Auto & Home Insurance Glossary

Fire or other damage caused by a covered loss could increase your 

living costs-you may be paying for a hotel, restaurant meals or 

Laundromat, for example. In a standard homeowner's policy, Loss 

of Use (Coverage D) will reimburse you for any additional living 

expenses incurred by you in an attempt to maintain a normal 

standard of living if your home is made uninhabitable by a covered 

peril. See Loss of Use.

An anti-theft device is something that deters a vehicle from being 

stolen, for example, a car alarm or a special key for the ignition. 

Cars with hood  locks and ignition alarms can save up to 15% on 

"other than collision" (comprehensive) premiums.

In a property insurance policy, "appurtenant structures" are detached 

buildings   on the same premises as the main, insured building. 

Appurtenant structures like garages or barns on your property are 

usually covered by your homeowner's insurance policy.

In your property insurance contract, the arbitration clause provides a 

means for settlement when you and your insurer cannot agree on 

an acceptable   claim payment. A representative of each party 

makes their case to a neutral arbitrator. The arbitrator makes a

final, binding decision after hearing all of the facts presented.

You could pay a lower premium on your auto insurance policy if you 

insured your home with the same company. Discounts are also 

available for Anti-theft Devices, Driver Training, Good Student, 

Multi-Car, and Safe Driver Discounts. Some companies even offer 

discounts for Non-Smokers

Bodily harm, sickness, or disease sustained by any person, including 

required care and loss of services, as well as resulting death.

An important type of liability coverage, Bodily Injury will pay damages 

awarded if you are held legally responsible for injury or death caused 

by a vehicle driven by you or by a covered family member. 

Coverage options include Single Limit Liability and Split Limit Liability.

An endorsement to a Dwelling Policy that provides theft coverage 

for contents of a named insured, owner occupant.

In a homeowner's policy, "business personal property" refers to items

or "contents" owned by your business or company The coverage limit 

for this coverage differs by insurance company

This covers the physical damage done to your car because of a 

collision with another vehicle or object, regardless of who is at 

fault. Collision does not cover bodily injury or property damage

liability-it protects your vehicle only, and is usually subject to a 

deductible.

Sometimes called "Other than Collision," Comprehensive Coverage 

pays for damages resulting from fire, theft, vandalism, falling 

objects, hailstorms, floods, and various other perils. Collision 

with animals falls under this coverage. Loss of auto glass or 

windshield is also covered under Comprehensive.

Any damage done to a vehicle that is caused by something other than 

a collision. This includes damage to the vehicle by theft, vandalism, 

fire, lighting, windstorm, flood, glass breakage and collision with 

animals.

Called "Dwelling", this is the part of your homeowner's insurance policy

that covers the home itself-frame, flooring and fixed objects. The 

amount of Coverage A should represent the cost to replace the 

structure of your home in the event of total loss. Other coverages 

are usually based on a percentage of Coverage A.

This part of your policy covers "Other Structures"-barns, sheds, garages.

Coverage B is usually 10% of Coverage A (Dwelling Coverage), but can 

be increased.

"Personal Property" covers your belongings automatically for 50% 

of Coverage A. In most cases this coverage may be increased to 70% 

of coverage A.

"Loss of Use" takes into account expenses you'll have if your home is 

uninhabitable because of a covered loss. It pays for temporary lodging 

and living expenses. Coverage D is usually 20% of Coverage A (Dwelling 

Coverage). See also Additional Living Expense

"Personal Liability" covers you for your legal responsibility for injury 

caused to others whether on or away from your own property. The 

standard limit is $100,000. Depending on the insurance company, this 

coverage may be increased.

"Medical Payments" pays medical costs if someone is injured on your 

property. A homeowner's policy automatically covers $1,000. This 

coverage may be increased. If the claimant wants to collect more 

than the Medical Payments limit, a claim must be filed under Coverage E.

