Insurance glossary

A 1035 exchange is a tax-free way to swap one life insurance policy or annuity for another under Section 1035 of the Internal Revenue Code. The exchange must follow IRS rules, and surrender charges or lost benefits may apply. Talk to a tax professional.

Read the guide · Related: Cash Value, Surrender Value

A rider or policy feature that lets a person with a qualifying terminal, chronic, or critical illness receive part of the death benefit while still alive. The amount paid out reduces what beneficiaries receive later. Terms, fees, and eligibility vary by insurer and state.

Read the guide · Related: Rider, Death Benefit, Beneficiary

Actual cash value (ACV) is the replacement cost of an item minus depreciation for its age and wear. Policies that pay ACV give you less than the cost of buying a brand-new item. Whether your policy pays ACV or replacement cost is stated in the policy.

Read the guide · Related: Replacement Cost, Depreciation, Total Loss

An additional insured is a person or business added to someone else's liability policy so it receives certain protection under that policy. This is common when a client or landlord requires it in a contract. The coverage extends only as far as the policy and its endorsement say.

Read the guide · Related: Certificate of Insurance, Endorsement, General Liability Insurance

An insurance adjuster investigates a claim to decide what happened, whether the policy covers it, and how much to pay. Adjusters may work for the insurer, as independent contractors, or on behalf of the policyholder (public adjusters). Licensing rules vary by state.

Read the guide · Related: Claim, Appraisal

An admitted insurer is licensed by a state's insurance department and is generally backed by that state's guaranty fund if it fails. It must file its rates and forms under state rules. Compare with a non-admitted insurer, which operates outside that system.

Read the guide · Related: Non-Admitted Insurer, Surplus Lines

An insurance agent is a licensed person who sells and services insurance policies. Captive agents represent one insurer, while independent agents can place coverage with several. Agents must be licensed in the state where they sell.

Read the guide · Related: Broker

An appraisal clause lets the insurer and policyholder resolve a disagreement over the dollar amount of a loss using independent appraisers and, if needed, an umpire. It settles the amount of loss, not whether the claim is covered. Each side usually pays its own appraiser.

Read the guide · Related: Claim, Adjuster, Total Loss

In an at-fault (tort) state, the driver who causes an accident is responsible for the other party's losses, and that driver's liability insurance pays. Most states follow this system. Others use no-fault rules for certain injury costs.

Read the guide · Related: No-Fault Insurance, Tort, Liability Insurance

A beneficiary is the person or entity you name to receive a life insurance death benefit. You can name primary and contingent beneficiaries and usually update them at any time. Beneficiary designations generally override a will.

Read the guide · Related: Death Benefit, Contingent Beneficiary

A binder is a temporary proof of coverage that takes effect before the full policy is issued. It is often used when closing on a home or buying a car. It lasts for a limited time, stated on the binder, until the policy is issued or the binder is canceled.

Read the guide · Related: Underwriting, Declarations Page

Bodily injury liability pays for injuries you cause to other people in an accident, up to your policy limit. It can cover medical bills, lost wages, and legal costs. It does not pay for your own injuries.

Read the guide · Related: Liability Insurance, Property Damage Liability, Limits

An insurance broker is a licensed professional who shops coverage from multiple insurers on behalf of a client. In many states, brokers are legally seen as representing the buyer rather than the insurer. Brokers are common in business and surplus lines markets.

Read the guide · Related: Agent, Surplus Lines

Business income coverage replaces lost income and pays ongoing expenses, such as rent and payroll, while a covered loss keeps your business closed or limited. It generally applies only when physical damage from a covered cause triggers it. Many policies include a waiting period.

Read the guide · Related: Commercial Property Insurance, Business Owner's Policy

A business owner's policy (BOP) bundles general liability, commercial property, and often business income coverage into one package for small businesses. It is usually priced lower than buying each separately. Eligibility depends on the insurer, industry, and business size.

