To assist a better understanding of insurance terms and phrases, Cranbrook Bloomfield Insurance Agency provides the following list of key industry terms. Contact us today for additional clarification or to speak to one of our insurance experts.
A.M. Best: A nationally recognized organization that evaluates insurance companies and rates their financial stability according to their rating system.
Accident: An unintentional, unforeseen and unexpected detrimental event.
Actual Cash Value (ACV): The value of your property at the time of a loss or damage. ACV may be determined as the replacement cost minus depreciation.
Adjusted Basis: The cost of a property plus the value of any improvements and minus depreciation.
Adjuster: A person who investigates and settles insurance claims on the behalf of the insurer.
Agent: A licensed person who sells insurance policies.
Appreciation: An increase in the value of a property or asset caused by economic factors such as inflation or other causes. The opposite of depreciation.
Assessed Value: The value placed on property for purposes of taxation.
Betterment: An improvement that increases the value of a property or facility.
Binder: A preliminary, temporary agreement that provides proof of insurance until the policy is official.
Blanket Insurance Policy: A single policy that covers more than one person or piece of property.
Breach: The failure to perform a promised act or obligation.
Cancellation: Voluntary termination of an insurance policy by the insurer or the insured prior to the renewal date.
Cash Value: The amount of money which the policy owner will receive as a refund if the coverage is cancelled and the policy is returned to the company. Also known as cash-surrender value.
Casualty Insurance: The type of insurance covering the legal liability for losses caused by injuries to others or property damage caused by you or other residents of your home.
Chattel: Articles of personal property.
Claimant: A person who makes an insurance claim.
Coinsurance: The sharing of risk between the insurer and the insured.
Coinsurance Clause: A provision in a hazard insurance policy that states the amount of coverage that must be maintained, as a percentage of the total value of the property, for the insured to collect the full amount of a loss.
Common Areas: Those portions of a building, land and amenities owned (or managed) by a planned unit development (PUD) or condominium project’s homeowners’ association (or a cooperative projects cooperative corporation) that are used by all of the unit owners, who share in the common expenses of their operation and maintenance. Common areas include swimming pools, tennis courts and other recreational facilities, as well as common corridors of buildings, parking areas, means of ingress and egress, etc.
Company Profile: A synopsis of a company’s performance including licensing data, an A.M. Best rating, financial information and complaint history.
Conditional Receipt: A premium receipt which makes the insurance effective only if or when a specified condition is met.
Condominium: Multi-family housing where units are owned individually by private owners, but common areas are the shared responsibility of all tenants.
Contents Coverage: Contents coverage, sometimes referred to as “coverage C” or “personal property coverage,” is the portion of your home insurance policy that covers the cost of replacing your possessions, or home’s contents, in the event that they are destroyed in a covered peril (wind, fire, hail, lightening, theft, etc.). Contents coverage limits are usually 50%-70% of your dwelling coverage.
Contract: In most cases, the term “contract” refers to an insurance policy. A policy is considered to be a contract between the insurance company and the policyholder.
Declarations Page: The page in your policy that shows the name and address of the insurer, the period of time a policy is in force, a description of the insured property, the amount of the premium and the amount of coverage.
Deductible: The amount that a policyholder has agreed to pay on a claim before the insurer is liable for any damages.
Deposit: A payment given as a guarantee that an obligation will be met.
Depreciation: A decrease in the value of property. The opposite of Appreciation.
Dividend: An amount of money from earnings that an insurance company may decide to distribute to policyholders.
Dwelling Coverage: Dwelling coverage, sometimes referred to as “coverage A,” protects against the damage and possible loss of your home in the event of a covered claim such as a hurricane, hailstorm, lightning strike or fire.
Earned Premium: The portion of a policy premium that has been used to actually buy coverage, or that the insurance company has earned. For instance, there would be two months of earned premium. The remaining four months of premium is called unearned premium.
Effective Age: An appraiser’s estimate of the physical condition of a building. The actual age of a building may be shorter or longer than its effective age.
Effective Date: The date on which an insurance policy becomes effective.
Endorsement: A written amendment attached to a policy that modifies the terms of the insurance contract.
Exclusions: Specific situations, conditions or circumstances listed in your policy that are not covered by your home insurance policy.
Experience Period: The period of time that a company will reference when making evaluations of an insuring policy.
Expiration Date: The date on which an insurance policy expires.
First-Party Loss: A situation involving only the insurer and insured.
