Ultimate Insurance Terms Guide

Welcome to the CheapInsurance.com Insurance Terms Guide. This page provides clear, plain language definitions of common insurance terms used in car insurance, renters insurance, homeowners insurance, commercial insurance and SR22 insurance.

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Term	Definition
Accident	Any unintended event that causes loss to property or life.
Act of God	Natural occurrences that cause unpreventable accidents or events such as severe storms.
Actual Cash Value	The amount the property was worth at the time of loss.
Actuary	Person who assess risk ratios for the insurance company.
Adjuster	Person who evaluates claims for the insurance company and determines loss on claims.
Agent	A person who sells insurance policies and is licensed to do so.
Aggregate Limit	Limitation of policy determined by time regardless of amount of accidents within that time period.
Agreed Value	Common in boat policy where the insurance company and insured agree on a value for a boat and it is considered the amount you would receive in the event of loss rather than the market value.
All Terrain Vehicle Insurance (ATV)	Policy that covers off road vehicles such as four wheelers.
Anti Theft Device	Any deterrent that prevents theft of property such as a car alarm.
Appraisal	A systematic approach to determining amount of damage and the cost to repair or claim a total loss. Also determines the value of property to assess taxes and initiate policies.
Arson	The intentional setting of a fire to property.
Assessed Values	Used in taxation to value properties.
Auto Death and Dismemberment Coverage	An additional coverage that pays for death or loss of limbs due to an auto accident.
Beach and Windstorm Policy	State sponsored insurance risk pool to provide coverage for hurricanes or other coastal storms.
Beneficiary	The person who is awarded claim money in the event of a loss.
Binder	A temporary agreement with the insurance company and insured that insurance is in effect.
Blue Water	Water territory further than five miles from shore.
Boat Insurance (Marine Coverage)	Coverage for vessels propelled on the water with either engine, wind or oars.
Bodily Injury Liability Coverage	Coverage that pays for the injured party if you are at fault in an accident. May also cover legal fees, lost time at work and other related expenses to an injured person.
Broker	A person who compares and finds insurance policies for a consumer. They do not represent a particular insurance company but rather the consumer.
Brown Water	Water territory less than five miles from shore.
Bundling	Coverage that includes multiple policies such as home and auto which when combined can save the consumer premium costs.
Burglary and Theft Coverage	Additional coverage that pays for loss due to criminal theft.
Calendar Year	Used for dating policy begin and end dates, which means a policy would be in effect for 365 days.
Cancellation	The end of a policy and coverage either due to policy end date or non payment.
CARFAX	A report that can be obtained to show the accident and repair history of a vehicle by researching its VIN number.
Car Pool Discount	Discounts on policy premiums for those that have proof they participate in a car pool for commuting purposes.
Carrier	Another name for the insurance company.
Cash Value	The actual value of property at the time of loss also considered the market value. It does not consider replacement value or amount owed.
Casualty Insurance	Coverage for a person who is killed or injured in an accident.
Catastrophe	A destructive sudden disaster that causes loss.
Certificate of Insurance	A written document that proves coverage is in force during a specific time period.
Citation	A violation of either moving or non-moving laws in which an official serves a ticket to the person at fault.
Claim	A request to the insurance company for compensation due to a covered loss.
Claim Number	A distinct number assigned to each claim for reference.
Clause	A specific part or wording of a policy which may include exclusions or exceptions.
Coinsurance	A portion of a claim that is paid by the insured towards the cost of the claim.
Collision Coverage	Coverage for physical damages caused by an accident with another car or object.
Commercial Vehicle	A vehicle that is used for business purposes and not for commuting or private use.
Commute	The drive between home and work or school and back home. This is usually measured in miles each day or amount of time on the road.
Competitive Replacement Parts	When replacing damaged parts from an accident these parts may be used versus the standard manufactured parts from the factory of origin.
Comprehensive Coverage	Coverage for loss not caused by a collision such as damage from fire or theft.
Comprehensive Personal Liability Policy (CPL)	A homeowners additional coverage option that includes liability coverage for family or individuals to cover loss such as from pet ownership, sports participation and other everyday activities.
Compulsory Auto Insurance	The state required basic minimum liability coverage which is legally required in most states. Severe penalties can be given if you are caught driving without insurance.
Conditions	These are limitations on policies that can deny coverage for certain criteria defined in the policy.
Condominium Insurance	Coverage for your personal property and the interior of your condo. May also contain liability coverage for someone injured in your home.
Contents Coverage	Additional coverage for items contained, housed or stored within a covered property.
