Understanding Insurance Terms

We know the language used by the insurance industry can be confusing. We want to make sure that you clearly understand your options and know precisely what you’re paying for.

Here are some terms we use for types of coverage. There are also a variety of other terms that might be unfamiliar to you. We hope this glossary helps make the world of insurance easier to understand.

Additional Living Expenses

If you can’t live in your home because of a covered loss, your insurance company may pay the necessary increase in living expenses while damage is assessed and your home is repaired or rebuilt.

Base Flood Elevation

The elevation shown on the Flood Insurance Rate Map (FIRM) for Zones AE, AH, A1-A30, AR, AR/A, AR/AE, AR/A1-A30, AR/AH, AR/AO, V1-V30, and VE that indicates the water surface elevation resulting from a flood that has a 1% chance of equaling or exceeding that level in any given year.

Broad Form Liability Coverage

Helps protect you from expenses related to injuries or property damage you or your watercraft cause in an accident. Some policies also cover certain accidental fuel spill liabilities and wreckage removal.

C.L.U.E. (Comprehensive Loss Underwriting Exchange)

C.L.U.E. is a claims history database created by ChoicePoint that enables insurance companies to access consumer claims information when they are underwriting or rating an insurance policy. It typically contains up to five years of personal auto or personal property claims history.  You can order a C.L.U.E. report:

LexisNexis Personal Reports, call toll free 1-866-312-8076
Or you can request a copy from the seller of a home you are purchasing.

Collision Coverage

Pays to repair your auto, classic auto, motorcycle and recreational vehicle damages caused by an accident. Your agent can help you determine the limits you need.

Comprehensive Coverage

Pays to repair or replace your vehicle if it is stolen, vandalized or damaged in some way other than in a collision. May include loss from fire, cracked windshields, floods, falling objects, and wind.

Custom Parts & Equipment Coverage

Many motorcycle owners like to customize their rides, and some policies pay for customized parts and equipment, often at no extra charge.

Deductible

When you get insurance, you agree to pay up to a certain amount out-of-pocket in case of a loss. This amount is called your “deductible.” The deductible you choose often affects how much you pay for your premium. For example, a higher deductible usually means a lower premium. In the case of a covered loss, you’ll only be required to pay your deductible, and the insurance company usually covers the excess, up to the applicable limit for that loss under your policy.

Elevation Certificate

A certificate that verifies the elevation data of a structure on a given property relative to the ground level. The Elevation Certificate is used by local communities and builders to ensure compliance with local floodplain management ordinances and is also used by insurance agents and companies in the rating of flood insurance policies.

Emergency & Roadside Assistance

For auto, boat and personal watercraft, emergency assistance pays for the cost of towing or emergency service. For motor homes, it also covers housing and transportation costs if your motor home becomes uninhabitable and covers the loss of personal property in your motor home.  Some policies also provide roadside assistance for motorcycles.

Estate Tax

Federal or state taxes on the value of assets left at death. Also called inheritance taxes or death taxes.

Excess Liability

Sometimes used interchangeably with “umbrella”, “excess liability” refers to extended liability coverage. This coverage is meant to supplement your insurance coverage if the damages exceeds your primary liability coverage.

Flood

A general and temporary condition of partial or complete inundation of two or more acres of normally dry land area or of two or more properties (at least one of which is the policyholder’s property) from one of the following:

  • Overflow of inland or tidal waters
  • Unusual and rapid accumulation or runoff of surface waters from any source
  • Mudflow
  • Collapse or subsidence of land along the shore of a lake or similar body of water as a result of erosion or undermining caused by waves or currents of water exceeding anticipated cyclical levels that result in a flood as defined above

Flood Zone

A geographical area shown on a Flood Hazard Boundary Map or a Flood Insurance Rate Map that reflects the severity or type of flooding in the area.

Identity Theft

Identity theft occurs when someone steals your personal information and uses it to open accounts or incur charges without your permission. Thieves can access your personal information in a variety of ways, such as stealing your personal mail, your wallet, or hacking your computer files. The thief then uses your identity to rack up debt in your name or perhaps to issue fake IDs. For more information on identity theft and tips on prevention visit the FTC’s Identity Theft Site.

Indemnity

Providing indemnity means to financially restore someone after a loss, through payment, repair or replacement.

Insurance Score

A Credit Based Insurance Score (CBIS) is derived from information on your credit report. It is a number that measures likelihood of having an insurance claim – not a measure of credit worthiness. Insurers use CBIS along with a number of other factors, including driving records, claims history, and the type of home or vehicle owned, to evaluate new and renewal auto and homeowner insurance policies.

Irrevocable Trust

A trust that cannot be terminated or revoked or otherwise modified or amended by the grantor. As modern trust law continues to evolve, however, it may be possible to effect changes to irrevocable trusts through court actions or a process called decanting, which allows the assets of an existing irrevocable trust to be transferred to a new trust with different provisions.

Medical Coverage (Home)

Covers medical expenses for guests if they are injured on your property, and in certain cases covers people who are injured off of your property. It does not cover healthcare costs for you or other members of your household.

Medical Coverage (Auto, Boat, Motorcycle)

Provides for your passenger and your medical expenses that are the result of an accident.

National Flood Insurance Program (NFIP)

A federal program enabling property owners in participating communities to purchase insurance protection against losses from flooding. This insurance is designed to provide an insurance alternative to disaster assistance to meet the escalating costs of repairing damage to buildings and their contents caused by floods.

Liability & Personal Liability Coverage

For homeowners, this coverage applies if someone is injured or property is damaged and you are to blame. The coverage applies anywhere in the world. When choosing liability coverage for your home, auto, personal watercraft, or recreational vehicle, consider things like how much money you make and what you own. Your liability coverage should be high enough to protect your belongings if you are sued.

Personal Property Coverage

Your home is filled with furniture, clothes, sports equipment, and other items that mean a lot to you. This coverage helps repair or replace these items if they are lost, stolen or destroyed as a result of an insured event.

Personal Watercraft

A personal watercraft (PWC) is a recreational watercraft that the rider sits or stands on, rather than inside of, as in a boat. Models have an inboard engine driving a pump jet that has a screw-shaped impeller to create thrust for propulsion and steering.

Physical Damage Coverage for Watercraft

Pays to repair the damage done to your watercraft due to an accident. It also generally pays to repair or replace your watercraft for insured situations such as theft, fire, vandalism or other non-collision damages that occur in or out of the water.

Premium

Simply put, a premium is the payment you make in exchange for one term of policy coverage.

Property or Dwelling Coverage

Typically pays to repair or rebuild your home if it’s damaged or destroyed by an insured event.

Revocable Trust

A trust created during lifetime over which the grantor reserves the right to terminate, revoke, modify, or amend.

Scheduled Personal Property

If you have special possessions such as jewelry, art, antiques, silverware, furs or collectibles, you may want to talk to your agent about this additional coverage. 

Trust

An arrangement whereby property is legally owned and managed by an individual or corporate fiduciary as trustee for the benefit of another, called a beneficiary, who is the equitable owner of the property.

Underwriter/underwriting

Underwriting is the process of assessing risks when deciding whether to issue a policy of insurance.

Uninsured/under-insured Motorist Coverage

Pays for damages associated with bodily injury or death from an accident caused by an uninsured, under-insured or hit-and-run driver, as defined by the law in the jurisdiction where the accident occurred, who is at fault. It also covers you if you are hit as a pedestrian.