Flood Insurance: Insurance that compensates for physical property damage resulting from flooding. It is required by lenders for properties located in federally-designated flood areas.
Grace Period(s): The time during which a policy remains in force after the premium is due but not paid.
Hazard Insurance: Insurance coverage that compensates for physical damage to a property from fire, wind, vandalism or other hazards.
Homeowners Insurance: An insurance policy that combines personal liability insurance and hazard insurance coverage for a dwelling and its contents.
Incontestability: A provision that places a time limit—up to two years—on a company’s right to deny payment of a claim because of material misrepresentation on your application.
Independent Adjuster: A person who charges a fee to the insurance company to adjust the company.
Inland Marine: Movable property (e.g. furs, jewelry, stamp collections) insured by policies called Floaters.
Insurance: A contract that provides compensation for specific losses in exchange for a periodic payment. An individual contract is known as an insurance policy, and the periodic payment is known as an insurance premium.
Insurance Binder: Written evidence that insurance is temporarily in effect until the specified expiration date. At that time, a permanent policy must be obtained.
Insured: The person or firm covered by an insurance policy.
Insurer: The insurance company.
Lapse: When a policy holder fails to make payments, the policy becomes null and void.
Legal Description: A property description, recognized by law, which is sufficient to locate and identify the property without oral testimony.
Liability: Responsibility to compensate another for your negligence.
Liability Coverage: Home insurance coverage that protects the insured against injury or damage claims.
Liability Insurance: A policy that protects owners against claims of negligence, personal injury or property damage.
Limit of Liability: The maximum amount of damages an insurer is bound to pay in case of a loss.
Loss: The amount sought through an insurer’s claim.
Loss History: Refers to an insured’s history of losses (claims) with other companies, or the company they are currently with. A company will consider “loss history” when underwriting a new policy or considering a renewal of an existing policy.
Loss-of-use Coverage: Loss-of-use coverage, sometimes referred to as “coverage,” provides for your living expenses in the event that you cannot live in your home due to a covered claim. This type of coverage typically covers hotel and restaurant bills and other living expenses you may incur while your home is being repaired. Coverage limits for loss of use is usually around 20% of your dwelling coverage.
Master Association: A homeowners association in a large condominium or planned-unit development (PUD) project that is made up of representatives from associations covering specific areas within the project.
Material Misrepresentation: False statements by an applicant or policyholder that affect whether or not the insurer will accept the risk and issue a policy.
Medical Payments Coverage: Medical payments coverage, sometimes referred to as “coverage F” or “MedPay,” helps cover medical expenses that you might be held responsible for due to an injury sustained on your premises when there is no lawsuit. Medical Payments limits vary depending on your policy but usually coverage injuries of up to $1,000 per person, per covered incident.
MedPay: MedPay coverage, short for “Medical Payment coverage” and sometimes referred to as “Coverage F,” is the section of a standard home insurance policy that will cover medical costs in the event that someone is injured on your property and does not want to sue you. When someone is injured on your property and does not want to sue you for the damages, you can use MedPay to help cover medical costs MedPay limits vary depending on your policy, but usually coverage injuries of up to $1,000 per person, per covered incident.
Net Cash Value: The cash value amount available to a policy owner after adjustments have been made to the cash surrender value to account for policy loans and dividends.
Non-Renewal: The decision made by an insurance company not to renew a policy.
Other Structure Coverage: Other structure coverage, sometimes referred to as “coverage,” protects structures on your property such as detached garages and sheds. The typical coverage limits for other structures is 10% of your dwelling coverage-although higher amounts may be purchased if necessary.
Paid-Up: This event occurs when a policy will not require any further premiums to keep the coverage in force.
Peril: Refers to a specific risk or cause of loss covered by an insurance policy, such as a fire, windstorm, lightening, hail, smoke damage or theft.
Personal Liability Protection Coverage: Personal liability protection coverage, sometimes referred to as “coverage,” protects you and/or covered family members against lawsuits. Coverage limits vary depending on your policy but most standard homeowners policies include a minimum of $100,000 worth of coverage.
Personal Property Coverage: Personal property coverage, sometimes referred to as “coverage” or “Contents Coverage,” is included in a standard home insurance policy and protects your personal items and household contents in the event they are stolen or destroyed by fire, hurricane or other peril covered in your policy. These items may include, but are not limited to, furniture, clothing and sports equipment. Contents coverage limits are usually 50%-70% of your dwelling coverage.
Policy: A contract issued by an insurance company to the insured.