Read the guide · Related: General Liability Insurance, Commercial Property Insurance, Business Income Coverage

Cancellation ends a policy before its scheduled expiration date. Either you or the insurer can cancel, but insurers must follow state rules about reasons and written notice. A refund of unused premium may be owed.

Read the guide · Related: Nonrenewal, Lapse, Grace Period

Cash value is the savings component in permanent life insurance policies such as whole and universal life. It grows over time based on the policy terms and can be borrowed against or withdrawn, which may reduce the death benefit. Term life does not build cash value.

Read the guide · Related: Whole Life Insurance, Surrender Value, Policy Loan, Universal Life Insurance

A certificate of insurance (COI) is a one-page document that shows a business has certain coverage, such as the insurer, policy number, limits, and dates. It is proof of coverage but does not change the policy. Clients and landlords often request one.

Read the guide · Related: Additional Insured, General Liability Insurance

A claim is a formal request to your insurer to pay for a loss that you believe your policy covers. The insurer reviews the loss, applies the policy terms, and pays, denies, or partly pays it. Deadlines for reporting claims are in your policy.

Read the guide · Related: Adjuster, Deductible, Claims-Made Policy

A claims-made policy covers claims that are first made against you while the policy is active, as long as the incident happened after the policy's retroactive date. Professional liability and cyber policies often work this way. Ending the policy may require buying tail coverage.

Read the guide · Related: Occurrence Policy, Professional Liability Insurance, Tail Coverage

Coinsurance is a clause or cost-sharing arrangement. In property policies, it can reduce a payout if you insure less than a set percentage of the property's value. In health-type plans, it is the share of a covered cost you pay after the deductible.

Read the guide · Related: Deductible, Underinsurance

Collision coverage pays to repair or replace your car after a crash with another vehicle or object, regardless of fault, minus your deductible. It is usually optional unless a lender requires it. It pays up to the car's actual cash value.

Read the guide · Related: Comprehensive Coverage, Deductible, Actual Cash Value

Commercial auto insurance covers vehicles used for business, such as vans, work trucks, and delivery cars. Personal car policies often exclude or limit business use. It typically includes liability and can add physical damage coverage.

Read the guide · Related: Liability Insurance, Non-Owned Auto Coverage

Commercial property insurance covers a business's buildings, equipment, inventory, and other physical assets against covered perils such as fire or theft. Flood and earthquake usually require separate coverage. It can be written on its own or in a BOP.

Read the guide · Related: Business Owner's Policy, Business Income Coverage, Peril

Comparative negligence is a legal rule that splits fault among the people involved in an accident, and reduces what each can recover by their share of blame. Some states bar recovery above a certain fault level. The specific rule varies by state.

Read the guide · Related: Tort, At-Fault State, Contributory Negligence

Comprehensive coverage pays for damage to your car from events other than a collision, such as theft, vandalism, hail, fire, or hitting an animal. It is subject to a deductible and is usually optional unless required by a lender or lessor.

Read the guide · Related: Collision Coverage, Deductible, Peril

The contestability period is usually the first two years of a life insurance policy, during which the insurer can investigate and potentially deny a claim or rescind the policy if the application contained a material misstatement. After it ends, the insurer's ability to contest is limited, with exceptions such as fraud.

Read the guide · Related: Underwriting, Death Benefit

A contingent beneficiary is the backup person or entity who receives a life insurance death benefit if the primary beneficiary has died or cannot be paid. Naming one helps avoid delays and probate. You can usually change your choices.

Read the guide · Related: Beneficiary, Death Benefit

Contributory negligence is a strict rule used in a few states and the District of Columbia that bars an injured person from recovering damages if they were even slightly at fault. Most states use comparative negligence instead. Check your state's rules.

Read the guide · Related: Comparative Negligence, Tort

A conversion privilege lets you change a term life policy into a permanent policy without a new medical exam, usually before a deadline. The new premium is based on your age at conversion. Terms vary by policy.

Read the guide · Related: Term Life Insurance, Whole Life Insurance

A coverage limit is the most an insurer will pay for a covered loss or in total during a policy period. Losses beyond the limit are your responsibility. Limits may be per person, per accident, per occurrence, or aggregate.