While most property policies cover only direct damages caused by an 

insured peril, the "debris removal clause" covers the cost of removing 

debris produced by the peril's occurrence. For example, a windstorm 

sweeps through your town; a fallen tree will be removed only if it 

lands on your house. Debris Removal reimburses you for the cost of 

cleaning up all the broken limbs and rubble

The declarations page, also called declaration page, tells you who and/or 

what is covered by the insurance, the amount of coverage purchased 

and the conditions- the "when" and "where"-covered by the purchased 

insurance. Declaration page, also called dec page, tells you who and/or

what is covered by the insurance, the amount of coverage purchased 

and the conditions-the "when" and "where" -covered by the purchased 

insurance

This is the amount you agree to pay out of your own pocket before the

insurance company reimburses you for damage expenses. If you had an 

accident with damages totaling $2,000, and carry a $500 deductible on

your collision coverage, you would pay the first $500, and the insurance 

company would cover the difference, the remaining $1,500. Increasing 

the amount of your deductible saves you money on the cost of your 

insurance.

In some states, individuals who successfully complete an authorized 

defensive driver course are eligible for further credits.

This is damage or a loss resulting as a direct consequence of an insured 

peril. For example, a computer lost in a fire is a direct loss; the data 

destroyed inside the computer is considered an indirect loss.

Safety is the first rule of the road. To encourage good driving habits in 

young people, drivers under 21 who complete a driver-training course 

can often save up to 15% on their insurance premiums. Discounts vary 

by state and are typically good for about 3 years.

These are policies that cover a residence dwelling or building, usually not 

occupied by the owner. Dwelling forms vary by the degree of coverage

they offer.

Driving While Intoxicated/Driving Under the Influence.

Most homeowner's policies exclude coverage for earthquake damage. 

People who are concerned  about the risk of earthquakes can add an

 Earthquake Endorsement  to cover damages.

An "easement" entitles its holder to specific interests, such as a right of 

way,  in land owned by someone else.

An acronym for "Fair Access to Insurance Requirements," FAIR offers 

insurance to people in high-risk areas who might otherwise be denied 

coverage. Reinsured by the United States government, FAIR is a pooling

plan providing policies for fire and allied perils.

This coverage pays for the rent the building could have earned, less any 

discontinued expenses, while the premises is not fit for occupancy.

Refer to Coverage D under your  homeowner's or dwelling policy for 

more information.

In your insurance agreement, the financial responsibility clause shows that

your policy conforms to state financial responsibility requirements.

Financial Responsibility Required

Drivers in most states are required by law to demonstrate their ability to 

pay for bodily injury or property damage for which they are responsible. 

In most cases, this "financial responsibility" is fulfilled by purchasing 

insurance with limits of liability equal to or greater than the amounts

 required by the state. In some states, you must carry proof of financial 

responsibility, in the form of an insurance policy, before you can register

 a vehicle.

In property insurance, "fire" refers to the unintentional or "hostile" occurrences of flame and combustion.

Building construction using fire-resistive materials in its roof, floors 

and exterior walls. See also Modified Fire-Resistive Construction.

Unfortunately, no one can make a building completely impervious to fire. 

Today, insurers use the term "fire-resistive" to describe buildings that are

practically resistant to most fire damage.

A temporary submersion, partial or complete, of ordinarily dry land by water 

or mud. Floods are typically caused by an overflow of waters, whether inland,

tidal or from any accumulated runoff from any source. Flood is excluded under 

a typical homeowner's insurance policy.

The most common form of housing construction, frame buildings are made

 primarily of wood frames and joists.

Funeral or burial expenses actually incurred if "bodily injury" causes an 

"insured's" death within 24 months from the date of a covered accident.

When is a garage not a garage? In this case, it refers to where you usually

keep your car when you're not driving it, whether in a building or not. 

If you normally keep your vehicle in a town other than the one you live in, 

you must notify your insurance company.

Since studies have proven a link between good grades and good,

safe driving, some insurance companies offer reduced premiums 

to students with high scholastic ratings. To be eligible for reduced

premiums, simply provide your insurance agent with a recent student 

report showing a B average or better. Good Student discount regulations

vary among states and the discount is not available in all states. 

Insurance studies have proven a link between good grades and good, 

safe driving, some insurance companies offer reduced premiums to 

students with high scholastic ratings. To be eligible for reduced premiums,

simply provide your insurance agent with a recent student report showing 

a B average or better. Good Student discount regulations vary among 

states and the discount is not available in all states.

Guaranteed Replacement Cost coverage on homeowner's 

insurance means that your home will be repaired to its value 

at the time of loss, regardless of the amount of coverage 

carried. For example, you estimate your home to have a 

full replacement value of $350,000 and you insure it for 

$350,000. If you have guaranteed replacement cost endorsement 

on your policy and the home is lost in a fire and the house 

costs $370,000 to rebuild, the policy will pay $370,000.

