Insurance glossary
Insurance has its own language. Here are the terms you'll see most when you compare auto, home, life and health coverage, explained in plain English.
A
- Actual cash value (ACV)
- What your property is worth today: the cost to replace it minus depreciation for age and wear. A policy that pays ACV pays less for older items than one that pays replacement cost. Learn more →
- Agent
- A licensed person who sells insurance. A captive agent sells for one company; an independent agent can quote several companies.
- At-fault state
- A state where the driver who causes a crash is responsible for the other people's injuries and damage, usually through their liability insurance. Most states work this way.
B
- Beneficiary
- The person or organization that receives a life insurance payout when the insured person dies. Learn more →
- Bodily injury liability (BI)
- Car insurance that pays for injuries you cause to other people in a crash, up to your limits. Required in nearly every state. Learn more →
- Broker
- A licensed professional who shops coverage from multiple insurers on your behalf.
- Bundling
- Buying more than one policy, such as home and auto, from the same insurer, often for a discount on each. Learn more →
C
- Claim
- A request you make to your insurer to pay for a covered loss.
- Coinsurance (health)
- Your share of a covered health care cost after you meet your deductible, shown as a percentage. With 20% coinsurance, you pay 20% and the plan pays 80%.
- Collision coverage
- Pays to repair or replace your car after it hits another vehicle or object, or rolls over, regardless of who is at fault. You pay your deductible first. Learn more →
- Comprehensive coverage
- Pays for damage to your car from things other than a collision, such as theft, hail, fire, flooding, vandalism or hitting an animal. Learn more →
- Copay
- A fixed amount you pay for a covered health service, such as $30 for a doctor visit.
D
- Declarations page
- The summary page of your policy. It lists who and what is covered, your coverage limits, deductibles, discounts and premium. Use it to compare quotes like for like.
- Deductible
- The amount you pay out of pocket on a claim before your insurer pays the rest. A higher deductible usually means a lower premium. Learn more →
- Dwelling coverage
- The part of a homeowners policy that pays to repair or rebuild the structure of your home. Learn more →
E
- Endorsement (rider)
- A change or add-on to a policy that adds, removes or adjusts coverage.
- Exclusion
- Something a policy specifically doesn't cover, such as flood damage on most homeowners policies. Learn more →
F
- Final expense insurance
- A small whole life policy meant to cover funeral and end-of-life costs. Learn more →
- Full coverage
- An informal term for a car policy with liability plus collision and comprehensive. It isn't an official coverage type, so the details vary by insurer. Learn more →
G
- Gap insurance
- Pays the difference between what you owe on a car loan or lease and the car's actual cash value if the car is totaled or stolen. Learn more →
H
- HO-3
- The most common homeowners policy form. It covers the house against all risks except those it excludes, and your belongings against listed risks.
- HO-6
- A condo insurance policy. It covers your unit's interior, your belongings and your liability, alongside the condo association's master policy. Learn more →
L
- Lapse
- A gap in coverage, usually because a policy was canceled or not renewed. Even a short lapse can raise future rates. Learn more →
- Liability coverage
- Pays for injuries or damage you cause to other people, up to your limits, and for your legal defense if you're sued.
- Limit
- The most your insurer will pay for a covered loss. Car liability limits are often written as three numbers, like 25/50/20. Learn more →
- Loss of use
- Home insurance that pays extra living costs, such as a hotel, while your home is being repaired after a covered loss.
M
- Medical payments coverage (MedPay)
- Car insurance that pays medical bills for you and your passengers after a crash, no matter who is at fault.
N
- No-fault state
- A state where your own personal injury protection pays your medical costs after a crash, no matter who caused it. Florida is one. Learn more →
- Non-owner car insurance
- Liability coverage for people who drive but don't own a car. It's often used to file an SR-22. Learn more →
O
- Open enrollment
- The yearly window when you can buy or change a health plan on the marketplace without a qualifying life event. Learn more →
- Out-of-pocket maximum
- The most you pay for covered health care in a plan year. After you reach it, the plan pays 100% of covered costs.
P
- Personal injury protection (PIP)
- Car insurance that pays medical costs and some lost wages for you and your passengers, regardless of fault. Required in no-fault states.
- Personal property coverage
- The part of a home, condo or renters policy that pays for your belongings after a covered loss. Learn more →
- Property damage liability (PD)
- Car insurance that pays for damage you cause to other people's vehicles and property.
Q
- Quote
- An insurer's estimate of your premium based on the information you provide. The final price can change once the insurer verifies your details.
R
- Rental reimbursement
- Optional car coverage that pays for a rental car while yours is being repaired after a covered claim. Learn more →
- Replacement cost
- What it costs to replace damaged property with new property of similar kind and quality, without subtracting depreciation. Learn more →
- Roadside assistance
- Optional car coverage for towing, jump-starts, flat tires and lockouts. Learn more →
S
- SR-22
- A form your insurer files with the state to prove you carry required liability coverage. Courts or the DMV may require it after a serious violation or a lapse. It isn't a type of insurance. Learn more →
T
- Term life insurance
- Life insurance that covers you for a set number of years, such as 20 or 30. It pays only if you die during the term. Learn more →
- Total loss
- When the cost to repair a car is more than the insurer decides it's worth fixing. The insurer pays the car's actual cash value, minus your deductible. Learn more →
U
- Underinsured motorist coverage (UIM)
- Pays for your injuries when the at-fault driver's liability limits are too low to cover them. Learn more →
- Underwriting
- How an insurer reviews your information to decide whether to cover you and at what price.
- Uninsured motorist coverage (UM)
- Pays for your injuries when you're hit by a driver who has no insurance, or by a hit-and-run driver. Learn more →
W
- Whole life insurance
- Permanent life insurance that lasts your whole life as long as premiums are paid, and builds cash value over time. Learn more →
Definitions are general. Your policy's wording controls what's covered, so check your policy documents or ask a licensed agent.