Key Insurance Terms and What They Mean

Understanding insurance terminology is crucial for making informed decisions about your coverage. Below is a list of key insurance terms and definitions of common concepts.

Reach out to your insurance provider or agent for further clarification on specific terms.

Key Insurance Terms and Definitions

• Actual cash value (ACV)—This is the value of your property, like your home or car, considering depreciation and current market conditions.

• Adjuster—This is a professional who evaluates insurance claims, determines coverage and calculates payment amounts.

• Binder—This is a temporary legal document that provides proof of insurance coverage until a formal policy is issued.

• Cancellation—This refers to the end of insurance coverage before the policy period concludes.

• Claim—This is a formal request made by the insured to receive reimbursement for covered losses.

• Collision coverage—This insurance may help pay for damage to your vehicle resulting from collisions, whether with another vehicle or object like a tree or guardrail.

• Comprehensive coverage—This insurance may help cover damage to your vehicle from incidents other than collisions, such as theft, vandalism, weather events and animal collisions.

• Deductible—This is the amount you must pay out of pocket before your insurance policy covers the remaining costs.

• Depreciation—This refers to the reduction in an item’s value due to age and wear and tear.

• Dwelling coverage—This insurance covers the physical structure of your home and any attached structures like garages or porches.

• Endorsement—This refers to an addition to your policy that modifies or extends your coverage. Examples include rideshare insurance, GAP insurance and scheduled personal property.

• Escrow—This is a system where your mortgage, homeowners insurance and sometimes property taxes are combined into one payment made to your mortgage lender, who then pays your insurance and taxes.

• Exclusion—These are specific conditions or causes not covered by your insurance policy.

• Grace period—This refers to the timeframe during which you can make a late payment on your insurance premium without losing coverage.

• Insured—This is the person or entity protected by the insurance policy.

• Insurer—This is the insurance company that provides coverage and manages policies.

• Limit—This refers to the maximum amount an insurer will pay out for a claim, as specified in your policy.

• Misquote—This is an inaccurate estimate of your insurance premium, often resulting from quick online quoting tools.

• Peril—This is an event or condition that can cause damage to your property and is covered by your policy. Common perils include fire, theft and vandalism.

• Policy—This refers to the written agreement that outlines the terms of your insurance coverage.

• Premium—This is the amount you pay for your insurance coverage.

• Quote—This is an estimate of your insurance costs based on information you provide to the insurance provider.

• Replacement cost—This is the amount it would cost to replace your property with a new or equivalent item, as determined by your policy. Extended replacement cost is an optional policy feature that provides additional coverage beyond your policy limits in case replacement costs exceed those limits.

• Rider—This is an additional provision or endorsement added to your policy to enhance coverage.

• Surcharge—This refers to an extra fee added to your premium, often due to higher risk or claims history.

• Underwriter—This is a professional who assesses risk and determines whether to approve insurance policies.

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Contact AMCO Gulf LLC in Houston, Texas, for personalized insurance quotes.

This blog is intended for informational and educational use only. It is not exhaustive and should not be construed as legal advice. Please contact your insurance professional for further information.