Insurance Terms Glossary

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Policy basics Coverage and claims Homeowners and property Auto specifics Risk and underwriting Industry structure Commercial and specialty Flood and catastrophe

Policy basics

Premium

The amount you pay for insurance coverage. Usually billed monthly, every six months, or annually. Example: a typical personal auto policy might run roughly $1,200 to $1,800 per year, often paid in two six-month installments.

Deductible

The amount you pay out of pocket on a covered claim before the insurance company pays the rest. Higher deductibles usually mean lower premiums and vice versa. Example: with a $1,000 deductible, a $7,500 hailstorm claim pays you $6,500. Bumping the deductible to $2,500 typically cuts the premium by 10 to 20 percent.

Declarations page (dec page)

The one-page summary of your policy showing who is insured, what is covered, the limits, the deductibles, and the premium. Always the first thing to read when reviewing coverage. Example: when a lender asks for proof of insurance on a new car, the dec page is what you send. It is also what we ask you for when you request a coverage review.

Policy period

The window during which the policy is in force, usually six or twelve months. Coverage applies only to losses that occur inside this window. Example: a homeowners policy effective March 1 through February 28 will not pay for a leak that started the prior February, even if you discovered it during the new term.

Policy limit

The most the insurance company will pay for a covered loss. Different coverages on the same policy can have different limits. Example: an auto policy might have $250,000 bodily injury liability per person but only $50,000 property damage liability. Total cars often cost more than that today.

Endorsement (or rider)

A formal change attached to the policy that adds, removes, or modifies coverage. Endorsements override the base policy language for the items they touch. Example: a scheduled jewelry endorsement adds full replacement coverage for a $15,000 ring that would otherwise be capped at the standard $1,500 jewelry sub-limit.

Renewal

Continuing the policy for another term. The carrier may adjust the premium or terms at renewal based on claims, market conditions, or changes to the risk. Example: after a hail-driven roof claim in year one, your homeowners renewal may include a 25 percent rate increase even with no fault on your part.

Cancellation

Ending a policy mid-term, by either the insured or the insurer. Insurer-initiated cancellations are restricted by law and usually limited to fraud, non-payment, or major risk changes. Example: missing two consecutive auto premium payments triggers a non-pay cancellation, which then sits on your record and raises future quotes.

Non-renewal

The insurer choosing not to continue the policy at the end of its term. Different from cancellation. Usually requires written notice. Example: after three roof-related claims in five years, a homeowners carrier may non-renew at term end. You then need to find new coverage in the standard or surplus market.

Carrier

An insurance company that actually writes the policy and pays the claim. Different from the agency that places the policy with the carrier on your behalf. Example: Olive Cover is the agency. Travelers, Nationwide, and Progressive are carriers we represent. The carrier name appears at the top of your declarations page.

Quote

An estimated price for a specific policy based on the information you provide. Quotes are good for a window of time and can change once the carrier verifies the underlying details. Example: an auto quote of $1,420 per year may rebracket to $1,580 after the carrier pulls a recent driving record showing a speeding ticket the applicant did not mention.

Lapse

A gap in coverage caused by non-payment, non-renewal, or cancellation. Even short lapses are visible to future carriers and almost always raise your premium. Example: an auto policy that lapses for 14 days because of a missed renewal payment can add 15 to 30 percent to the next quote, even after the lapse is fixed.

Coverage and claims

Liability coverage

Pays for injuries or property damage you cause to other people. The most important coverage on most policies, because it protects you from being personally on the hook. Example: you rear-end a car and cause $40,000 in injuries to the driver and $20,000 in vehicle damage. Your $100,000 bodily injury and $50,000 property damage liability cover both. State minimum limits would have left you owing money personally.

Comprehensive (auto)

Covers damage to your vehicle from non-crash events: theft, vandalism, fire, weather, falling objects, and animal strikes. Optional unless required by your lender. Example: a deer runs into your front bumper at dusk. Comprehensive pays for the bumper, headlight, and grille repair, minus your deductible. Collision would not.

Collision (auto)

Covers damage to your vehicle from a crash, whether you hit another vehicle, an object, or a pothole. Optional unless required by your lender. Example: you slide on wet leaves and hit a guardrail. Collision pays for the body damage and bent rim, minus your deductible. Your liability does not pay for your own car.