Continual Coverage	Coverage that has not had any lapses for a specific time period and no gaps of time between policies without coverage.
Coverage	Reimbursement protection for loss according to a written insurance policy.
Coverage Area	A specific area such as a state or country in which coverage exists, outside of the area coverage is excluded.
Crash Test Ratings	Safety ratings for a specific vehicle on their performance during simulated or controlled crash tests.
Credit Risk	A person or entity which has a higher chance of default on policy premiums. Some insurance companies compare credit risk to overall responsibility of the driver and those with higher risk are generally charged higher premiums.
Crime Insurance	Coverage for damage or loss incurred during a crime such as theft or burglary. Some areas with higher crime rates may choose for this additional option.
Date Restrictions	Some policies only cover during seasonal use when you are using watercraft. Coverage is only in effect during the dates set in the policy.
Death Benefit	Payments made to a beneficiary due to the death of a person in a covered accident.
Declarations Page	A specific part of your policy which describes the type and amounts of coverage.
Deductible	A portion of a claim that is paid by the insured which is a set amount agreed upon during the purchase of the policy. Usually the higher the deductible, the lower the premium. This amount is paid either per occurrence or per calendar year depending on the coverage type. It is to be paid to the servicing agent who is repairing the damaged property.
Defensible Space	A designated area around a fireplace or other hazard to prevent fires or accidents.
Defensive Driving Course	A traffic safety course which improves driving. It may be taken to prevent a citation from being placed on your driving record or to reduce insurance premiums.
Deposit	A monetary contribution toward premiums which guarantees scheduled payments.
Depreciation	When the actual value of property is lowered to reflect age, misuse or neglect.
Disaster	A natural occurring event that creates unpreventable loss.
Driving Record	A detailed account of an individual's driving violations.
Driving Under the Influence	Driving a motor vehicle when you are under the effects of drugs or alcohol. Each state has a legal limit for alcohol use and if you test above that limit you will be cited for DUI or DWI. Severe penalties have been placed in each state for each offense and special insurance may need to be purchased after conviction of DUI or DWI.
Drought	A recorded deficiency in rainfall that leads to loss of property or makes fire conditions dangerous.
Effective Date	The beginning date of policy coverage.
Emergency Coverage	Coverage for services during an accident such as towing.
Endorsement	These are changes to your original policy and can include adding additional drivers or selecting additional coverage or deductibles.
Evidence of Insurance	A written proof of insurance coverage for a specific period of time.
Exclusions	Any policy exception that is not covered under your policy.
Excluded Driver	Any licensed driver that is excluded from your policy. This person will not be covered in the event of an accident because they have been excluded from the policy.
Extended Replacement Cost	Additional coverage for replacement value of your property. If labor and material costs rise you may not be able to replace your property to its previous condition at the market value.
Family Member	A person who resides with you at the same address who is also related to you. However a college student who lives away from home is also usually considered as a family member for policy purposes.
FEMA	Federal Emergency Management Agency. Handles emergency situations such as severe storms and the destruction they cause.
Financial Responsibility Laws	Laws that make it illegal to not have the minimum state standards of insurance liability insurance.
Fire Insurance	Coverage that pays for loss associated with fire.
Floater	Additional coverage for personal items that may not always be either at home or in your possession such as jewelry or art. It may also cover these items during transit or when being serviced or repaired.
Flood Insurance	Additional coverage that covers for loss associated with flood waters. This coverage may be mandatory depending on the zoning laws of your area.
Full Coverage	Covers liability, collision and comprehensive on a specific vehicle. Most financed vehicles are required to carry full coverage.
Gap Insurance	The market value of your vehicle may not be how much you owe on your loan. Gap insurance covers the monetary amount owed to the finance company in the event of total loss.
Garage Address	This is your primary residence where your vehicle is kept the majority of the time.
Glass Insurance	Additional coverage for loss associated with glass windows and doors.
Grace Period	Additional time that you have to pay your premium without penalty.
Graduated Driver License	A license that limits the driving privileges until further driving experience time has passed.
Gross Negligence	Reckless behavior that specifically harms another without regard for their safety or property.
Guaranteed Renewal	A policy that is automatically renewed after each policy term as long as premium is paid accordingly.
Guaranteed Replacement Cost Coverage	Additional coverage that will pay the full replacement value of property that has incurred loss to restore it to its original condition prior to the loss.
Hazard	Any safety issue such as exposed wiring that could cause a fire.
Homeowners Insurance	A policy in which covers the homeowner's property and also liability coverage for anyone injured at his property.