One of the most common types of homeowner policies, an HO3 is a 

Special Form policy that covers all perils except those specifically

excluded by the policy. Typical coverages in a HO3 might be: 

Coverage A - $200,00; Coverage B - $20,000; Coverage C - $100,000; 

Coverage D - $40,000; Coverage E - at least $100,000; and Coverage F 

at least $1,000.

Also called a Renters or Tenants Policy, an HO4 provides coverage 

on your personal property for a range of perils specifically named in 

the policy. Typical coverages in a HO4 might be: Coverage C 

- $25,000 and up; Coverage D - $5,000; Coverage E - at least $100,000; 

and Coverage F - at least $1,000. loss called a Renters or Tenants Policy, 

an HO4 provides coverage on your personal property for a range of perils 

specifically named in the policy. Typical coverages in a HO4 might be: 

Coverage C - $25,000 and up; Coverage D - $5,000; Coverage E - 

at least $100,000; and Coverage F - at least $1,000.

Condominium insurance is like HO4 (Renters) except that it takes into

account the fact that you own the inner walls of your condo or 

townhouse. It can also fill in any gaps in your condo association's coverage. 

Typical coverages in a HO6 might be: Coverage A - starts at $1,000; 

Coverage C - $50,000 and up; Coverage D - $10,000; Coverage E - 

at least $100,000; and Coverage F - at least $1,000.

Homeowner's Policy

Combined property and liability insurance that covers homeowners and

renters for damage to or theft of their property and liability, in case they 

are responsible for injury to another person.

Commonly added as an endorsement to homeowner's policies, "increased 

cost of construction insurance" covers the additional costs of building repair 

or reconstruction when you rebuild with more expensive services, materials 

and techniques required by local ordinances.

Property insurance terms are tailored to the nature and, 

use of the property, as it exists when the policy is written

Should you introduce dangerous materials or activities 

into the property, like making fireworks, you will have 

added an increased hazard whose liabilities would not be

covered by your policy.

Indirect Loss

Also known as consequential loss or damage, indirect loss 

results from, but is not caused directly by, a peril. If your

business property burned down, for instance, the property

itself is a direct loss, while the lost business revenues 

would be considered an indirect loss.

Inflation Guard Coverage

"Inflation Guard Coverage" provides automatic periodic 

increases on the building's property insurance, to reflect

the effects of inflation on building replacement expenses.

A property flaw or fault, which causes its own destruction. 

Damages from inherent vices are usually not covered 

through insurance.

The ceiling set on the amount an insurer will pay for a loss. See Single 

Limit Liability and Split Limit Liability.

This is use of a vehicle to carry passengers for a fee, as in a taxicab or a 

rented limousine. Unless specified in your policy, livery use is not covered 

by your auto insurance. Carpooling is not considered livery use.

If your home becomes uninhabitable because of an insured peril, Loss of 

Use (Coverage D) provides compensation for additional living expenses 

incurred in an attempt to maintain a normal standard of living. Loss of 

Use is automatically  included as 20% of the Replacement Cost amount 

you carry in Coverage A. If your home were covered for $300,000, for 

example, Loss of Use coverage would provide up to $60,000 for additional

 living expenses. See 

Additional Living Expenses.

To protect lenders or lien holders, this clause extends coverage to parties 

with an insurable interest in your property, most often the institution holding 

your mortgage.

Refers to buildings constructed from noncombustible 

materials such as masonry walls of brick, cinder block, 

stone, tile, or other similar materials, and floors and 

roofs made of metal or other noncombustible materials.

Covers you, the members of your household and your 

passengers for medical and funeral expenses resulting 

from an auto accident, regardless of who is at fault. 

Personal Injury Protection is not applicable in all states.

Mobile Home Policy

Building construction featuring exterior walls, floors and roofs 

made of fire-resistive materials such as masonry or metal.

Mortgage Clause

In policies covering mortgaged property, the "mortgage clause" 

protects the interests of the mortgagee for loss reimbursement 

and other rights of recovery, regardless of any acts or neglect 

by the insured.

A lender or creditor, typically a bank, who holds the

mortgage, and lends money secured by the value of 

the mortgaged property.