Read the guide · Related: Limits, Underinsurance

Cyber liability insurance helps cover costs from data breaches and cyberattacks, such as notifying customers, restoring data, legal expenses, and in some cases ransom or lost income. Coverage varies widely between policies. It is often sold as a standalone policy or add-on.

Read the guide · Related: Claims-Made Policy, Professional Liability Insurance

The death benefit is the amount a life insurance policy pays to the beneficiary when the insured person dies. It is generally income-tax-free to the beneficiary, with some exceptions. The amount is set in the policy and can be reduced by loans.

Read the guide · Related: Beneficiary, Face Amount, Policy Loan

The declarations page, or dec page, is the summary at the front of a policy. It lists who and what is insured, coverage types and limits, deductibles, the policy period, and the premium. Read it each renewal to check for errors.

Read the guide · Related: Endorsement, Limits, Premium

A deductible is the amount you pay out of pocket on a covered claim before the insurer pays the rest. A higher deductible usually means a lower premium, and a lower deductible usually means a higher premium. Some policies use a percentage deductible instead of a dollar amount.

Read the guide · Related: Premium, Out-of-Pocket, Named Storm Deductible

Depreciation is the loss in value of property over time from age, wear, and use. Insurers subtract it when paying actual cash value claims. Some policies refund the withheld amount when you complete repairs.

Read the guide · Related: Actual Cash Value, Replacement Cost

Diminished value is the drop in a car's market value after an accident, even when it is repaired well, because it now has an accident history. Whether you can claim it depends on your state and which policy the claim is under. It is commonly allowed against the at-fault driver's insurer in some states.

Read the guide · Related: Total Loss, Actual Cash Value

Directors and officers (D&O) insurance protects a company's leaders from claims that they made poor management decisions or breached their duties. It can cover legal defense costs and settlements. It is common for nonprofits and companies with boards or investors.

Read the guide · Related: Professional Liability Insurance, Claims-Made Policy

Dwelling coverage, often called Coverage A, pays to repair or rebuild the structure of your home after a covered loss. The limit should reflect rebuilding costs, not market value. Attached structures like garages are usually included.

Read the guide · Related: Homeowners Insurance, Replacement Cost, HO-3

Earthquake insurance covers damage from earthquake shaking, which standard home policies exclude. It is usually a separate policy or endorsement with a percentage deductible. Availability and terms vary by state and insurer.

Read the guide · Related: Exclusion, Percentage Deductible

Employment practices liability insurance (EPLI) covers an employer against claims by employees or applicants, such as wrongful termination, discrimination, or harassment. It typically pays defense costs and settlements. It generally does not cover wage-and-hour claims.

Read the guide · Related: Claims-Made Policy, Directors and Officers Insurance

An endorsement is a written change to an insurance policy that adds, removes, or modifies coverage. It becomes part of the policy and may carry an extra premium. Examples include adding scheduled jewelry or an additional insured.

Read the guide · Related: Rider, Exclusion, Declarations Page

Errors and omissions (E&O) insurance is another name for professional liability coverage. It protects service providers from claims that their mistakes, missed deadlines, or advice caused a client financial harm. It usually covers legal defense costs.

Read the guide · Related: Professional Liability Insurance, Claims-Made Policy

An exclusion is a policy provision that lists what the insurance does not cover. Common examples include flood in home policies and intentional acts. Reading the exclusions shows where gaps might exist.

Read the guide · Related: Endorsement, Peril

The face amount is the death benefit amount stated on a life insurance policy. It is what beneficiaries generally receive, minus outstanding loans or other adjustments. It is also called the face value.

Read the guide · Related: Death Benefit, Cash Value

A FAIR Plan is a state-run insurance pool that provides basic property coverage to people who cannot get it in the regular market, often because of high risk such as wildfire. It usually offers limited coverage at its own rates. Many states have one, and rules vary.