Policy Owner: The person or party who owns an individual insurance policy.
Policy Period: The period a policy is in force, from the beginning or effective date to the expiration date.
Premium: The amount paid by an insured to an insurance company to obtain or maintain an insurance policy.
Premium Expense Charges: An amount deducted from each premium payment, which reduces the amount credited to the policy.
Property Damage (PD): Destruction or loss of use of tangible property.
Property Insurance: Home Insurance coverage for your personal or real property.
Public Adjuster: A person who acts as an advocate for the policy holder in the insurance claim process.
Rated Policy: An insurance policy that is issued at a higher than standard premium to cover a person classified as a higher than average risk.
Renewal Policy: A policy issued as a renewal of an expired policy in the same company or agency—not new business.
Replacement Cost: The cost associated with replacing property at current market prices.
Return Premium: The premium returned to an insured for canceling or amending a policy.
Rider: Also known as an endorsement. A rider is an amendment to a policy used to add or delete coverage.
Staff Adjuster: Employee of the insurance company’s claim department.
Subrogation: The right of the insurance company after payment of a loss to recover from the responsible party.
Surcharge: An extra charge added to your premium by an insurance company. For home insurance, a surcharge is usually added if you have a claims history.
Third Party Loss: A situation involving a person other than the insurer and insured, i.e., a person making a liability claim against the insured.
Underwriter: A person who reviews and evaluates an application for a loan or insurance policy.
Underwriting: The process an insurance company uses to decide whether to accept or reject an application for a policy.
Unearned Premium: The insured’s remaining premium equity in his policy; that part of the policy premium that has not been “used up.”
Additional Interest Insured: a company or person who has been named as an additional interest insured on a policy can be liable for an accident that involves an insured person or vehicle. For example, a lienholder can be an additional interest insured.
Agent: An individual who acts as a representative for the company and sells insurance, usually on a commission basis. This individual could be an ‘exclusive’ or ‘non-exclusive’ agent.
Anti-Theft Device: There are essentially two types of anti-theft devices: passive and active. Passive devices require no action or activation and automatically arm themselves when the vehicle is turned off, the ignition key is removed or a door is shut. Active devices require some action or activation, such as pushing a button or placing a “lock" somewhere in your car. Typically with active devices, you must re-activate them every time you set them or they won’t work. Keep in mind that you could get a discount for having an anti-theft device in your car.
Appraisal: Process that determines the value of property, or the extent of damage, usually performed by an impartial expert.
At-Fault: The party that is legally liable for the damages in an accident.
Bodily Injury Liability Coverage (BI): If an insured person is legally liable for an accident, BI coverage pays for injuries/death to people involved in the accident other than the insured driver. BI also pays for legal defense costs if you are sued. Certain exclusions may apply. Refer to your policy.
Cancellation: Termination of an insurance contract before the end of the policy, by the insured or insurer.
Comprehensive Coverage: If your insured vehicle is damaged due to an event other than a collision, Comprehensive coverage will pay for the damage. This includes damages from fire, theft, windstorm, flood and vandalism. If your vehicle is stolen, Comprehensive covers transportation and loss of use expenses when applicable.
Collision Coverage: When your insured vehicle overturns or collides with another object, Collision coverage pays for the damage to your vehicle. Collision coverage also may extend to a non-owned vehicle or one rented for personal use that is in your custody or that you are operating. Certain exclusions may apply. Refer to your policy.
Continuously Insured: Being continuously insured means your insurance coverage from an insurer or more than one insurer was in effect at all times, without a break or lapse in coverage for any reason.
Declarations Page (Dec Page): Also known as an auto insurance coverage summary, this page is provided by your insurance company and lists the following:
• Types of coverage you have elected
• Limit for each coverage
• Cost for each coverage
• Specified vehicles covered by the policy
• Types of coverage for each vehicle covered by the policy
• Other information applicable to the policy
Deductible: A deductible is the amount you agree to pay out of pocket for damage resulting from a specific loss or accident. Generally, choosing a higher deductible will lower your premium.
Driver Improvement Course: Drivers age 55 and older can take a voluntary driver improvement course to refresh and enhance their driving skills. Taking this course may qualify these drivers for a discount if they meet eligibility requirements.
Driver Status: People can be added to policies with the following types of driver status:
Rated – Actively drive vehicles on the policy
Excluded – Not allowed to drive vehicles on the policy and will not be covered under your policy in the event of an accident
Listed – Residents of the household who do not drive the vehicles on the policy (such as a roommate)
Full Coverage: “full coverage" is a common term that people use to describe how much auto insurance coverage they have. Though there is no such thing as “full coverage," it often implies that the policy has more than just liability coverage.