Replacement cost (RCV)

Pays what it costs to replace a damaged item with a new equivalent today, with no deduction for age or wear. Usually the better setting on a homeowners policy. Example: a fire destroys an eight-year-old sofa you bought for $1,200. Replacement cost pays roughly $1,500 to buy a new equivalent today. ACV would pay around $400 after depreciation.

Actual cash value (ACV)

Pays the current market value of the item, factoring in age and wear. Lower payouts than replacement cost. Example: a totaled twelve-year-old sedan with 140,000 miles might have ACV around $4,500 even though replacing it costs $14,000 at a dealer. The dealer markup is not your insurer's problem.

Depreciation

The reduction in value of an item over time due to age and wear. On ACV claims it is subtracted from what the carrier pays. Example: a fifteen-year-old asphalt roof has roughly 75 percent depreciation. A $20,000 hail repair on an ACV roof policy might pay only $5,000 after depreciation, leaving you to fund the rest.

Subrogation

Your insurer's right to chase reimbursement from a third party who actually caused the loss. If they recover money, your deductible may come back to you. Example: a neighbor's tree falls on your fence. Your homeowners pays you minus your deductible. Your carrier then pursues the neighbor's homeowners and recovers the cost. Your $1,000 deductible is refunded when the recovery closes.

Claim

A formal request to your insurer for payment after a covered loss. Filing a claim opens an investigation, an adjuster review, and a settlement process. Example: a kitchen pipe bursts and floods your floors. You file a claim, the carrier sends an adjuster, the adjuster writes an estimate, you choose a contractor, and the carrier pays in two installments: actual cash value first, recoverable depreciation after the work is done.

Adjuster

The person who investigates a claim and decides how much the carrier pays. Can be an insurer employee, an independent contractor, or a public adjuster hired by you. Example: after a hailstorm, the adjuster climbs onto your roof, photographs the impact marks, measures the affected slopes, and writes a line-item estimate. If you disagree, you can request a re-inspection or hire a public adjuster to negotiate.

Total loss

A claim where the cost to repair the damaged item is higher than its current value, so the carrier pays the value instead of fixing it. Example: a six-year-old sedan worth $9,000 takes $11,500 in collision damage. The carrier declares it a total loss, pays you $9,000 minus your deductible, and takes the salvage.

Diminished value

The drop in resale value of a vehicle after a major repair, even if the repair was done correctly. Recoverable from the at-fault party's insurer in many states. Example: a $50,000 SUV repaired after a collision may sell for $44,000 instead of $48,000 once a buyer pulls the accident history. The $4,000 gap is a diminished-value claim.

Excess liability

Coverage that sits above your underlying policy limits and pays only after the underlying limits are exhausted. Personal umbrella is a kind of excess liability. Example: a $1 million personal umbrella behind a $250,000 auto liability policy turns a $700,000 jury award from a personal disaster into something the carrier pays out.

Aggregate limit

The most a policy will pay in total during the policy period, across all claims combined. Common on liability and professional policies. Example: a general liability policy with a $1 million per-occurrence limit and a $2 million aggregate caps the carrier at $2 million for the year regardless of how many separate claims are filed.

Homeowners and property

Dwelling coverage

Covers the physical structure of your home, including the roof, walls, floors, and built-in fixtures. Set this limit based on the cost to rebuild, not the market price. Example: a 3,500 square foot suburban home might have a market value of $750,000 but a rebuild cost of $525,000. The dwelling limit should be the rebuild number, not the listing-site estimate.

Personal property coverage

Covers your belongings inside the home: furniture, electronics, clothing, kitchen items. Usually a percentage of the dwelling limit. Example: with a $400,000 dwelling limit at 50 percent personal property, you have $200,000 for contents. Sub-limits cap categories like jewelry at $1,500 and firearms at $2,500 unless you schedule them separately.

Loss of use

Pays the extra cost of living somewhere else when your home is uninhabitable after a covered loss. Example: a fire forces your family into a rental for four months. Loss of use covers the $3,200 monthly rent above your normal mortgage cost, plus restaurant meals over your usual grocery spend, plus pet boarding for the dog.

