Reference Guide
Insurance Glossary
Insurance should not require a translator. Here are over 50 common insurance terms explained in plain English so you can understand your policy and make informed decisions.
Actual Cash Value (ACV)
The current value of your property after accounting for depreciation. If your five year old TV is destroyed, ACV pays what a five year old TV of that model is worth today, not what a new one costs.
Additional Insured
A person or business added to your policy who receives limited coverage. Landlords often require tenants to name them as an additional insured on their liability policy.
Additional Living Expenses (ALE)
Coverage that pays for hotel stays, restaurant meals, and other increased costs when your home is uninhabitable after a covered loss.
Agent
A licensed professional who sells insurance policies on behalf of one or more insurance companies. Your WeInsureCali agent is your point of contact for all policy questions and claims.
Aggregate Limit
The maximum total amount your insurer will pay for all claims during a single policy period. Once you hit the aggregate, no more claims are paid until the policy renews.
Appraisal
A process for resolving disputes about the value of a loss. Both you and the insurer hire appraisers who attempt to agree on the amount owed.
Binder
A temporary agreement that provides immediate insurance coverage while your full policy is being processed. Think of it as a receipt that confirms you are covered.
Bodily Injury
Physical harm to another person caused by an accident you are responsible for. Your liability coverage pays for the injured person's medical bills, lost wages, and pain and suffering.
Business Owners Policy (BOP)
A bundled commercial insurance package that combines general liability and commercial property coverage into one affordable policy for small businesses.
Certificate of Insurance (COI)
A document proving you have insurance coverage. Landlords, clients, and contractors often request COIs as proof that you are properly insured.
Claim
A formal request to your insurance company for payment after a covered loss. When you have damage or an accident, you file a claim to activate your coverage.
CLUE Report
Comprehensive Loss Underwriting Exchange. A database that tracks your insurance claims history for the past seven years. Insurers check this when determining your eligibility and premium.
Coinsurance
A clause requiring you to insure your property to a certain percentage of its value (usually 80%). If you underinsure, the company may reduce your claim payment proportionally.
Collision Coverage
Auto insurance that pays for damage to your own vehicle when you hit another car or object, regardless of who is at fault.
Comprehensive Coverage
Auto insurance that covers damage to your vehicle from events other than collisions, such as theft, vandalism, hail, fire, and animal strikes.
Conditions
The section of your policy that outlines your responsibilities and the insurer's responsibilities. Failing to meet conditions (like reporting a claim promptly) can affect your coverage.
Coverage
The protection your insurance policy provides. Each type of coverage has its own limits, deductibles, and exclusions.
Declarations Page
The first page of your policy summarizing your coverage, limits, deductibles, and premium. Also called the dec page. This is the page most people actually read.
Deductible
The amount you pay out of pocket before insurance kicks in. A $1,000 deductible means you pay the first $1,000 of a covered loss, and insurance pays the rest up to your policy limit.
Depreciation
The decrease in value of an item over time due to age, wear, and use. Depreciation is the difference between what you paid for an item and what it is worth today.
Dwelling Coverage
The part of your home insurance that covers the physical structure of your house. It pays to repair or rebuild your home after a covered loss.
Endorsement
An addition or change to your existing policy that modifies coverage. Also called a rider. Common endorsements add coverage for jewelry, home businesses, or water backup.
Exclusion
Something your policy specifically does not cover. Common exclusions include flood, earthquake, intentional damage, and normal wear and tear.
Experience Modification Rate
A multiplier applied to your workers compensation premium based on your claims history compared to similar businesses. A rate below 1.0 means fewer claims than average (lower premium).
FAIR Plan
California's insurer of last resort for property owners who cannot find fire coverage on the open market. It provides basic fire insurance when private companies decline to write a policy.
Floater
Coverage for specific valuable items that extends beyond the limits of your standard policy. Common floaters cover jewelry, art, musical instruments, and cameras.
Grace Period
A window of time after your premium due date during which your policy remains in effect even if you have not yet paid. California typically provides a 30 day grace period.
Indemnification
The principle of restoring you to the financial position you were in before the loss. Insurance indemnifies you; it does not make you better off than before.
Inland Marine
Insurance that covers movable property like tools, equipment, and materials in transit or at job sites. Despite the name, it has nothing to do with boats.
Insurable Interest
A financial stake in the property or person being insured. You must have an insurable interest to purchase insurance. You can insure your own home but not your neighbor's.
Liability
Your legal responsibility to pay for damage or injury you cause to others. Liability coverage in your policy pays these costs on your behalf.
Limit
The maximum amount your insurance company will pay for a covered loss. Your policy has per occurrence limits (per claim) and aggregate limits (total for the policy period).
Loss of Use
Coverage that pays for temporary living arrangements when your home is uninhabitable. Similar to additional living expenses.
Medical Payments Coverage
A small coverage that pays medical bills for people injured on your property (home) or in your car (auto) regardless of fault. Helps resolve minor incidents quickly.
Named Peril
A policy that only covers losses specifically listed in the policy. If a peril is not named, it is not covered. Compare to open peril policies.
Occurrence
A single event that causes damage or injury. Your per occurrence limit is the maximum paid for one event, regardless of how many claims result from it.
Open Peril
A policy that covers all causes of loss unless specifically excluded. More comprehensive than a named peril policy. Also called all risk coverage.
Per Occurrence Limit
The maximum amount paid for a single event or claim. A $1 million per occurrence limit means the insurer pays up to $1 million for any one incident.
Property Damage
Physical harm to someone else's property caused by your actions or your property. Your liability coverage pays for property damage claims against you.
Replacement Cost
The amount it costs to replace or rebuild your property with new materials of similar kind and quality. Unlike actual cash value, replacement cost does not deduct for depreciation.
Rider
Another term for an endorsement. An addition to your policy that modifies or adds coverage. See endorsement.
Subrogation
The process where your insurance company seeks to recover money it paid on your claim from the person who caused the loss. If another driver hit your car, your insurer may pursue them for reimbursement.
Surety Bond
A three party agreement that guarantees a business will fulfill its obligations. Unlike insurance, if a bond claim is paid, you must reimburse the surety company.
Umbrella Policy
An extra layer of liability coverage above your existing policies. Provides additional protection, typically starting at $1 million, for a very low premium.
Underinsured Motorist
Coverage that protects you when the other driver's insurance is not enough to cover your injuries or damage. Fills the gap between their limits and your actual costs.
Underwriting
The process insurers use to evaluate your risk and determine whether to offer coverage and at what price. Underwriters review your application, claims history, and risk factors.
Uninsured Motorist
Coverage that protects you when the other driver has no insurance at all. An estimated 15% of California drivers are uninsured, making this coverage essential.
Vacancy Clause
A provision that reduces or eliminates coverage if your property is vacant for an extended period, typically 60 days. Important for landlords between tenants and for seasonal properties.
Waiver of Subrogation
An agreement where you give up your insurer's right to pursue recovery from a third party. Common in commercial contracts and landlord tenant agreements.
Workers Compensation
Insurance that covers medical expenses, lost wages, and disability benefits for employees injured on the job. Required in California for virtually every employer with employees.
Still Have Questions About Your Coverage?
Our team explains insurance in plain English every day. Call us and we will walk you through your policy, answer your questions, and make sure you understand exactly what you are paying for.