Usually the homeowner who, as debtor, receives money

in return for a property mortgage granted as a security 

for the loan.

Your state's record of your auto accidents and/or traffic violations.

Your insurance rates are based on, among other factors, the quality 

of your driving history.  For example, when you accept a policy with 

an insurance company, that company uses your driver's license number

to review your MVR for claims, losses and violations you 

may have had in the past five years. A good record 

translates in lower rates

Multi-Car Discount

If you have more than one car insured with the same

Insurance company, you probably qualify for a 

20% discount.

Named Perils Insurance covers specific perils listed in 

a policy, as opposed to a Special Form Policy (such 

as an HO3) that covers all perils except the ones excluded

by name in the policy.

A program reinsured by the United States government to

provide flood insurance for fixed property. The NFIP writes 

policies directly and offers reimbursement to private carriers

offering flood insurance.

See PIP (Personal Injury Protection)

Occupancy

Property insurance rates reflect the way the property is used. In general, 

"owner occupied" homeowner's policies are less expensive than "non-owner

occupied" policies.

Off Premises

Coverage you can obtain for personal property or "contents" which are 

away from the principle insured property. In most cases, the amount of 

this coverage is limited to a percentage of the property's total coverage.

Generally detached structures, such as a garage or tool shed, sharing 

property with the insured dwelling. Under a homeowner's policy, "other 

structures" are automatically covered for 10% of the limit chosen for 

Coverage A.

The Personal Auto Policy covers cars owned by an individual, or a husband

and wife residing in the same household. These requirements exclude coverage

for cars owned by businesses or groups of people.

Personal Injury Protection Deductible

Deductible Under your Personal Injury Protection (PIP) coverage, you may

have the option of choosing a deductible or co-payment amount. These 

are amounts that you would pay out of pocket (in exchange for a reduced

premium) before you were entitled to any recovery payment under your PIP 

coverage. These options are not available in all states.  

Waiver of Work Loss Under the Personal Injury Protection coverage, selecting 

Waiver of Work Loss will eliminate coverage for any work loss due to the 

covered accident. You may waive the Work Loss coverage only if you and 

your resident spouse (if applicable) have not received any earned income 

from wages during the thirty-one days prior to your policy's effective date 

and none is expected in the next one hundred eight days. 

(This waiver applies only to the named insured and resident spouse. 

All other covered persons will be entitled to basic PIP benefits for Work Loss). 

This option does not apply to all states with Personal Injury Protection 

coverage options.

Personal Property

Any of your property, such as furniture, clothing and consumer electronics, 

other than real estate property. Your homeowner's policy covers the 

personal property of you and any family members.

Actual damage to your property.

Damage to the property of others, including loss of use, caused by your 

car or another person's car driven by you or a family member.

An accident shouldn't leave you stranded without transportation. 

Rental Reimbursement coverage helps pay for the cost of a rental 

vehicle while yours is being repaired. In most states, coverage options 

range from $20/day up to $50/day. This coverage is optional. When you 

carry physical damage coverage for theft, you may be entitled to

reimbursement of rental expenses if your car is stolen even if you don't 

carry Rental Reimbursement Coverage. Also called Transportation Expense 

Coverage or Substitute Transportation.

Insurance protection against loss of rental value or actual rent should the 

owner's insured  property suffer damages prohibiting property use or tenant 

occupation.

See HO4 policy.  

Replacement Cost

Coverage for the cost of replacing damaged property at the time of loss 

with that of similar kind and quality. If you carry replacement cost 

coverage and have a loss, the insurer pays for the cost of a new 

replacement, minus any policy deductible, without deduction for 

depreciation.

Where you, the insured, live. In homeowner's insurance, this includes the 

dwelling, grounds and other structures, or that part of any other building in 

which you live.

Safe Driver Insurance Plan

To encourage safe driving-and penalize unsafe drivers-most states assign

 "points" to traffic violations and certain accidents. Each point adds a 

percentage surcharge to your insurance policy. Specific surcharge 

guidelines vary by state.

Adding this special endorsement can insure personal belongings that are 

worth more than the limits of liability set in your policy, such as jewelry, 

furs, silverware, etc.

Single Limit Liability

Insurance policies covering both bodily injury and property damage can be

limited in two ways. A single limit liability has one limit for both injury and 

property damage combined. For example, if a policy had a $300,000 liability

limit, the maximum amount the policy would pay for the total injury 

and property damage would be $300,000.