Other structures

Covers detached structures: detached garage, fence, shed, gazebo. Usually around ten percent of the dwelling limit. Example: a tornado destroys your detached workshop and 200 feet of wood fence. The $40,000 combined replacement comes out of the other-structures bucket, not dwelling.

Ordinance or law

Pays the extra cost to rebuild a damaged home up to current building codes. Example: a 1970s home suffers a kitchen fire. Local code now requires updated wiring, GFCI outlets, and code-compliant HVAC venting throughout the affected wing. The base policy pays for damage. Ordinance or law pays the $25,000 of mandatory upgrades on top.

Coverage A through F (homeowners)

The lettered coverage parts on a homeowners policy. A: dwelling. B: other structures. C: personal property. D: loss of use. E: personal liability. F: medical payments to others. Example: a homeowners declarations page might list Coverage A at $400,000, B at $40,000, C at $200,000, D actual loss sustained, E at $300,000, F at $5,000.

Guaranteed and extended replacement cost

Endorsements that pay above your dwelling limit if the actual rebuild cost exceeds it. Guaranteed pays whatever it takes (rare). Extended pays a set percentage above the limit, often 25 or 50 percent. Example: a $400,000 dwelling limit with 50 percent extended replacement cost will pay up to $600,000 if a total-loss rebuild runs over because lumber and labor spiked.

Wind and hail deductible

A separate deductible that applies only to wind and hail claims, often shown as a percentage of the dwelling limit instead of a flat dollar amount. Common in storm-prone regions. Example: a $400,000 dwelling with a 2 percent wind-hail deductible owes $8,000 out of pocket on a hailstorm roof claim, even if the rest of the policy uses a $1,000 flat deductible.

Homeowners form codes (HO-1, HO-2, HO-3, HO-5, HO-6, HO-8)

Industry codes for the standard homeowners policy forms. HO-1 is a basic named-peril form (rare today). HO-2 is a broad named-peril form. HO-3 is the most common owner-occupied form: open peril on the structure, named peril on contents. HO-5 is the broadest: open peril on both structure and contents. HO-6 is the condo-owner form. HO-8 is for older homes where rebuild cost would far exceed market value, paying repair cost instead. Example: a typical owner-occupied single-family home in good repair is usually written on HO-3 or HO-5. A condo unit is HO-6. A 1920s home priced below rebuild value may end up on HO-8.

Dwelling form codes (DP-1, DP-2, DP-3)

Industry codes for landlord and non-owner-occupied dwelling policies. DP-1 is a basic named-peril form, often used for vacant or hard-to-place homes. DP-2 is broad named-peril. DP-3 is the most common landlord form: open peril on the structure with optional contents and loss-of-rents coverage. Example: a single-family rental property leased year-round is typically written on DP-3 with $250,000 dwelling, $30,000 other structures, $50,000 personal property for landlord-owned items, and 12 months of fair-rental value coverage.

Risk and underwriting

Underwriting

The insurer's review of your risk to decide whether to offer coverage and at what price. Example: a homeowners application asks about roof age, claims history, dog breed, pool, and trampoline. A 22-year-old roof, a recent claim, and a high-bite-risk dog may decline the application even if everything else looks clean.

Insurable interest

The legal right to insure something based on owning it or being financially tied to it. Example: you cannot buy a homeowners policy on your neighbor's house, even if you live next door and care about the neighborhood. You can buy renters insurance on your apartment because you have an interest in your contents and personal liability.

Peril

A specific cause of loss. Fire, theft, wind, hail, lightning, vandalism, water leak. Example: a tree falls on your roof. The peril is wind, which is covered. The same tree falling because of slow root rot from a yard you neglected would be the peril of decay, which usually is not covered.

Exclusion

A specific cause of loss, person, or item the policy will not cover. Example: standard homeowners excludes flood. A burst pipe inside the house is covered as water damage. Six inches of street water through the front door after a storm is not, because that is flood. The water looks the same; the policy treatment is opposite.

Named peril

A policy that only covers losses from causes specifically listed. Example: a basic homeowners form lists fire, lightning, wind, and ten other named perils. Damage caused by a sewer backup is not on the list and not covered, even though the structure suffered real harm.

