The library · glossary

The glossary.

Insurance terms in plain English. 73 entries · last reviewed Apr '26.

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73 terms

Aactual cash value:Replacement cost minus depreciation — what the item is worth today given its age and condition.

Aadditional insured:Someone added onto your policy by endorsement so they get the benefit of your coverage too.

Aadditional living expense:Covers the extra cost of living somewhere else while your home is being repaired after a covered loss.

Aadjuster:The person assigned by the insurance carrier to investigate, value, and settle a claim.

Aaggregate limit:The most your insurance will pay over the entire policy year — total, across all claims combined.

Aagreed value:A pre-set payout amount you and the insurer agree to up front, no depreciation arguments at claim time.

Aall risk:Coverage for any cause of loss except those specifically excluded.

Bbinder:Temporary written evidence that coverage has been bound, used while the actual policy is being issued.

Bbusiness interruption:Covers the income you lose and the ongoing expenses you still have to pay while your business is shut down by a covered loss.

Bbusiness owners policy:A pre-packaged commercial policy bundling general liability and commercial property for small businesses.

Bbuy-sell agreement:A legal agreement among business owners, typically funded by life insurance, that triggers a sale of an owner's interest to the others on death or other triggering event.

Ccertificate of insurance:A one-page summary of your insurance coverage, issued to a third party as proof you're insured.

Cclaim:A formal demand for payment under an insurance policy, made by the insured (first party) or by a third party against the insured.

Cclaimant:The person making a claim against you under your liability coverage.

Cclaims-made:A policy form where coverage is triggered by when the claim is filed against you, not when the act happened.

Ccoinsurance:A clause that penalizes you on a claim if you've underinsured the property.

Ccombined single limit:One single liability limit that covers bodily injury and property damage together, instead of separate per-person and per-accident sublimits.

Ccommercial auto:Auto liability and physical damage coverage for vehicles owned, leased, or operated by a business.

Ccyber liability:Coverage for the costs of a data breach, ransomware attack, or other cyber incident.

Ddeclarations page:The summary page at the front of your policy that lists what's covered, the limits, the deductibles, and what you paid.

Ddeductible:The amount you pay out of pocket on a claim before insurance starts paying.

Ddenial of claim:The insurer's formal refusal to pay a claim, with stated reasons.

Ddepreciation:The reduction in value applied to property because of age, wear, and obsolescence — used in ACV settlements.

Ddirectors and officers:Personal liability coverage for executives and board members for decisions they make on behalf of the company.

DDP-3:A landlord policy for rental properties — like an HO-3 but written for non-owner-occupied homes.

Ddram shop:Liability coverage for businesses that serve alcohol — protects against claims arising from over-serving a customer who then causes harm.

Eemployment practices liability:Covers claims by employees for harassment, discrimination, wrongful termination, retaliation, and similar.

Eendorsement:A document attached to your policy that adds, removes, or modifies coverage.

Eexclusion:Something the policy specifically does not cover, listed in the policy form or added by endorsement.

Eexperience modifier:A multiplier on your workers' comp premium based on your claim history vs. similar businesses.

Ffirst party:Coverage that pays you, the insured, for your own losses — as opposed to third-party (liability) coverage that pays others on your behalf.

Ggeneral liability:The base liability coverage for a business — covers third-party bodily injury, property damage, and personal/advertising injury claims.

Hhired and non-owned auto:Liability coverage for vehicles your business uses but doesn't own — rental cars, employees' personal cars used for work errands.

HHO-3:The most common homeowners policy — covers your home all-risk and your personal property named-peril.

HHO-5:An upgraded homeowners policy where personal property is also all-risk, not just the dwelling.

HHO-6:A condo owners policy — covers your unit's interior, your belongings, and your personal liability.

Iinland marine:Despite the name, this covers movable business property — tools, equipment, electronics — wherever they go, including off-site jobs.

Kkey person:Life insurance owned by a business on a key employee or owner — the business is the beneficiary.

Lloss of use:Coverage for the costs and lost rents while you can't use your property after a covered loss.

Lloss payee:A lender or lessor named on the policy to be paid first on a property loss, ahead of the insured.

Lloss runs:A report from a carrier listing all claims activity on a policy over a stated period — usually 3 to 5 years.

Mmaster policy:The condo or HOA association's policy that covers shared structures and common areas. Your HO-6 covers everything inside your unit and gaps the master leaves.

Mmortgagee:The bank holding the mortgage, named on your homeowners policy to receive loss payments and notice of cancellation.

Nnamed insured:The person or entity actually buying the policy and named on the dec page.

Nnamed peril:A property policy that only covers losses from causes specifically listed (fire, lightning, wind, etc.) — anything not listed is not covered.

Ooccurrence form:A policy form where coverage is triggered by when the act happened, regardless of when the claim is filed.

Oordinance or law:Coverage for the extra cost of rebuilding to current code after a loss, when the building wasn't up to code before.

Pper-occurrence limit:The most your insurance will pay for any single claim or incident.

Ppolicy period:The dates between which the policy is in effect — typically one year, listed on the dec page.

Ppremium:What you pay for the insurance coverage.

Ppremium audit:The end-of-policy review where the carrier checks your actual payroll/sales against the estimates, and bills or refunds the difference.

Pprimary and noncontributory:An endorsement that says your policy pays first and the other party's policy doesn't have to chip in.

Pprior acts:Coverage for claims arising from work performed before your current claims-made policy started, going back to a specified retroactive date.

Pproducts and completed operations:Coverage for bodily injury or property damage caused by your products after they've left your hands or your work after it's been completed.

Pprofessional liability:Coverage for claims that you gave bad advice, made a mistake in your professional service, or failed to perform.

Pproof of loss:A formal sworn statement from the insured documenting the loss, required by most property policies before the carrier will pay.

Rreplacement cost:What it costs to rebuild or replace something today, with no deduction for age or wear.

Rretroactive date:The earliest date for which a claims-made policy will cover work — claims from work performed before this date are not covered.

Rrider:Same as an endorsement — a document attached to a policy that adds, removes, or modifies coverage.

Sscheduled articles:Specific high-value items (jewelry, art, collections) listed individually on your policy with their own appraised values.

Sself-insured retention:An amount you pay yourself before insurance attaches — like a deductible, but you also handle the defense for losses below it.

Ssublimit:A smaller cap inside the main policy limit that applies to a specific kind of loss.

Ssubrogation:When your insurer pays your claim and then goes after whoever caused the loss to get the money back.

Ttail coverage:Extended reporting period after a claims-made policy ends, so claims for old work can still be filed against it.

Tterm life:Life insurance that pays a death benefit only if you die during a fixed period (10, 20, 30 years) — no cash value, just protection.

Tthird party:A claimant outside the insurer-insured relationship — someone who claims against you under your liability coverage.

Uumbrella policy:A separate policy that adds liability limits on top of your home, auto, or business policies — and may broaden coverage in places where the underlying policies don't reach.

Uunderinsured motorist:Coverage that pays you when you're hit by someone whose liability limits aren't enough to cover your damages.

Uuninsured motorist:Coverage that pays you when you're hit by someone with no liability insurance.

Wwaiver of subrogation:An agreement that your insurance won't go after the other party to recover money it paid out, even if they caused the loss.

Wwhole life:Permanent life insurance with level premiums, a guaranteed death benefit, and a cash value that grows on a fixed schedule.

Wwind/hail deductible:A separate, often percentage-based deductible that applies only to wind or hail damage, not other claims.

Wworkers compensation:Insurance that pays employees for work-related injuries — medical bills, lost wages, disability — without going to court.

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