Read the guide · Related: Residual Market, Surplus Lines

Final expense insurance is a small whole life policy designed to pay for funeral and burial costs and related bills. Face amounts are usually modest, and many policies require little or no medical underwriting. Premiums tend to be higher per dollar of coverage.

Read the guide · Related: Whole Life Insurance, Simplified Issue

First-party coverage pays you, the policyholder, for your own losses, such as damage to your car or home. Collision, comprehensive, and homeowners property coverage are examples. Liability coverage is third-party coverage.

Read the guide · Related: Third-Party Claim, Liability Insurance

Flood insurance covers damage from rising water, which standard home and renters policies exclude. It is available through the National Flood Insurance Program and some private insurers. Most policies have a waiting period, often 30 days, before they take effect.

Read the guide · Related: NFIP, Exclusion

An FR-44 is a certificate of financial responsibility that some states require after certain serious driving offenses, typically DUI. It requires higher liability limits than an SR-22. Only a few states, including Florida and Virginia, use it.

Read the guide · Related: SR-22, High-Risk Driver

The free look period is a window after you receive a new life insurance or annuity policy in which you can cancel for a full premium refund. Its length is set by state law and typically ranges from about 10 to 30 days. Some policy types or situations have different periods.

Read the guide · Related: Cancellation, Grace Period

Full coverage is a common phrase, not an official insurance term. It usually means a car policy that includes liability plus collision and comprehensive. No policy covers everything, so check the actual coverages and limits.

Read the guide · Related: Liability Insurance, Collision Coverage, Comprehensive Coverage

Gap insurance pays the difference between your car's actual cash value and what you still owe on a loan or lease if the car is totaled or stolen. It is most relevant when you owe more than the car is worth. It generally does not cover missed payments, and some policies exclude certain amounts such as your deductible.

Read the guide · Related: Total Loss, Actual Cash Value

General liability insurance covers a business against claims of bodily injury, property damage, and certain advertising injury to third parties. It typically covers legal defense and settlements, up to limits. It does not cover your own employees' injuries or professional mistakes.

Read the guide · Related: Professional Liability Insurance, Business Owner's Policy, Additional Insured

A grace period is extra time after a premium due date during which coverage generally stays in force. Its length depends on the policy type and state law. For life insurance it is often 30 or 31 days. Auto insurers may offer none or only a short one.

Read the guide · Related: Lapse, Premium, Cancellation

Guaranteed issue life insurance accepts applicants without health questions or an exam. It usually has small face amounts, higher premiums, and a graded death benefit during the first couple of years. It is an option when other coverage is hard to get.

Read the guide · Related: Simplified Issue, Final Expense Insurance

A high-risk driver is someone insurers see as more likely to file claims, often because of DUIs, multiple accidents, or lapses. Standard insurers may charge more or decline. Some states have assigned-risk programs.

Read the guide · Related: SR-22, Residual Market

HO-3 is the most common homeowners policy form. It covers the dwelling on an open-perils basis, meaning anything not excluded is covered, and covers belongings on a named-perils basis. Standard exclusions like flood and earthquake still apply.

Read the guide · Related: HO-5, Peril, Dwelling Coverage

HO-5 is a broader homeowners form that covers both the dwelling and personal belongings on an open-perils basis. It often comes with higher limits and replacement cost on belongings, though terms vary. Insurers may reserve it for newer or higher-value homes.

Read the guide · Related: HO-3, Peril

HO-6 is condo unit owner insurance. It generally covers your belongings, interior improvements, and liability, plus items the condo association's master policy does not cover. Coverage needs depend on the association's rules.

Read the guide · Related: HO-3, Loss Assessment Coverage

A home inventory is a list or record of your belongings, ideally with photos, receipts, and estimated values. It helps you pick coverage limits and speeds up a claim after a loss. Keep a copy outside the home, such as in cloud storage.

Read the guide · Related: Personal Property Coverage, Claim

Homeowners insurance is a package policy that covers your house, belongings, and liability, plus extra living costs after a covered loss. It does not cover everything, and floods and earthquakes are typically excluded. Mortgage lenders usually require it.