Sinkhole Collapse

A special form of earth movement, covered by some homeowner's insurance, 

referring to the sudden collapse or sinking of land into empty, underground 

spaces eroded by water.

Split Limit Liability

A split limit liability policy has separate limits per person and per accident 

for bodily injury, and a per accident limit for property damage.

Stated Amount

In your policy, you may choose to cover certain items for a specific 

amount. In the event of loss, the insurer pays the stated amount 

regardless of the property's actual value. If, for example, you insured 

a set of golf clubs for a stated amount of $5,000, in the event of theft

 you would recover the $5,000 (minus your deductible), even if the 

painting had accrued value after the policy had been signed.

This is an optional coverage pays for towing and/or repair of your insured 

vehicle at point of breakdown. The coverage limit is usually $25 to $50

Transportation Expense coverage helps pay for the cost of a rental vehicle 

while yours is being repaired. In most states, coverage options range from 

$20/day up to $50/day. This coverage is optional. When you carry physical 

damage coverage for theft, you may be entitled to reimbursement of 

transportation expenses if your car is stolen, even if you don't carry 

Transportation Expense Coverage.

Type of Vehicle

The terms of your insurance policy vary with the type of vehicle you 

wish to cover.  In order to qualify for Personal Auto Coverage, for 

example, your vehicle must be a  private passenger auto or a motor 

vehicle considered to be a private passenger auto.  (A "private passenger 

auto" is defined as a four-wheel motor vehicle, other than a truck,  owned 

or leased for at least six continuous months.) Pickups and vans may be 

considered  private passenger autos under the following conditions: They

 must have a gross vehicle weight (GVW) of less than 10,000 pounds and 

must not be used for the delivery or transportation of goods or materials, 

unless such use is incidental to an insured's business of installing, 

maintaining or repairing equipment, or such use is for farming or ranching.

Underinsured Motorist Property Damage (UIMPD)

Underinsured Motorist Property Damage Coverage provides coverage 

when property damage is sustained by an insured and the negligent 

operator possesses insurance, but the limits of liability carried by the 

negligent driver are not sufficient to cover the damages.

Underinsured Motorist (UIM)

Insurance provisions for the "underinsured motorist" cover you, the

insured members of your household and your passengers for injuries, 

damage or death caused by the negligence of a person with insufficient 

insurance. Should you have a valid claim against a person whose coverage 

cannot meet your damages, your policy will meet the difference-up to the

limit of liability listed on your policy.

Uninsured Motorist Property Damage Deductible

Uninsured Motorist Property Damage coverage may be subject to a 

deductible at the option of the insured. This option may not be available 

in all states.  

Uninsured Motorist (UM)

In your policy, the "uninsured motorist" provision covers you, the 

insured members of your household and your passengers for 

bodily/personal injuries, damage or death caused by an at-fault

uninsured or hit-and-run driver. For example, if you are involved i

n an accident where the other driver is at fault but has no insurance, 

your policy will cover your medical expenses, up to the limit on your policy.

Uninsured Property Damage (UMPD)

Property Damage Uninsured Motorists Coverage provides coverage

for your auto when property damage is sustained by an insured and 

the negligent operator does not possess insurance.

Property without people occupying or living within it. As opposed to vacant 

property, unoccupied property may hold furnishings. Un-occupancy beyond 

a specified period of time is prohibited by the standard homeowner's policy.

Vacant

A building with nothing in it. While an "unoccupied" building is defined by 

not having  people in it, a "vacant" building is also devoid of furnishings 

and other items. Vacancy beyond a specified period of time is prohibited 

by the standard homeowner's policy.

Vandalism and Malicious Mischief

Your homeowner's policy automatically covers you for willful destruction or 

damage performed by others to your property.

VIN (Vehicle Identification Number)

This is a 17-character number that is unique to each vehicle and identifies 

characteristics of the vehicle such as year, make, and model and engine 

specifics. The VIN is usually located on the driver's side of the dashboard.

Any driving offense for which you are issued a ticket. (Does not include 

parking tickets.)  When applying for insurance, you must disclose all 

violations received within the specified time frame. The completion of

safe or defensive driving courses does not negate the fact 

that a ticket was received.