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Glossary of Insurance Terms

If you’re hoping to better understand some of the commonly used terms in our policy forms, view our glossary below. Please note that the information stated may not apply to all situations, since insurance laws vary by state and coverage may not be available in some jurisdictions. Our actual policy will address any questions of interpretation.

Click on a word to view the definition.

 

An accident or event resulting from natural causes, without human intervention or agency, and one that could not have been prevented by reasonable foresight or care—for example, floods, lightning, earthquake or storms.

At the time of the loss, the cost to repair or replace the lost or damaged property, minus depreciation.

Insurance that supplements an already existing policy.

Any necessary increase in living expenses incurred by the insured, so the household can maintain its normal standard of living if a covered peril causes the residence premises to become uninhabitable.

A form completed and signed by a prospective policyholder that gives information the insurer relies upon when evaluating the applicant and issuing the policy.

A process to resolve disputes when the insured and insurer agree on the scope of the direct physical loss or damage that is covered by the terms and conditions of the policy, but disagree on the amount payable for that scope of loss.

The minimum limits of coverage that can be purchased by an insured.

Termination of an insurance contract before its expiration date by either the insurance company or the policyholder.

A sudden, severe disaster that causes a large loss.

A request for payment under an insurance contract for the estimated or actual amount of loss.

A common insurance-to-value provision that requires the policyholder to pay a portion of a loss in the event a home is not insured to value.

Provisions that set forth the rights, duties and responsibilities of the parties to an insurance contract. Conditions may be found anywhere in the contract.

A sum of money that a party is legally obligated to pay to another as compensation for injury.

The part of the policy that provides detailed information about the insured, the insurer and the coverages.

The amount of a claim that the policyholder has agreed to pay. This amount is deducted from a claims payment.

A state’s Department of Insurance is charged with the regulation and general administration of insurance laws, the enforcement of the insurance codes, supervision and licensing of insurance companies and agents.

A decrease in the value of property over time.

The date the coverage begins on an insurance contract (policy).

A document that amends an insurance policy by adding or deleting coverage or otherwise modifying the coverage.

Part of an insurance contract that excludes coverage of certain perils, persons, property or locations.

The ending date of an insurance contract (policy).

A clause in an insurance policy or in an endorsement that provides additional coverage for other hazards or risks than those provided under the basic policy provisions.

Coverage against damage caused by flood. Flood coverage may be provided via an optional endorsement to a homeowners policy in certain areas. Coverage may also be available through a national insurance program that must be purchased separately from a homeowners policy.

Situation or condition that increases the probability or extent of a loss.

A package insurance policy providing property and liability coverages tailored to the needs of most homeowners, condominium owners and apartment tenants. Various versions are available depending on the type of dwelling insured and the scope of protection to be covered.

Optional coverage that increases a policy’s Coverage A limits to protect policyholders from any unforeseen increases in construction cost.

When the amount of insurance written on a property is approximately equal to its value.

The person who is protected by the insurance policy.

The insurance company that issues a policy to an insured and is contractually bound to indemnify the insured for covered losses and render services.

Part of the insurance policy that states the insurer agrees to provide the insurance coverages indicated on the Declaration Page, pursuant to all policy terms and conditions.

Paid on behalf of the policyholder for bodily injury or property damage to others.

The maximum amount that will be paid for a loss under the policy contract.

The basis of a claim for damages under the terms of a policy.

A policy condition that enables an insured to direct the company to pay any loss that may be due to a third party with an insurable interest in the covered property.

Compensation for the insured’s loss of use of the property due to a loss by a covered peril.

A clause in an insurance policy that protects the interest of the party that holds a mortgage on the property, establishing that loss to a mortgage property is jointly payable to the mortgagee and the insured.

The individual or organization with whom an insurance contract is made and who is specifically named as an insured on the Declaration Page. Additional individuals or organizations can also be added as Named Insureds via endorsements.

When the insurer elects not to renew an insured’s policy for an additional term after the current policy’s expiration date.

An accident or loss, including exposure to harmful conditions, which results during the policy period in bodily injury or property damage.

This coverage provides for the cost associated with the enforcement of any ordinance or law regulating the construction, repair or demolition of a building or structure that has been damaged by a covered peril.

A loss that does not completely destroy the insured property or does not completely exhaust the applicable insurance limit(s).

The cause of a possible accident, loss or claim.

Coverage for an insured found legally responsible for liability for property damage to others or bodily injury to others.

A written contract of insurance between the insurer and the insured.

The amount charged by the insurer for a contract of insurance.

Physical injury to, destruction of or loss of use of tangible property.

First-party insurance indemnifying the insured for loss caused by a covered peril to owned property.

Coverage afforded by an insurance contract.

Land and attachments to the land, such as buildings, also known as real estate.

Returning a lapsed policy to its full value after its termination, coverage continues as if the policy was never terminated.

A policy issued to replace one that has expired.

A form of homeowners policy sold to person(s) who rent their living quarters.

At the time of the loss, the cost to repair or replace the lost or damaged property, without a deduction for depreciation.

An employee of an insured whose duties are related to the maintenance or use of the residence premises.

The location described on the Declaration Page (including the dwelling, other structures and grounds), where the named insured resides.

A listing of personal property items that are insured for a specific amount true to that item’s value. Items are usually scheduled when they are higher in value and subject to limits of liability within the policy that are lower than their value.

A loss that completely destroys the insured property or completely exhausts the applicable policy limit(s).

A process that evaluates an applicant and their property against pre-established criteria for insurability, determining whether the applicant will be rejected or accepted for coverage and whether at standard or modified rates.

Learn More About Your Policy

To better understand the structure of your policy, get answers to frequently asked questions or for helpful loss prevention tips, view the links below. For more insurance term definitions, visit A.M. Best’s Glossary of Insurance Terms.

Please note that this section highlights examples of safety precautions that you can consider to help prepare yourself, others and your personal property for a disaster. Please recognize that a particular precaution may not be appropriate or effective in every circumstance. We encourage you to use your own good judgment about what is appropriate. Please reference our Legal Statement for additional disclaimers.