Read the guide · Related: Dwelling Coverage, Personal Property Coverage, Loss of Use

Inland marine insurance covers movable property, such as tools, equipment, and goods in transit, that standard property policies may not fully cover. Despite the name, it is not about boats. Contractors and photographers commonly use it.

Read the guide · Related: Commercial Property Insurance, Scheduled Personal Property

Insurable interest means you would suffer a financial loss if the insured person or property were damaged or died. Insurers require it to prevent people from insuring things they have no stake in. It must exist when the policy is issued for life insurance and when the loss occurs for property.

Read the guide · Related: Beneficiary, Underwriting

An insurance score is a number built from parts of your credit history that insurers in many states use to help predict claims. It is not the same as a credit score. Some states restrict or ban its use.

Read the guide · Related: Underwriting, Premium

The insured is the person or entity covered by an insurance policy. The policyholder, who owns the policy, may or may not be the insured. Named insureds appear on the declarations page.

Read the guide · Related: Policyholder, Declarations Page

An insurer, or carrier, is the company that issues an insurance policy and agrees to pay covered claims. Insurers must be licensed in each state where they operate. Their financial strength is rated by agencies.

Read the guide · Related: Admitted Insurer, Underwriting

Landlord insurance covers a rental property you own, including the building, liability, and often lost rent. It does not cover your tenants' belongings, so tenants need renters insurance. It differs from a standard homeowners policy.

Read the guide · Related: Renters Insurance, Dwelling Coverage

A lapse happens when coverage ends because a premium was not paid or a policy was not renewed. Gaps in coverage can affect your future rates and may carry legal penalties for required insurance like auto. Life policies may sometimes be reinstated.

Read the guide · Related: Grace Period, Cancellation, Reinstatement

Liability insurance pays for harm you legally cause to others, such as injuries or property damage, and typically covers legal defense. It does not pay for your own losses. It appears in auto, home, and business policies.

Read the guide · Related: Bodily Injury Liability, Property Damage Liability, Third-Party Claim

Life insurance pays a death benefit to your named beneficiaries when you die, in return for premiums. The two main types are term and permanent. Premiums depend on factors like age, health, and coverage amount.

Read the guide · Related: Term Life Insurance, Whole Life Insurance, Beneficiary

Limits are the maximum amounts a policy will pay for a covered loss. They are listed on the declarations page and may be split, such as per person and per accident. Higher limits cost more.

Read the guide · Related: Coverage Limit, Declarations Page

Loss assessment coverage helps pay your share when a condo or homeowners association charges owners for a covered loss or liability claim that exceeds its policy. It is commonly part of condo (HO-6) policies and has a limit. Check how it applies to deductibles.

Read the guide · Related: HO-6, Endorsement

Loss of use coverage pays added living costs, such as a hotel and restaurant meals, when a covered loss makes your home unlivable. It is in homeowners and renters policies with a limit or time cap. It is also called additional living expense (ALE).

Read the guide · Related: Renters Insurance, Homeowners Insurance

Medical payments (MedPay) coverage pays reasonable medical and funeral costs for you and your passengers after a car accident, regardless of fault. Limits are typically modest. It is optional in most states.

Read the guide · Related: Personal Injury Protection, No-Fault Insurance

A modified endowment contract (MEC) is a life insurance policy funded faster than federal tax rules allow. It keeps its death benefit tax treatment but loans and withdrawals are taxed gain-first and may carry a 10 percent penalty before age 59 and a half. The seven-pay test defines it under the IRS rules.

Read the guide · Related: Cash Value, Policy Loan, 1035 Exchange

Mortgage protection insurance is a life policy sold to pay off or help pay a mortgage if the borrower dies. The payout is often tied to the loan balance. Many people compare it with regular term life, which pays beneficiaries who can use the money freely.

Read the guide · Related: Term Life Insurance, Death Benefit

Named perils coverage protects only against the specific causes of loss listed in the policy, such as fire, lightning, or theft. If a cause is not listed, it is not covered. It contrasts with open perils coverage.

