms, even when the damage is partial.

Loss of use coverage, sometimes called additional living expenses coverage, pays for the extra cost of living elsewhere while your home is being repaired or rebuilt after a covered loss makes it temporarily uninhabitable. It typically covers costs like a hotel or short-term rental, extra restaurant meals or food storage costs, and other verified expenses beyond your normal cost of living, usually up to a limit or for a set period of time defined in the policy.

Mold coverage refers to how a homeowners policy treats mold damage and removal. Policies commonly exclude mold removal except when the mold results from a covered loss, such as a sudden burst pipe, and some limit even that. Additional mold coverage may be available as an endorsement.

A mortgagee clause is a provision in a property policy that names the lender (the mortgagee) and protects its interest in the property. Because of it, claim payments for damage to the home are typically made out to both the homeowner and the lender, and the lender is generally notified if the policy is cancelled.

Ordinance or law coverage pays the extra cost of repairing or rebuilding a damaged home to meet building codes or other laws in force at the time of the repair, when those requirements are stricter than when the home was built. It's generally added by endorsement or included with a limited amount, depending on the policy.

Other structures coverage is the part of a homeowners policy that pays to repair structures on the property that aren't attached to the house, such as detached garages, sheds and fences, after a covered loss. Its limit is often about 10% of the dwelling limit and is shared by all such structures.

Personal liability coverage is the part of a homeowners or renters policy that pays when you're legally responsible for injuring someone or damaging their property, including medical bills, lost wages and court costs, up to its limit. It generally applies to accidents at home and many elsewhere, but not to business activities or car accidents.

Personal property coverage is the part of a homeowners or renters policy that pays when your belongings, such as furniture, clothing and electronics, are stolen, damaged or destroyed by a covered cause. On homeowners policies its limit is often a percentage of the dwelling limit, and special limits apply to some categories.

Scheduled personal property is coverage for specific, listed valuables, such as jewelry, art or instruments, added to a homeowners or renters policy by endorsement or bought as a floater, each insured for its appraised value. It generally removes the policy's special limits for those items and often covers losses a standard policy doesn't, such as mysterious disappearance.

Sinkhole coverage pays for structural damage caused by sinkhole activity. In Florida, all property insurers must cover catastrophic ground cover collapse, a narrowly defined event, and must offer broader sinkhole loss coverage for an additional premium. Outside Florida, sinkhole damage is generally excluded as earth movement unless added.

Water backup coverage is an optional endorsement added to a homeowners, condo, or renters policy that pays for damage caused by water or sewage backing up through a drain, sewer line, or a failed sump pump, rather than entering the home from an outside flood source. It fills a gap left by both standard homeowners policies, which typically exclude this type of damage, and separate flood insurance, which generally covers rising water from outside the home rather than backup from interior plumbing systems.

Flood insurance is a separate policy that covers damage from flooding, which most homeowners policies exclude. In the United States it's available through the National Flood Insurance Program, run by FEMA, and from private insurers. NFIP building coverage goes up to $250,000 and contents coverage up to $100,000.

Increased Cost of Compliance is a coverage within National Flood Insurance Program policies that helps pay to bring a flood-damaged building into compliance with the community's floodplain management rules, such as by elevating it, up to $30,000, when the community determines the building is substantially or repetitively damaged.

A special flood hazard area (SFHA) is a high-risk flood area on FEMA's flood maps, labeled with zones beginning with A or V. In communities participating in the National Flood Insurance Program, flood insurance is required for properties in an SFHA with government-backed mortgages.

Landlord insurance is a property policy for a home rented to tenants, generally covering the structure, the landlord's property left on site, liability, and often lost rental income after a covered loss. It doesn't cover the tenant's belongings. It's sometimes called a dwelling fire policy, and typically costs more than a homeowners policy.

Renters insurance is a policy for tenants that generally covers three things: the renter's belongings, the renter's liability for injuring others or damaging their property, and additional living expenses if a covered loss makes the rental unlivable. A landlord's policy covers the building, not the tenant's belongings.