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Glossary of Insurance Terms

We’ve compiled a list of terms and their definitions to better help you navigate the sometimes confusing world of insurance.

Click on the letter that your term begins with. To return to the top of your screen, Click Ctl-Home or the back button on your browser.

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Actual Cash Value (ACV) – The cost to replace property minus an allowance for the property’s depreciation.

Admitted Insurer – Sometimes referred to as a “licensed insurer”. An insurer authorized by the state insurance department to sell insurance within that state.

Agent/Agency – sells, solicits, or negotiates insurance for compensation and represents or acts on behalf of another party.

Aggregate Limit – A type of policy limit found in liability policies which limits coverage to a specified total amount for all losses occurring within the policy period.



Binder – An oral or written agreement to provide temporary insurance coverage until a form written policy is issued.

Bodily Injury – As defined in many liability policies, any physical injury to a person, including sickness, disease, and death.

Broad Form Coverage – Coverage for causes of loss due to falling objects (trees or other objects that may fall onto a structure), sudden and accidental water damage (sudden leaks, may for example, damage carpets, floors, or ceilings).



Cancellation – Termination of an insurance policy.

Catastrophic Loss – Losses incurred as a result of a hurricane, earthquake, fire, or other major storm

Claim – A demand by a person or business seeking to recover from an insurer for a loss that may be covered by an insurance policy.



Damages – Money awarded to a party who has suffered bodily injury or property damage for which another party is legally responsible.

Declaration – Insurance policy information page outlining specific details about the insured and the subject of the insurance.

Deductible – A portion of a covered loss that is subtracted from the amount the insurer would otherwise be obligated to pay the insured.

Depreciation – The allowance for physical wear and tear or technological or economic obsolescence.

Dwelling Policy – An allied lines policy which provides coverage for the dwellings and personal property of individuals and families against fire and additional perils.



Endorsement – A document that amends an insurance policy.

Excess and Surplus Lines (E&S) – Insurance coverage’s unavailable in the standard market that are written by nonadmitted insurers.

Exclusion – A policy provision that eliminates coverage for a specified exposure.

Exposure – Any condition or situation that presents the possibility of a loss.



Field Claim Representative – An insurer employee who handles claims that cannot be handled easily by phone, mail, or e-mail.

Floater – A policy designed to cover property that floats, or moves, from location to location.



General Damages – Compensatory damages awarded for losses that do not have a specific economic value, such as pain and suffering.

Guaranty fund – A state fund that provides a system to pay the claims of insolvent insurers, generally funded by assessments collected from all insurers licensed in the state.



Hazard – A condition that increases the frequency or severity of a loss.

Homeowners Policy – A personal multiple line contract incorporating both property and liability coverage’s. Several different forms provide varying degrees of protection.



Incurred Losses – The sum of paid losses and changes in loss reserves for a particular period.

Indemnity – A principle of insurance which provides that when a loss occurs, the insured should be restored to the approximate financial condition occupied before the loss occurred, no better, no worse.

Independent Agent – A producer who works for an independent agency who can be either owner or an employee of the agency. This agency usually represents several unrelated insurers.

Insurable Interest – A coverage verification criterion that exists when a person or other entity would suffer a financial loss if the subject property were damaged.

Insurance – A form of risk management primarily used to hedge against the risk of a contingent, uncertain loss.

Insurance Agent – A legal representative of one or more insurers for which the representative has a contractual agreement to sell insurance.

Insured – The individual whose property or liability is covered by an insurance policy.

Insurer – An insurance company.



Liability – Financial obligations, or debts, owed by a company to another entity, usually the policyholder in the case of an insurer.

Licensed Insurer – An insurer authorized by the state insurance department to sell insurance within that state.

Limits of Liability – The maximum amount of insurance the insurance company will pay for a particular loss or for a loss during a period of time.



Managing General Agency (MGA) – An independent business or organization that appoints and supervises independent agents for insurers that use the independent agency system.

Medical Payments Coverage – Coverage that pays necessary medical expenses incurred within a specified period by a claimant (and in certain policies, by an insured) for a covered injury, regardless of whether the insured was at fault.



Named Insurer – The policyholder whose name(s) appears on the declarations page of an insurance policy.

Nonadmitted Insurer – Insurers that are not licensed in many of the states in which they operate and that write E&S insurance coverage’s.



Occurrence Basis Coverage – Coverage for liability claims that occur during the policy period, regardless of when the claim is submitted to the insurer.



Peril – The actual means by which property is damaged or destroyed.

Policy – A complete written contract of insurance.

Personal Liability Insurance – Insurance that provides liability coverage to individuals and families for bodily injury and property damage arising from the insured’s personal premises or activities.

Premium – The price of the insurance coverage provided for a specified period.

Proof of Loss – (1) The evidence offered by the insured to prove entitlement to collect the amount claimed from the insurer.  (2) The statement, signed and sworn by the insured, setting forth the claim information required by the policy.

Property Damage – A type of loss covered under many liability contracts.  Property damage means physical injury to intangible property, including loss of use.



Rate – The amount per exposure unit for insurance coverage, used to arrive at a premium when multiplied by the number of exposure units.

Reinsurance – A contractual agreement that transfers some or all of the potential costs of insured loss exposures from policies written by one insurer to another insurer.

Replacement Cost – The cost to repair or replace property using new materials of like kind and quality with no deduction for depreciation.

Risk – (1) Uncertainty arising from the possible occurrence of given events. (2) The insured or the property to which an insurance policy relates.



Salvage – Damaged property that may be retrieved, reconditioned, and sold to reduce an insured loss.

Settlement – An adjustment where the disposition of the claim involves the payment of a sum of money to the insured or third-part claimant.

Solvency – The ability of an insurer to meet its financial obligations as they become due, even those resulting from insured losses that may be claimed several years in the future.

Special Form – A policy that provides coverage for any direct loss to property unless the loss is caused by a peril specifically excluded.

Subrogation – The insurer’s right, assumed from the insured, to recover payment from a third party that is legally responsible for the loss.



Underwriter – An insurer employee who evaluates applicants for insurance, selects those that are acceptable to the insurer, prices coverage, and determines policy terms and conditions.

Underwriting – The process of selecting insured’s, pricing coverage, determining insurance policy terms and conditions, and then monitoring the underwriting decisions made.

FL Department of Financial Services, Bureau of Licensing, General Lines Manual, 2011. Print.
Luthardt, Constance M. and Wiening, Eric A. and Frappolli, Martin J. Property and Liability Insurance Principles. Pennsylvania: Malvern, 2005. Print.