Read the guide · Related: Peril, Open Perils

A named storm deductible is a separate deductible, usually a percentage of the insured value, that applies to damage from a storm officially named by the National Weather Service. It is common in coastal states. Triggers and percentages vary by insurer and state.

Read the guide · Related: Percentage Deductible, Deductible

The National Flood Insurance Program (NFIP) is a federal program run by FEMA that offers flood insurance in participating communities. For a single-family home, coverage is available up to $250,000 for the building and $100,000 for contents. Private flood policies are also available.

Read the guide · Related: Flood Insurance, Exclusion

In a no-fault state, your own auto insurance pays your medical costs and some other losses after a crash, regardless of who caused it. Rules differ by state, and some allow lawsuits only above certain thresholds. About a dozen states use some form of no-fault.

Read the guide · Related: Personal Injury Protection, Tort, At-Fault State

A non-admitted insurer is not licensed in your state but is allowed to write certain coverage there, usually through the surplus lines market. It has more freedom on rates and forms. State guaranty funds typically do not protect its policyholders.

Read the guide · Related: Admitted Insurer, Surplus Lines, Broker

Non-owned auto coverage protects a business against liability when employees use their own or rented vehicles for work. It does not cover damage to those vehicles. It is often added to a general liability or commercial auto policy.

Read the guide · Related: Commercial Auto Insurance, General Liability Insurance

Non-owner car insurance provides liability coverage for people who drive but do not own a vehicle, such as renters of cars or those needing an SR-22. It usually covers liability only. It does not cover a car you have regular access to in your household.

Read the guide · Related: SR-22, Liability Insurance

Nonrenewal means an insurer decides not to renew a policy at the end of its term. States require advance written notice, with time frames that vary. It is different from cancellation, which ends a policy mid-term.

Read the guide · Related: Cancellation, Renewal

An occurrence policy covers incidents that happen during the policy period, even if the claim is filed after the policy ends. General liability is usually written this way. It contrasts with claims-made coverage.

Read the guide · Related: Claims-Made Policy, General Liability Insurance

Open perils coverage, also called all-risk, protects against any cause of loss unless the policy specifically excludes it. HO-3 policies use it for the dwelling. Excluded items like flood and earthquake remain uncovered.

Read the guide · Related: Named Perils, Exclusion, HO-3

Out-of-pocket costs are what you pay yourself, such as a deductible, copays, or amounts over your policy limits. Some policies have an out-of-pocket maximum. It is a term used most in health plans.

Read the guide · Related: Deductible, Coinsurance

A percentage deductible is calculated as a percent of your insured value, not a flat dollar amount. For example, 2 percent of a $300,000 dwelling limit is $6,000. It is common for wind, hail, hurricane, and earthquake coverage.

Read the guide · Related: Named Storm Deductible, Deductible

A peril is a cause of loss, such as fire, wind, theft, or flood. Policies list which perils they cover or exclude. Understanding perils helps you see what a policy protects against.

Read the guide · Related: Named Perils, Open Perils, Exclusion

Personal injury protection (PIP) pays medical bills and sometimes lost wages and other costs for you and your passengers after a crash, regardless of fault. It is required in some no-fault states and optional in others. Benefits and limits vary by state.

Read the guide · Related: Medical Payments Coverage, No-Fault Insurance

Personal property coverage pays to repair or replace your belongings, such as furniture and clothing, if they are damaged or stolen in a covered event. It is in homeowners and renters policies. Limits and special sublimits for items like jewelry apply.

Read the guide · Related: Scheduled Personal Property, Home Inventory, Actual Cash Value

A policy loan lets you borrow against the cash value of a permanent life insurance policy. Interest accrues, and unpaid loans reduce the death benefit. If the loan grows beyond the cash value, the policy can lapse and may cause taxes.

Read the guide · Related: Cash Value, Lapse, Death Benefit

The policyholder is the person or business that owns the insurance policy and is responsible for paying premiums. This is often the same as the insured, but not always, such as with life insurance on another person.