Open peril (all-risk)

A policy that covers all causes of loss except those specifically excluded. Example: a modern homeowners open-peril form will pay for a kid driving a Lego through your TV. A named-peril form would not, because random impact from a household occupant is not on the list.

Co-insurance

A clause that requires you to insure a property to a certain percentage of its value. Under-insure and the carrier may pay only a proportional share. Example: a commercial building worth $1 million with an 80 percent co-insurance clause must be insured to $800,000. If insured at $500,000 and you suffer a $200,000 loss, the carrier pays only $125,000 (the 500/800 ratio of $200,000).

Reinsurance

Insurance that insurance companies buy to spread their own risk. Example: after major catastrophe years, global reinsurance prices rise sharply. Homeowners across many states then see 10 to 25 percent premium increases driven by the reinsurance market, even if their own area had no claims.

Industry structure

Admitted carrier

Licensed and regulated by the state. Backed by the state guaranty fund. Example: most major personal carriers are admitted in the states where they sell. If an admitted carrier becomes insolvent, the state guaranty fund pays open claims up to its limits.

Non-admitted carrier (surplus lines)

Not licensed by the state directly. Used to place risks the standard market will not write. Generally not protected by the state guaranty fund. Example: a 1958 home with a 22-year-old roof, prior claim history, and no replacement-cost upgrades may only be insurable through a surplus-lines carrier. Premium often runs 30 to 60 percent higher than admitted.

Independent agent

An agent representing multiple insurance carriers and shopping the market. Example: Olive Cover holds appointments with multiple A-rated personal and commercial carriers. The same dec page we receive can be quoted across all of them at once.

Captive agent

An agent who represents only one insurance company. Example: a captive office can only place you with that single carrier. The captive agent is not allowed to quote you anywhere else, even if their carrier is not the right fit for your situation.

Standard market

The mainstream group of insurance carriers writing typical risks at competitive prices. Example: a clean-record driver with a recent-model sedan and no claims is a textbook standard-market client. Most major auto carriers will compete for the business.

Non-standard market

Carriers that write higher-risk drivers, prior-claim properties, or unusual situations the standard market declines. Example: after a serious driving violation or two homeowners claims in three years, the standard market may decline. Specialty carriers will write at higher premiums until the record clears.

Auto specifics

Bodily injury liability

Pays for injuries you cause to other people in an at-fault accident. Limits usually shown as a per-person and per-accident pair. Example: a 100/300 policy means up to $100,000 per injured person and up to $300,000 total per accident. A two-person serious-injury crash with $250,000 in combined medical bills can hit these limits quickly.

Property damage liability

Pays for damage you cause to other people's property. Mostly vehicles. Example: you total a $55,000 SUV at a stoplight. State minimum property damage of $25,000 leaves you personally on the hook for the remaining $30,000 plus a likely diminished-value claim. Carrying $100,000 usually costs only a few dollars more per month.

Uninsured motorist (UM)

Pays your medical bills and lost wages when an at-fault driver carries no insurance. Roughly one in eight US drivers is uninsured. Example: an uninsured driver runs a red light and breaks your collarbone. UM pays your $35,000 hospital bill and three weeks of lost income. Without UM, you would be chasing a likely-judgment-proof driver in court.

Underinsured motorist (UIM)

Pays the gap when an at-fault driver does have insurance but their limits are not enough. Example: an at-fault driver with $25,000 BI limits causes you $90,000 in medical bills. Their carrier pays $25,000. Your UIM pays the remaining $65,000 up to your UIM limit.

Personal injury protection (PIP)

Pays medical bills and sometimes lost wages for you and passengers regardless of fault. Required in some states, optional in others. Example: in a no-fault state, after a crash where fault is unclear, your PIP pays the first $10,000 of medical bills immediately, before any liability fight.

Medical payments coverage

Pays medical bills for you and passengers regardless of fault. Smaller limits than PIP, no lost-wage component. Example: $5,000 of MedPay covers the ER visit and a follow-up MRI for your passenger after a low-speed rear-end collision. No deductible, no fault question.

Stated amount

An agreed value used for claim purposes on classic cars, custom builds, and certain commercial vehicles. Example: a 1969 Camaro restoration with a stated amount of $85,000 pays $85,000 on a total loss, regardless of dealer book values for old Camaros.

