Insurance Terms Glossary

Actual Cash Value: The value of property based on the cost of repairing or replacing it with property of the same kind and quality. Typically, actual cash value equals the current replacement cost minus depreciation (age, condition, length of time in use, and obsolescence.)

Auto Collision coverage: Optional auto insurance which pays for damage to your car caused by collision with another car or object, or by rolling the car over. Frequently required if you have a car loan.

Auto Comprehensive Physical Damage Coverage: Optional auto insurance which pays for damage to your auto caused by things other than collision or rolling the car over, such as fire, theft, vandalism, flood or hail. Frequently required if you have a car loan.

Cash Value (cash surrender value): The cash amount payable to a life insurance policy owner in the event of termination or cancellation of the policy before its maturity or the insured event.

Deductibles: The portion of the loss that the policyholder agrees to pay out of pocket, before the insurance company pays the amount they are obligated to cover. For example, if the covered claim is $1000 and your deductible is $250, you pay $250 and your company will pay $750. Deductibles help to keep insurance rates reasonable. Raising the amount of the deductible lowers the cost of insurance.

Depreciation: Reduction in the value of property due to age and use.

Endorsement: Attachment or addendum to an insurance policy; an endorsement changes the contract's original terms.

Face Amount: The amount stated in the life insurance policy as the death benefit.

Insured: The person whose insurable interest is protected under an insurance policy

Lapse: Termination of a policy due to nonpayment of premiums.

Liability Coverage: Insurance that provides compensation for a harm or wrong to a third party for which an insured is legally obligated to pay.

Loss: A claim either paid or payable due to the insurer's policy obligations.

Medical Payments coverage: Medical and funeral expense coverage for bodily injuries sustained from or while occupying an insured vehicle, regardless of the insured's negligence.

Peril: The cause of loss or damage.

Personal Property Insurance: Protects against the loss of, or damage to property other than real property (real estate) caused by specific perils.

Policy: The written forms that make up the insurance contract between an insured and insurer. A policy includes the terms and conditions of the coverage, the perils insured or excluded, etc.

Policy Limits: The maximum amount an insured may collect or for which an insured is protected, under the terms of the policy.

Premium: The price for insurance coverage as described in the insurance policy for a specific period of time.

Proof of Loss: A sworn statement that usually must be furnished by the insured to an insurer before any loss under a policy may be paid.

Term Insurance: Life insurance under which the benefit is payable only if the insured dies during a specified period. If the insured survives beyond that period, coverage ceases. The type of policy does not build up any cash or non-forfeiture values.

Theft Limit (or Inside Policy Limits): The highest amount an insurance company will pay on certain items of personal property. For instance, some policies have a $5000 limit for computers.

Uninsured Motorist Coverage: Coverage that pays for covered damage for bodily injury that an uninsured motorist is legally liable but unable to pay.

 

 

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