Your Guide to Insurance Terms

We believe informed clients make better decisions. This glossary breaks down key insurance terms in simple, easy-to-understand language.

A

  • ACORD Forms: Standardized insurance forms used across the insurance industry for applications, certificates, and policy documentation.
  • Actual Cash Value (ACV): Replacement cost of property minus depreciation.
  • Additional Insured: A person or entity added to a policy who receives protection under the policy.
  • Adjuster: A professional who investigates insurance claims and determines the insurer’s liability.
  • At-Fault Accident: An accident where the insured driver is determined to be responsible for causing the damage or injury.

B

  • Bodily Injury Liability (BI): Coverage that pays for injuries or death to another person when the insured is legally responsible.
  • Binder: Temporary proof of insurance until the formal policy is issued.
  • Blanket Coverage: Coverage that applies to multiple properties or risks under a single limit.

C

  • Claim: A request made to an insurance company for payment of a covered loss.
  • Collision Coverage: Auto insurance that pays for damage to the insured vehicle caused by collision with another vehicle or object.
  • Comprehensive Coverage: Coverage for damage caused by events other than collision such as theft, fire, vandalism, hail, or falling objects.
  • Certificate of Insurance (COI): A document that provides proof that insurance coverage exists.
  • Coverage Limit: Maximum amount the insurer will pay for a covered loss.

D

  • Deductible: The amount the insured must pay before the insurer pays a claim.
  • Declarations Page (Dec Page): The summary page of the insurance policy listing insureds, coverages, limits, and premiums.
  • Depreciation: Decrease in property value due to age, wear, or obsolescence.

F

  • Full Tort: An auto insurance option allowing the insured to sue for pain and suffering after an accident regardless of injury severity.

G

  • Gap Insurance (Loan/Lease Gap Coverage): Coverage that pays the difference between the vehicle’s actual cash value and the remaining loan or lease balance if the car is totaled.

H

  • Hit-and-Run Accident: An accident where the responsible driver leaves the scene without providing information.

I

  • Inland Marine Insurance: Coverage for movable or specialized property such as tools, equipment, or goods in transit.

L

  • Limited Tort: An auto insurance option limiting the insured’s ability to sue for pain and suffering unless the injury is considered serious.
  • Liability Coverage: Coverage that pays for damages or injuries the insured is legally responsible for.

O

  • Optional Coverages: Additional coverages that policyholders may add to a basic insurance policy for extra protection.

P

  • Personal Injury Protection (PIP): Coverage that pays for medical expenses, lost wages, and sometimes other expenses after an auto accident regardless of fault.
  • Peril: The cause of a loss such as fire, theft, or windstorm.
  • Policy: A legal contract between insurer and insured outlining coverage terms.
  • Premium: The amount paid to maintain insurance coverage.
  • Property Damage Liability (PD): Coverage that pays for damage the insured causes to another person’s property.

R

  • Rental Car Coverage (Rental Reimbursement): Coverage that reimburses the insured for the cost of renting a car while their vehicle is being repaired due to a covered claim.
  • Roadside Assistance: Coverage providing emergency services such as jump-starting a battery, changing a tire, or fuel delivery.
  • Replacement Cost: The cost to replace damaged property with new property of similar kind and quality without depreciation.

S

  • Stacked Coverage: Allows uninsured or underinsured motorist coverage limits to combine across multiple vehicles on a policy to increase protection.
  • Unstacked Coverage: Coverage limits apply separately to each vehicle and cannot be combined.
  • Subrogation: The insurer’s right to recover money from the party responsible for a loss after paying a claim.

T

  • Towing Coverage: Coverage that pays for towing costs if a vehicle breaks down or is disabled.
  • Trip Interruption Coverage: Coverage that reimburses expenses such as lodging or meals when a breakdown occurs far from home during a trip.

U

  • Uninsured Motorist Coverage (UM): Coverage that protects the insured if they are injured by a driver who has no insurance.
  • Underinsured Motorist Coverage (UIM): Coverage that protects the insured when the at-fault driver’s insurance is insufficient to cover damages.
  • Underwriter: A professional who evaluates risk and determines policy terms and pricing.

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