Read the guide · Related: Insured, Beneficiary

A premium is the price you pay for an insurance policy, usually billed monthly, quarterly, or annually. It is set by the insurer based on risk factors and can change at renewal. Missing payments can lead to cancellation or a lapse.

Read the guide · Related: Deductible, Underwriting, Grace Period

Professional liability insurance covers claims that your professional services or advice caused a client financial harm through mistakes or negligence. It is also called errors and omissions (E&O). Common for consultants, designers, and accountants.

Read the guide · Related: Errors and Omissions Insurance, General Liability Insurance, Claims-Made Policy

Proof of insurance is a document, such as an insurance ID card or digital version, showing you have the required coverage. Police, DMVs, and lenders may ask for it. Many states accept electronic proof.

Read the guide · Related: Declarations Page, SR-22

Property damage liability pays for damage you cause to someone else's property, usually their car, in an accident. It does not pay for repairs to your own vehicle. It is required in nearly every state, with minimums that vary.

Read the guide · Related: Bodily Injury Liability, Liability Insurance

Reinstatement restores a policy that lapsed or was canceled, usually after you pay overdue premiums and sometimes show insurability. Terms depend on the policy and state law. For life insurance there is generally a time limit.

Read the guide · Related: Lapse, Grace Period

Renewal is the continuation of a policy for another term, usually after the insurer issues new terms and a new premium. Rates, coverage, and discounts may change. Review renewal documents before they take effect.

Read the guide · Related: Nonrenewal, Premium, Declarations Page

Renters insurance covers a tenant's belongings, personal liability, and added living costs after a covered loss. It does not cover the building, which is the landlord's responsibility. Landlords may require it in a lease.

Read the guide · Related: Personal Property Coverage, Loss of Use, Landlord Insurance

Replacement cost coverage pays what it costs to repair or replace damaged property with similar new materials, without subtracting depreciation. You often receive part of the payout first and the rest after the work is done. Policies may cap it.

Read the guide · Related: Actual Cash Value, Depreciation

The residual market is made up of state-created programs that provide insurance to people who cannot find it in the regular market. Examples include assigned risk plans for auto and FAIR Plans for property. Coverage is often basic and costs more.

Read the guide · Related: Fair Plan, High-Risk Driver

A rider is an optional add-on to a policy that adds benefits or changes terms, usually for an extra premium. Life insurance examples include waiver of premium and accelerated death benefit. Availability varies by insurer.

Read the guide · Related: Endorsement, Waiver of Premium, Accelerated Death Benefit

Scheduled personal property coverage lists specific valuable items, like jewelry or art, on your policy with their own limits. It often has fewer exclusions and may have no deductible. It is added by endorsement.

Read the guide · Related: Endorsement, Personal Property Coverage

Simplified issue life insurance skips the medical exam but asks health questions. Approval is faster than full underwriting, but premiums are often higher and coverage amounts smaller. Answers on the application still matter during the contestability period.

Read the guide · Related: Guaranteed Issue, Underwriting, Contestability Period

An SR-22 is a form your insurer files with the state to prove you carry required liability insurance. It is not a type of insurance. Courts or DMVs may require it after serious violations, usually for a set period.

Read the guide · Related: FR-44, High-Risk Driver, Non-Owner Car Insurance

Subrogation is the right of an insurer that paid your claim to seek repayment from the person who caused the loss. If it recovers money, you may get your deductible back. It happens after the claim is paid, usually in the background.

Read the guide · Related: Claim, Deductible, At-Fault State

A surety bond is a three-party agreement where a surety guarantees that a business will meet an obligation to a third party. If the business fails, the surety pays and then seeks repayment. It protects the party requiring it, not the business, unlike insurance.

Read the guide · Related: General Liability Insurance, Certificate of Insurance

Surplus lines insurance is coverage from non-admitted insurers for risks the standard market will not cover, such as unusual or high-risk exposures. It is sold through licensed surplus lines brokers and is subject to state taxes. Guaranty funds usually do not apply.

