Insurance can be a confusing world to explore. Whether you’re walking through the quoting process for a new auto insurance policy or perusing an article in our learning center, you’ll likely come across phrases or coverages that give you pause.
And believe me, I’ve been in your shoes. When first joining the team here at Berry Insurance, I too felt perplexed by the various important terms, acronyms, or industry-specific lingo that makes up the insurance world. But just as I’ve learned by working with our team of designated client success managers, I’m here to impart wisdom to you with our very own handy-dandy insurance glossary!
Now don’t worry, there won’t be a vocab pop quiz at the end - this is just a guide so you too can feel like an insurance expert! So whether you’re a first-time insurance buyer or simply want a refresher on some top terms in insurance, read on!
Top terms and definitions:
- Actual cash value: Actual cash value (ACV) or market value is the value of your home, vehicle, or belongings if they were sold today. This takes multiple factors into account - such as depreciation, land value, location, and the current state of the real estate market.
- Adjuster: Adjusters investigate claims as well as determine the coverage and payment amount. Adjusters can work as an employee or contractor for insurance companies or as a public adjuster.
- Agent: Insurance agents are licensed persons or organizations that work on behalf of insurance carriers to provide clients with proper coverage. Agents will be your first point of contact after you suffer a loss, need to file a claim, or simply have an insurance question. To learn more about the benefits of buying insurance from an agent instead of directly from the carrier, read this article: Buying Insurance: Insurance Agent vs Buying Direct.
- Binder: An insurance binder is a legal document that provides temporary proof of insurance coverage before a permanent policy can be issued.
- Cancellation: The termination of insurance coverage during the middle of a policy period. To learn how you can avoid policy cancellations, check out this guide: Your Insurance Billing Options: How to Avoid Late Fees and Policy Cancellations.
- Claim: Claims are the formal requests the insured policyholder files for reimbursement for losses covered by their policy. To learn all about the claims process for home or auto insurance, read these guides:
- Collision: This auto insurance coverage covers damages to your vehicle from a collision - whether you are at fault or not. These collisions can be with any object like a tree, pole, guard rail, pothole, or with another vehicle. To read up on how this coverage differs from comprehensive, read this guide: Do I Need Comprehensive or Collision Auto Coverage?
- Comprehensive: Comprehensive auto insurance coverage covers damage to your vehicle resulting from incidents other than collisions with another car. This can include vandalism, theft, wind, flood, fallen objects, hail, pest infestations, animal collisions, and more.
- Deductible: The agreed amount that the policyholder is responsible for paying before the insurance carrier pays them any claim money.
- Depreciation: A decrease in value due to age, wear and tear, and more.
- Dwelling: Home insurance coverage protecting the actual structure of your home and any attached structures such as garages and decks/porches.
- Endorsement: Endorsements are amendments or changes to your existing policy insurance policy that modifies your coverage. Some examples of endorsements you could add to your policies for additional coverage are rideshare insurance, GAP insurance, or scheduled personal property to name a few.
- Escrow: Escrow essentially means your mortgage and homeowners insurance (sometimes even your property taxes) will be lumped together in one payment. You pay that sum to your mortgage company, and your mortgage company pays for your insurance.
- Exclusion: Certain causes or conditions listed on insurance policies that are not covered by the policy.
- Grace period: A designated period of time in which the insured policyholder can make a late payment to their insurance premium without losing their coverage.
- Insured: The insured is the policyholder in the relationship. The insured is protected by the insurer in the case of a loss or claim.
- Insurer: The insurer is the actual insurance company/carrier that provides the coverage and approves policies. The insurer will work with insurance agencies to help cover clients.
- Limit: The maximum amount your insurer will pay out for a claim, stated in your policy.
- Misquote: An incorrect estimate of an insurance premium. Misquotes are common with quick quotes or online quoting tools - for more on how you should go about the quoting process to avoid misquoting, read this: Why You Shouldn’t Get a Quick Personal Insurance Quote.
- Peril: Any event, situation, or incident that causes harm to your property that is covered by your insurance policies. For example, covered perils on a homeowners policy can include fire, theft, vandalism, and more.
- Policy: A policy is the actual written contract of insurance.
- Premium: A premium is the amount of money the policyholder will be charged for insurance coverage.
- Quote: A quote is the estimated cost of insurance that you will receive based on information supplied to your insurance agency or carrier.
- Replacement cost: Replacement cost value (RCV) is the cost it will take to replace something as new or in equal value. This reimburses you based on the value deemed by the insurance provider or what it was assigned on the insurance policy.
-
- Extended replacement cost: This is an optional policy add-on that would increase replacement coverage in the event that any damages result in costs that would exceed your policy limits. Extended coverage can usually be added to a policy at either 25, 50, or 100 percent of dwelling coverage.
- Rider: Another name for an endorsement on your policy, as listed above. Also, Rider just so happens to be our VP of Puplick Relations (which was definitely a complete coincidence).
- Surcharge: Surcharges are an extra fee that are applied to your insurance premium. For example, your insurance provider may apply a surcharge fee to your auto insurance policy after you demonstrate a degree of risky behavior while driving.
- Underwriter: Underwriters work with or on behalf of insurance carriers to review potential policyholders for the risk that could come with insuring them. For more on underwriters, check out the links below:
Defining coverage:
Now that you’ve studied up on all the top insurance vocabulary terms - you’re ready for the pop quiz! No, completely kidding - but you will be ready for your next insurance quote, renewal, or claim.
Still need to know more? Check out our Learning Center and YouTube channel for various in depth articles and videos covering the subjects we listed above and more!
Looking for a quote? Download our insurance quoting worksheet below so you can know exactly what you’ll need to prepare when working with your insurance agent or carrier.
