Insurance and the terms used can be complicated. So today, we will break down the most common insurance terms you may come across. We’ll cover general terms used and those specifically used around business, homeowners, and auto insurance.
General Insurance Terms
- Actual Cash Value - This coverage takes depreciation into account and will pay the amount an item was worth at the time it was damaged or stolen.
- Actual Replacement Cost - This coverage doesn’t factor in depreciation or wear and tear and pays the amount it would cost to replace a damaged or stolen item.
- Adjuster - An employee at an insurance company that evaluates losses and settles claims.
- Declarations Page - This page creates a contract between you and the insurance company. This details the policyholder, what is covered and for how much.
- Deductible - This is the amount you agree to pay out of pocket in the event of a claim. Generally, the lower your deductible the higher your premium.
- Premium - The amount you pay for your insurance policy. This is typically paid monthly, twice a year, or yearly.
- Subrogation - When an insurance company pays a claim and seeks damages from a third party who was responsible for the damage.
- Term - The period an insurance policy is in effect. Typically 6 or 12 months.
- Underwriting - When an insurance company is evaluating whether they will provide coverage to a customer and the premium associated with the policy.
Business Insurance Terms
- ACORD 25 Certificate of Liability Insurance - A one-page document that proves you have business liability insurance. This is often given to businesses you do business with to show your business and theirs are protected from common risks.
- Independent Contractor - A self-employed individual who provides services to other businesses and people. The key distinction between an employee and an independent contractor is the employer does not have the right to control the details of how a service is performed by an independent contractor.
- Risk Management - Identifying and managing threats to your business so you can have the proper protections in place if something goes wrong.
Homeowners Insurance Terms
- Additional Living Expenses - Coverage for living expenses you usually wouldn’t experience due to a claim, such as a hotel room.
- Catastrophe - A natural disaster such as a tornado or hurricane affecting a certain area that causes significant damage.
- Home Contents - Items in your home that are not fixed to the structure, such as appliances and furniture.
- Peril - A risk that is specifically defined, like hail, flooding, and wind damage.
- Scheduled Property - Separate coverage for high-value items that exceed policy limits or are excluded like expensive jewelry.
Auto Insurance Terms
- Bodily Injury - This covers the expenses associated with physical injuries, such as medical care.
- Collision - This pays for vehicle damage caused by you or someone else covered under your policy.
- Comprehensive - This covers damage to your vehicle that is outside of your control, such as a fire or tree falling.
- PIP (Personal Injury Protection) - If you, someone on your policy, or a passenger is injured in an accident, regardless of fault, this will pay the medical expenses.
While there are even more terms used in the insurance world, we hope this gives you a better understanding of the most common ones used. If you have questions about insurance for you or your business, please reach out to us via phone or our website. We are happy to help!