Read the guide · Related: Non-Admitted Insurer, Admitted Insurer, Broker

The surrender value is the cash you receive if you cancel a permanent life insurance policy. It is the cash value minus surrender charges and any loans. Surrendering ends coverage and can create taxable gain.

Read the guide · Related: Cash Value, Policy Loan, 1035 Exchange

Tail coverage, or an extended reporting period, lets you report claims after a claims-made policy ends for incidents that occurred while it was active. It is often needed when switching insurers or closing a business. It is usually bought for a set period.

Read the guide · Related: Claims-Made Policy, Professional Liability Insurance

Telematics uses a phone app or plug-in device to track driving habits such as speed, braking, mileage, and time of day. Some insurers use the data to set or adjust premiums. Programs, data use, and effects on rates vary.

Read the guide · Related: Usage-Based Insurance, Premium

Term life insurance covers you for a set period, such as 10, 20, or 30 years, and pays a death benefit if you die during it. It generally costs less than permanent coverage and builds no cash value. Some policies can be renewed or converted.

Read the guide · Related: Whole Life Insurance, Conversion Privilege, Death Benefit

A third-party claim is a claim made by someone other than you or your insurer, for harm you are accused of causing. Your liability coverage responds to it. It contrasts with a first-party claim, which you file for your own loss.

Read the guide · Related: First-Party Coverage, Liability Insurance

A tort is a civil wrong, like negligence, that harms someone and can lead to a lawsuit for damages. In at-fault states, the injured person can pursue the responsible driver. No-fault states limit when tort lawsuits are allowed.

Read the guide · Related: No-Fault Insurance, Comparative Negligence, At-Fault State

A car is a total loss when repair costs plus salvage value approach or exceed its value, based on a state-set percentage or formula. The insurer typically pays actual cash value minus your deductible. Rules for the threshold vary by state.

Read the guide · Related: Actual Cash Value, Gap Insurance

An umbrella policy adds extra liability coverage above your auto, home, or other underlying policy limits. It may also cover some claims those policies exclude. Insurers usually require minimum underlying limits.

Read the guide · Related: Liability Insurance, Limits

Underinsurance means your coverage limits are lower than your actual exposure or the cost to replace what you insured. A loss may leave you paying the difference. It also can trigger coinsurance penalties on some property policies.

Read the guide · Related: Coinsurance, Limits, Replacement Cost

Underwriting is how an insurer evaluates a risk to decide whether to offer coverage and at what price. For life insurance it may include health questions, exams, and records. For auto and home it may use claims history and other data.

Read the guide · Related: Insurance Score, Premium

Uninsured motorist (UM) coverage pays your injury costs, and sometimes vehicle damage, when an at-fault driver has no insurance or leaves the scene. Underinsured motorist (UIM) coverage applies when their limits are too low. Rules vary by state, and it is required in some.

Read the guide · Related: Bodily Injury Liability

Universal life insurance is permanent coverage with flexible premiums and an adjustable death benefit, plus a cash value account that earns interest. Policy costs can rise, and underfunding may cause it to lapse. Variants include indexed and variable.

Read the guide · Related: Cash Value, Whole Life Insurance

Usage-based insurance sets part of your car premium on how you drive or how far you drive, measured through telematics. Some programs reward safe driving with discounts, while others may raise rates. Participation is voluntary in most cases.

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A waiver of premium rider keeps your life insurance in force without paying premiums if you become totally disabled, after a waiting period. It usually costs extra and has its own definition of disability. Terms vary.

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Whole life insurance is permanent coverage that lasts your lifetime as long as premiums are paid. It has a fixed premium and builds cash value at a rate set by the policy. It generally costs more than term for the same death benefit.

Read the guide · Related: Term Life Insurance, Cash Value, Universal Life Insurance

Workers' compensation insurance pays medical costs and part of lost wages for employees hurt or made ill on the job, no matter who was at fault. It also limits an employee's right to sue the employer. Most states require it for employers, with rules that vary.

Read the guide · Related: General Liability Insurance, Employment Practices Liability Insurance