Back to Basics, Part Two: The Language of Insurance, A-I

Like many people who work in niche or highly technical industries, insurance professionals use a lot of jargon. While some of the words we use are really only used in an insurance context (like “deductible”), others are common words that mean something a little different when spoken by an insurance professional (“risk,” for example).

In the first two installment of Back to Basics, we will teach you to speak the language of insurance, and demystify some common insurance terms.

Actual Cash Value – the actual cost to replace damaged property, based on its depreciated value.

Use it in a sentence: The actual cash value of the trailer is only $1,500, even though it would cost significantly more to replace it with a brand new one.

Additional Insured – a party, in addition to the primary insureds, who is named on the policy and benefits from the coverages under the policy.

Use it in a sentence: Now that your partner lives with you, we will add them as an additional insured, so they are covered too.

Adjuster – the person who assesses a claim, determines whether there is coverage, and guides the settlement process. (An adjuster may work for the insurance company, or they may work for an independent company contracted by the insurance company to settle claims on their behalf.)

Use it in a sentence: An adjuster will call you to set up a time to view the damage.

Agreed Value – the value of a vehicle or other property upon which the insurer and the insured agree coverage will be based.

Use it in a sentence: The agreed value of your motorcycle is $12,000, based upon the appraisal you provided.

Bodily Injury – physical injury to a third party.

Use it in a sentence: In the car accident, your passenger suffered bodily injury.

Binder – an agreement that provides coverage until a policy can be set up. (In home insurance, we also use binder to mean a proof of insurance, provided to lenders during home purchases or mortgage refinancing.)

Use it in a sentence: This binder provides you with coverage until February 10^th, by which point we will have a policy in place for you.

Use it in a sentence again: I sent the binder to your lawyer to prove you purchased insurance.

Claim – a request for compensation due to loss or damage to insured property or third parties.

Use it in a sentence: To have your stolen bike replace, make a claim under your tenant insurance policy.

Declarations / Declaration Page – the page(s) in a policy that outlines the general information, like the insured’s name and address, details of the insured property, the limits of insurance, the premium, and the effective and expiration dates of the coverage.

Use it in a sentence: Refer to your declaration page to find out the amount of liability coverage your business has.

Deductible – the portion of a claim you must pay before the insurance policy will respond.

Use it in a sentence: Your deductible for water damage is $2,000.

Dwelling – a residential premises that you own and live in or rent to others. (“Dwelling” is often used interchangeably with “house.”)

Use it in a sentence: Your dwelling is insured for $450,000.

Effective Date – the date on which coverage under your insurance policy commences.

Use it in a sentence: The effective date of your policy is January 12, 2021.

Endorsement – an agreement added to your policy to enhance or reduce coverage or change the policy conditions, which overrides the original wording. We also use “endorsement” as a synonym for change.

Use it in a sentence: There is an endorsement on your policy adding coverage for damaged caused by sewer back-up.

Use it in a sentence (again): We made an endorsement to your policy to reduce your water damage deductible.

Floater / Schedule – property specifically listed/itemized on your policy and insured to a certain value, typically used for high-value or unique items like jewelry, contractors tools, and farm equipment.

Use it in a sentence: We will schedule your tools onto your policy so they are covered.

Use it in a sentence (again): We can add a floater for the ring from your grandmother to ensure you have enough coverage for it.

Guaranteed Replacement Cost – a provision in your policy that ensures your home (or trailer or mobile home) is fully replaced/rebuilt following a total loss, even if the costs to do so exceed the limit of insurance under your policy.

Use it in a sentence: Your home insurance policy includes Guaranteed Replacement Cost, ensuring it will be fully rebuilt, no matter the cost, if it is completely destroyed in a fire.

Indemnity – security against a loss, or the compensation paid following a loss.

Use it in a sentence: Indemnity is provided for stolen jewelry.

Insured – the person/people/organization protected by an insurance policy.

Use it in a sentence:

Insurer – the company providing insurance, also called a carrier.  

Use it in a sentence: The insurer will send you your policy documents.

Some of these words are defined differently by different insurers. Refer to the first page of your policy wording for exact definitions.

Check back next week for terms starting with J-Z!