Garaging Location: A garaging location is the place you primarily park your vehicle when you’re not using it. Generally, this is your primary residence.
Limits: An insurance coverage limit is selected by you and is the most an insurance company will pay for damages or injuries that apply to the coverage. Most states have laws that specify the minimum limit that must be purchased for each required insurance coverage.
Life Insurance: Life insurance is a financial safety net for your family. If you pass away, your life insurance policy will pay a lump sum of money to your beneficiaries. There are a few common types of life insurance: term, final expense and permanent.
Loan/Lease Payoff Coverage: Loan/lease payoff coverage, sometimes called “gap" coverage, pays the difference between what you owe on your vehicle and what your insurance pays if your vehicle is declared a total loss or stolen and not recovered, less your Comprehensive or Collision Deductible.
Medical Payments (MedPay) Coverage: MedPay is an optional insurance coverage that pays for reasonable and necessary medical and funeral expenses for covered persons. These expenses must be incurred as a result of an auto accident.
Named Insured: The first person in whose name the insurance policy is issued.
Occasional Driver: A person who is not the primary or principal driver of the insured vehicle is an occasional Driver.
Personal Injury Protection (PIP) Coverage: PIP is a coverage in which the auto insurance company pays, within the specified limits, the medical, hospital and funeral expenses of the insured person, people in the insured vehicle and pedestrians struck by the insured vehicle. PIP is the basic coverage implemented in no-fault automobile insurance states.
Policy Expiration Date: Your current insurance policy ends on your policy expiration date, which is found on your current policy documents, Declarations Page (Dec Page), insurance identification card or recent cancellation notice. This date should not be confused with payment due dates.
Policy Term: The length of time your policy is active and in force is your policy term.
Premium: A premium is the amount of money paid to an insurance company in return for insurance protection.
Primary Residence: A primary residence is the place where you will live for the majority of your policy term.
Primary Use: Primary use is how you mainly use your vehicle. Primary use options include to/from work, business, pleasure or farm use.
Principal Driver: The person who drives the car most often is the principal driver.
Property Damage Liability Coverage (PD): If an insured person is legally liable for an accident, PD coverage pays for damage to others’ property resulting from the accident. PD also pays for legal defense costs if you are sued. Certain exclusions may apply. Refer to your policy.
Rental Reimbursement Coverage: Rental Reimbursement provides rental car coverage if you have a claim that is covered under comprehensive or collision coverage. Daily rental amounts are subject to the limit purchased.
Roadside Assistance Coverage: Roadside Assistance provides services such as towing, flat tire change, locksmith service and battery jump-start to customers, who can elect the service for an additional premium if it is not already included with their insurance policy.
Salvage Titles: State laws determine if a vehicle requires a salvage title.
Second Named Insured: The named insured or listed agent/broker on a policy may request to designate any other person listed on the policy as a second named insured. The second named insured has the same coverage under the policy as the named insured.
SR-22: An SR-22 is a document required by the court that demonstrates proof of financial responsibility for persons convicted of certain traffic violations.
Uninsured Motorist Coverage (UM): If a driver or owner of a vehicle does not have insurance and is legally liable for an accident, you can use UM coverage for injuries, including death, that you, your resident relatives, and occupants of your insured vehicle sustain, up to the limits you select. Certain exclusions may apply. Refer to your policy.
Underinsured Motorist Coverage (UIM): If a driver or owner of a vehicle is legally liable for an accident, but does not have enough insurance, you can use UIM coverage for injuries, including death, that you, your resident relatives, and occupants of your insured vehicle sustain, up to the limits you select. Certain exclusions may apply. Refer to your policy.
Uninsured/Underinsured Motorist Property Damage Coverage (UMPD): If driver or owner of a vehicle is legally liable for an accident, but does not have insurance or does not have enough insurance, you can use UMPD to cover damage to your insured vehicle, up to the limits you select. In some states, UMPD is available as an alternative to Collision coverage. Certain exclusions may apply. Refer to your policy.
Vehicle Identification Number (VIN): The Vehicle Identification Number (VIN) for your vehicle is usually found on the driver’s side of your dashboard, vehicle registration or title. The VIN is a combination of 17 letters and numbers that can be used to identify the make, model and year of a car.