Insurance Glossary

The replacement cost of damaged property minus depreciation for age, wear, and condition.

Coverage D on a homeowners policy that pays the extra costs of living elsewhere — rent, hotel, meals, pet boarding, extra mileage — while the home is uninhabitable from a covered loss, until repairs are complete or the limit is exhausted.

An insurance company that is licensed by the state insurance department to sell policies in that state, files its rates and forms for state approval, and contributes to the state guaranty fund that pays claims if the carrier becomes insolvent.

A professional assessment of value for insurance purposes; also a claim process to resolve disputes about the amount of loss.

A temporary insurance contract that provides proof of coverage until the formal policy is issued.

Computer simulations that estimate the probable insured loss from natural catastrophes — hurricane, wildfire, earthquake, severe convective storm, flood — for a specific property or a portfolio of properties, expressed as average annual loss and as probable maximum loss at defined return periods.

A formal request to an insurance company for coverage or compensation after a loss.

The record of property insurance claims tied to a homeowner and an address, tracked in the CLUE and A-PLUS databases and used by carriers for underwriting and pricing decisions for up to seven years.

A claim history report that carriers use to review a property’s prior insurance losses when deciding whether to offer or renew coverage.

A policy clause that requires the homeowner to insure the dwelling to a stated percentage of its replacement cost — usually 80% — or accept a proportional penalty on every partial-loss claim, not just total losses.

The maximum dollar amount an insurer will pay for a covered loss under a specific coverage part, set per coverage line and sometimes per item or per occurrence.

The first page of a homeowners policy that summarizes who is insured, the property, coverage limits, deductibles, and premium.

The amount you pay out of pocket on a covered claim before insurance pays the rest.

The buffer zone around a structure where vegetation and other combustible materials are managed to reduce wildfire risk and slow fire spread.

The reduction in an item's value from age, wear, and obsolescence. On a claim, depreciation is the dollar amount subtracted from replacement cost to arrive at actual cash value, and it is held back until the homeowner completes the repair or replacement.

The part of a homeowners policy (Coverage A) that pays to repair or rebuild the physical structure of the home and anything attached to it, up to the policy limit.

A separate insurance policy or endorsement that covers damage to structures and personal property caused by earthquakes, which is excluded from standard homeowners policies.

A written amendment or addition to an insurance policy that modifies coverage, terms, or conditions.

A specific cause of loss, type of property, or circumstance that the policy explicitly does not cover — either by industry standard or by a carrier-specific endorsement added to a particular policy.

The price property would sell for in current market conditions.

A state-sponsored insurance pool that provides basic property coverage to homeowners who cannot get insurance in the private market.

Separate insurance coverage that protects against flood damage, which is excluded from standard homeowners policies.

A policy a lender buys on your behalf when they believe your coverage has lapsed.

Extra time allowed to pay premium before the policy is canceled for nonpayment.

Physical damage to property caused by hailstones, commonly affecting roofs, siding, windows, and vehicles.

A home that standard insurance carriers consider more likely than average to produce a claim, based on location, condition, claims history, or exposure to natural disasters.

The most common homeowners insurance policy form, providing open-peril coverage for the dwelling and named-peril coverage for personal property.

A comprehensive property insurance policy that protects homeowners against damage to their dwelling, personal property, and liability for injuries occurring on their property.

A separate, almost always percentage-based deductible that applies only when damage is caused by a named tropical storm or hurricane, triggered by specific weather-service criteria written into the policy.

The principle of compensating for loss to restore financial position, not to create profit.

A financial stake in the property being insured; required for a valid policy.

The written contract between insurer and insured that defines coverage, exclusions, limits, and conditions.

The person or entity protected by an insurance policy.

The company providing insurance coverage.

Termination of coverage due to nonpayment of premiums or failure to renew.

The part of a homeowners policy (Coverage E) that pays bodily-injury and property-damage claims against the homeowner, plus legal defense costs, up to the policy limit.

Insurance coverage that pays for additional living expenses when your home is uninhabitable due to a covered loss.

Coverage for medical expenses of injured guests, often on a no-fault basis up to a small limit.

A premium discount, deductible reduction, or eligibility offer given by an insurer when a property has documented features that reduce the probability or severity of loss — impact-rated openings, hip roofs, defensible space, monitored alarms, water-leak sensors, and similar.

A tropical cyclone that has reached tropical-storm strength (39 mph sustained winds) and been assigned an official name by the National Hurricane Center or equivalent regional warning center. On a homeowners policy, "named storm" usually triggers a separate percentage deductible that applies to all wind damage caused by the event.

Failure to use reasonable care, resulting in injury or damage to another party.

The National Flood Insurance Program - a federal program providing flood insurance to property owners, renters, and businesses.

An insurance company's decision not to renew a policy when it expires, usually because the carrier no longer wants the risk.

Coverage for the additional cost of repairing or rebuilding a damaged home to current building, zoning, and land-use codes — including demolition of undamaged portions, removal of debris, and code-required upgrades — that standard dwelling coverage does not pay because the upgrades go beyond the pre-loss condition.

The specific cause of a loss — fire, wind, theft, lightning, hail — that determines whether a homeowners policy responds, on what terms, and at what limit.

The part of a homeowners policy (Coverage C) that pays to repair or replace belongings inside the home, subject to per-category sublimits and a settlement basis of either replacement cost or actual cash value.

The amount you pay for an insurance policy, typically billed monthly, quarterly, or annually.

Cancellation that returns unused premium based on the proportion of time remaining in the term.

Documentation required to support a claim, often a formal statement of the amount being claimed.

Extension of an insurance policy for another term.

The amount it would cost to replace damaged property with new property of similar kind and quality, with no deduction for depreciation.

State-created insurance mechanisms — FAIR Plans, beach and windstorm plans, and joint underwriting associations — that provide coverage to property owners who cannot obtain insurance in the standard market, funded by required participation from the admitted carriers in that state.

The carrier process of evaluating a property and applicant against location, structural, behavioral, and financial factors to decide whether to insure, at what price, and on what terms.

A list of specific items or coverages with individual values, often used for valuables.

The agreement and payment that resolves a claim under the policy terms.

The abnormal rise of seawater pushed onto land by a storm, driven mainly by hurricane winds, that is a leading cause of coastal flood damage.

The insurer’s right to recover costs from the party responsible for a loss after paying the claim.

An added premium increase applied due to claims, violations, or other risk factors.

Property insurance written by a non-admitted carrier — a specialty insurer that is not licensed in your state but is approved to cover risks the standard market will not accept.

A separate liability policy that sits on top of the liability limits on home, auto, boat, and rental-property policies, adding $1 million or more of additional protection and broadening coverage to include certain claims the underlying policies exclude.

The process an insurance company uses to decide whether to offer a policy, on what terms, and at what price.

A voluntary relinquishment of a known right, sometimes affecting claims or recovery rights.

Coverage for damage caused by water or sewage backing up through drains, sewers, or sump pump failures.

The geographic zone where homes and other structures meet or mingle with undeveloped wildland vegetation. Properties in the WUI face elevated wildfire ignition risk from embers, direct flame, and radiant heat, and are subject to stricter insurance underwriting, building codes, and defensible-space rules.

A separate, usually higher deductible that applies only to losses caused by wind or hail — commonly written as a percentage of the dwelling limit.

Property improvements and construction techniques designed to reduce damage from high winds, often resulting in insurance premium discounts.

Amounts deducted from a claim payment for deductible, depreciation, or other policy-based reasons.