Insurance Terms You Need to Know

Actual cash value The cost value of your property today, minus age, wear and
tear, and depreciation.

At fault Describes the person who is legally responsible for or contributes to the cause of an accident or claim, such as in an auto accident.

Claim A report of a loss sent to the insurance company.

Coverage Protection provided by an insurance policy.

Deductible The amount the policyholder agrees to pay out-of-pocket in case of a loss. The insurance company pays the remaining amount, up to the limit.

Depreciation The decrease in the value of property due to wear and tear and age.

Endorsement A written amendment attached to an insurance policy to change, restrict or broaden coverage.

Exclusion A provision in an insurance policy that eliminates coverage for certain risks, people, property classes, or locations.

Insurance A system to make large financial losses more affordable by pooling the risks of many individuals and business entities and transferring them to an insurance company or other large group in return for a premium.

Insured A person who is insured by an insurance policy.

Insurance company The company who provides the insurance coverage and services on a specific policy.

(Auto) Liability Pays the losses of other people which an insured may cause unintentionally, or through neglegence.


Limit The maximum amount that an insurance company
will pay for a covered loss.

Loss Damage or destruction to something of value.

Peril Causes of loss under an insurance policy, such as fire, windstorm, explosion, vandalism, etc.

Policy A legal contract that sets forth the rights and obligations of both the policyholder and the insurance company

Policyholder The person who owns the policy.

Premium The monthly or annual cost of insurance.

Quote Estimate from the insurance company of the premium you will pay for an insurance policy. This is used to shop for a policy and compare providers.

Replacement cost The amount it would cost to replace damaged property at today’s prices, without a deduction for depreciation.

Risk The chance of financial loss.

Underwriter Insurance professional who evaluates requests for insurance, determines who will be awarded coverage, and at what cost. This person is an expert in assessing risk.