Actual Cash Value: coverage where the insured receives an amount equal to the replacement value of damaged property, minus an allowance for depreciation (see also Replacement Cost Coverage).

Bodily Injury Liability Insurance (auto): insurance that covers you should you injure or kill someone in an accident.

Collision Insurance: coverage that pays for damage to an insured’s vehicle caused by collision with another auto or object.

Comprehensive Insurance: coverage that pays for damage to an insured’s vehicle caused by incidents other than collision, including fire, severe weather, vandalism and theft.

Deductible: the portion of a claim paid by the insured prior to payment by an insurance company; a fee set forth and agreed upon in the policy.

Discount: a deduction given to an insured for actions or items that lower risk.

Endorsement: a form attached to an insurance policy that changes the policy’s coverage, terms, or conditions.

Floater policy: a policy that provides property insurance coverage for your valuables and protects your valuables against perils not covered by your homeowners policy.

Fraud: a deliberate act committed by or against insurance companies for financial gain.

1. Hard Fraud: intentional actions to create an accident, injury, or incident that would be covered under an insurance policy.
2. Soft Fraud: when a policyholder exaggerates a claim or provides false, incomplete, or missing information to the insurance company during the application process to receive a lower insurance premium.

Gap Insurance: coverage that pays the difference between what you owe on a car and what your insurer pays if your car is totaled in an accident.

Homeowners Insurance: the insurance that protects your home and possessions in case of damage or destruction.

Indemnity: compensation to a victim for a loss.

Insurance: a device by which a company assumes the risk of potential loss in exchange for a premium paid by an individual or entity.

Liability Insurance: the insurance that covers damages for which you are responsible (see Bodily Injury Liability and Property Damage Liability ).

Limit of Liability: the maximum amount of damages that the insurer is responsible for as specified in your policy.

Loss Experience: claims made by individuals in a particular underwriting class.

Market Value: the amount of money a buyer on the open market would pay to purchase your home.

No-Fault Insurance: coverage that allows a claimant to collect from his own insurance company in the case of an accident, regardless of who was responsible for damages. Not offered in all states. (Note: Maryland, New Jersey and Pennsylvania are no-fault states. North Carolina, Tennessee and Virginia are not.)

Premium: the price paid by an insured for insurance coverage for a set period of time.

Property Damage Liability Insurance: insurance that protects you should you damage another person’s property in an accident.

Rate: the cost of a unit of insurance

Rating: the process of assigning specific costs for specific coverages for an underwriting group.

Renter’s Insurance: a homeowner’s policy adapted to the needs of individuals who rent.

Replacement Cost Coverage: coverage where the insured receives an amount equal to the replacement value of damaged property.

Surcharge: an additional premium charge for increased level of risk, such as a violation, license suspension, or accident.

Tenant’s Insurance: see Renter’s Insurance.

Umbrella Policy: a policy that provides coverage for losses above the liability coverage offered under other policies.

Underinsured Motorist Coverage: coverage that protects you if you are in an accident in which damages exceed the coverage held by an at-fault motorist.

Underwriting: the process by which a company identifies risks and classifies them so that appropriate rates can be set.

Underwriter: an employee of the insurance company who has training and experience in identifying classes of risk and determining appropriate rates.

Uninsured Motorist Coverage: coverage that protects you should you be in an accident in which an uninsured driver is at fault.