Hurricane	A severe coastal storm that produces winds of 75mph and has the ability to cause flooding, excessive rain and tornadoes.
Lapse	A period of no coverage due to non-payment or gaps between policies.
Lay Up Period	Periods when an insured vehicle or craft is not in use and coverage is suspended.
Liability Coverage	Coverage that pays for injuries or property damage you cause to others.
Licensed Driver	A person who meets state requirements and holds a valid driver's license.
Limits	The maximum amount an insurer will pay under a policy.
Limited Liability	Minimum coverage that satisfies state liability requirements.
Loss	Any financial or personal damage resulting from an accident or event.
Manufactured Home Coverage	Insurance coverage designed specifically for mobile or manufactured homes.
Material Misrepresentation	Providing false or misleading information when obtaining insurance.
Mediation	A dispute resolution process assisted by a neutral third party.
Medical Payment Coverage	Covers medical expenses related to an auto accident regardless of fault.
Mortgage Guarantee Insurance	Coverage protecting lenders against borrower default.
Motorcycle Coverage	Insurance coverage for registered motorcycles including liability and physical damage.
Motor Vehicle Report	A record of a driver's driving history and violations.
Named Perils	Specific risks listed in a policy that are covered.
National Flood Insurance Program (NFIP)	A federal program that provides flood insurance to reduce financial impact.
Navigational Limits	Coverage restrictions based on geographic water boundaries.
Negligence	Failure to exercise reasonable care resulting in harm.
No Fault	Laws allowing medical claims to be paid regardless of fault.
Non Renewal	A policy that does not automatically renew at the end of its term.
Notice of Loss	Required notification to an insurer following a loss.
Occurrence	An individual accident or event.
Operators	Only specifically listed individuals allowed to operate a vehicle or craft.
Package Policy	A policy that offers discounts for multiple policies such as home and auto.
Passive Alarm	An alarm that is activated automatically and emits a warning sound. It also disables the vehicle until disarmed.
Personal Injury Protection	Also known as medical payment insurance. It covers medical costs and treatment associated with an accident up to a certain monetary policy limit.
Personal Watercraft	Vehicles such as jet skis that operate on water and are not classified as boats.
Pet Coverage	Additional coverage for pets that are injured during an accident.
Policy	The written document outlining the coverage details of your insurance plan.
Policy Holder	The person who purchases the policy and is usually the beneficiary.
Preferred Auto	Discounted insurance coverage for drivers with excellent driving records or low-risk profiles.
Premium	The cost of the policy that must be paid in order to maintain coverage.
Proof of Coverage	A written document that shows insurance coverage for a specific property during a specific time period.
Proof of Loss	Documentation that verifies property loss, such as accident or police reports.
Property Damage Coverage	Coverage for damage to property such as vehicles, structures, or windows.
Qualifying Event	An event that meets the policy requirements for a covered loss.
Recreational Vehicle (RV)	Insurance coverage for motor homes, trailers, and campers.
Reinstatement	When coverage becomes active again after a lapse due to non-payment.
Renewal	The option to continue a policy for another term at the end of the current policy period.
Rental Car Reimbursement	Coverage that pays for a rental car while your vehicle is being repaired due to a covered loss.
Rental Property	Any property that is leased or rented to tenants.
Renter	A person who leases or rents a property.
Renters Policy	Insurance coverage that protects personal property within a rented residence.
Replacement Cost	The cost of replacing damaged property with materials of like kind and quality without depreciation.
Rider	An additional coverage endorsement added to an existing policy.
Risk Ratio	Factors associated with a policyholder that influence insurance pricing.
Roadside Assistance Coverage	Coverage providing services such as towing, jump starts, or emergency key replacement.
Salvage	A vehicle that is deemed a total loss and cannot be safely repaired.
SR-22	A certificate of insurance required for drivers convicted of DUI or DWI offenses.
Supplemental Coverage	Additional insurance coverage added beyond a base policy.
Total Loss	When repair costs exceed the market value of the property or vehicle.
Towing and Labor	Coverage for expenses related to towing a disabled vehicle.
Umbrella Policy	Provides additional personal liability coverage beyond standard policy limits.
Underwriter	The individual or entity responsible for determining premiums and policy terms.
Uninsured / Underinsured Coverage	Coverage that protects you when an at-fault driver lacks sufficient insurance.
Vehicle Identification Number (VIN)	A unique identifying number assigned to every motor vehicle.
Water Damage Policy	Covers property damage caused by water incidents such as plumbing leaks, excluding flood damage.

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