Combined single limit (CSL)

A single liability limit that applies to both bodily injury and property damage in any combination, instead of separate per-person and per-accident limits. Common on commercial auto policies. Example: a $500,000 CSL can pay $400,000 in injuries and $100,000 in vehicle damage on the same claim, with no internal cap. A 100/300/100 split-limit policy could not.

Standard personal auto policies exclude coverage when the vehicle is being used for ride-share or livery (paid passenger transport). Some carriers offer a ride-share endorsement to fill the gap. Example: driving for Uber without a ride-share endorsement means a crash that happens with a passenger in the car may not be covered by either your personal policy or the platform's contingent coverage.

Commercial and specialty

Business owners policy (BOP)

A bundled small-business policy that combines property and liability coverage in one contract, often with optional add-ons. Typically priced lower than buying property and liability separately. Example: a small accounting office with a $500,000 BOP gets office contents, business interruption, and general liability under one policy and one renewal date instead of two separate carriers.

Workers compensation and experience mod

Workers comp pays medical bills and lost wages for employees injured on the job. Experience mod (or mod) is a multiplier comparing your claim history to industry peers. Example: a roofing contractor with a 1.25 mod pays 25 percent more than the baseline. A clean three-year record can drop the mod to 0.85, cutting premiums by hundreds of thousands of dollars on a large payroll.

Cyber liability and breach

Cyber coverage pays for response costs, customer notification, regulatory fines, and ransom payments after a data breach or ransomware event. A breach is the technical event itself: unauthorized access to or theft of data. Example: a small business hit by a $50,000 ransomware demand uses cyber coverage to pay forensics, customer notification, credit monitoring, and (if elected) the ransom itself, often capped by sub-limit.

Errors and omissions (E&O)

Professional liability coverage that pays when a service provider's mistake or oversight causes a client a financial loss. Same idea as malpractice for non-medical professions. Example: an architect who specifies the wrong load rating, causing a structural failure, has E&O to defend the lawsuit and pay the settlement, even though there was no bodily injury or property damage in the traditional sense.

Claims-made vs occurrence

Two ways liability and professional policies trigger coverage. Occurrence pays for events that happen during the policy period, no matter when the claim is reported. Claims-made pays for claims reported during the policy period, regardless of when the underlying event happened. Example: a doctor on an occurrence policy in 2020 is covered for a 2024 lawsuit about 2020 treatment. A doctor on a claims-made policy must keep coverage active in 2024 (or buy tail) to be covered.

Retroactive date and tail coverage

On claims-made policies, the retroactive date sets how far back the carrier will cover prior acts. Tail coverage extends the reporting window after the policy ends. Example: a consultant retiring after 20 years on a claims-made E&O policy buys a 5-year tail. Any claim reported in the next 5 years for work done before retirement is still covered. Without tail, that exposure goes uninsured.

Flood and catastrophe

NFIP (National Flood Insurance Program)

The federal flood insurance program that writes most residential flood policies in the US. Coverage is capped at $250,000 dwelling and $100,000 contents. Example: a home in a high-risk flood zone with $475,000 of dwelling exposure can place an NFIP policy up to $250,000, then add a private excess flood policy for the remaining $225,000 to fill the gap.

Flood zone

FEMA's classification of how flood-prone a property is. Zones starting with A or V are high-risk and usually trigger a lender requirement to buy flood insurance. Example: a home rezoned from X to AE after a FEMA map update may suddenly require flood coverage at the next mortgage refinance, with premiums jumping from optional to several thousand dollars per year.

Elevation certificate

A surveyor's document showing the height of a building's lowest floor relative to the base flood elevation. Often required for accurate flood pricing in high-risk zones. Example: a home that turns out to be 2 feet above base flood elevation rather than 1 foot below it can drop NFIP premiums by 40 to 60 percent once the elevation certificate is on file.

Catastrophe (cat)

An industry term for a single event causing widespread insured damage above a defined threshold. Hurricanes, major hailstorms, wildfires, and tornado outbreaks are usually declared cats. Example: when a hailstorm hits a metro area and produces tens of thousands of roof claims, carriers declare a cat event, deploy mobile claim units, and prioritize cat claims separately from routine ones.

Have you ever checked if you have roadside?

Insurance terms, in plain language.