From a licensed insurance agent who believes insurance should be easy to understand
When it comes to protecting your home, car, toys, and personal assets, insurance terms can sometimes sound like a foreign language. Whether you’re reviewing your homeowners policy, adding an umbrella, or covering your new ATV, knowing the key terms will help you make better decisions.
As a licensed insurance agent who works with clients every day, I’ve created this clear, easy-to-scan glossary so you can understand exactly what you’re buying — and what’s protected.
Homeowners & Renters Insurance
- Actual Cash Value (ACV) – Replacement cost minus depreciation.
- Replacement Cost (RC) – Pays the cost to replace damaged items without depreciation.
- Dwelling Coverage – Insurance for the structure of your home.
- Other Structures Coverage – Coverage for sheds, fences, detached garages.
- Personal Property Coverage – Insurance for your belongings inside the home.
- Loss of Use (Additional Living Expenses) – Pays for temporary housing if your home is uninhabitable.
- Liability Coverage – Protects you if you’re found legally responsible for injuries or property damage to others.
- Medical Payments to Others – Pays for injuries to guests, no matter who’s at fault.
- HO-3 – Standard homeowners policy for most owner-occupied homes.
- HO-4 (Renters Insurance) – Covers belongings and liability for renters.
- HO-5 – A broader form of homeowners insurance with higher limits.
- HO-6 (Condo Insurance) – Covers condo interiors, belongings, and liability.
- Scheduled Personal Property – Extra protection for high-value items (jewelry, art, collectibles).
- Endorsement/Rider – A policy add-on that expands or changes coverage.
- Ordinance or Law Coverage – Pays to bring your home up to code after a covered loss.
- Water Backup Coverage – Covers damage from sewer or sump pump backups.
- Flood Insurance – Separate coverage for floods (not in a homeowners policy).
- Earthquake Insurance – Optional coverage for earthquake-related damage.
- Inflation Guard – Automatically adjusts coverage to account for inflation.
- Named Perils – Only covers risks specifically listed in your policy.
- Open Perils – Covers all risks unless specifically excluded.
- Deductible – The amount you pay out-of-pocket before insurance kicks in.
Auto Insurance
- Bodily Injury Liability – Pays for injuries you cause to others in an accident.
- Property Damage Liability – Pays for damage you cause to another person’s property.
- Medical Payments (MedPay) – Pays for medical expenses for you and passengers.
- Personal Injury Protection (PIP) – Pays medical expenses and lost wages (in no-fault states).
- Uninsured Motorist (UM) – Protects you if you’re hit by an uninsured driver.
- Underinsured Motorist (UIM) – Protects you if the other driver doesn’t have enough coverage.
- Collision Coverage – Pays for damage to your car after an accident, regardless of fault.
- Comprehensive Coverage – Pays for non-collision damage (theft, fire, hail, vandalism).
- Gap Coverage – Pays the difference between your car’s value and your loan balance if totaled.
- Rental Reimbursement – Pays for a rental car while your car is being repaired.
- Towing & Labor (Roadside Assistance) – Pays for towing, lockouts, and minor roadside services.
- Stacked Coverage – Combines coverage limits across multiple vehicles for more protection.
- OEM Parts – Coverage for original manufacturer parts when making repairs.
- Non-Owned Auto – Covers you when driving a vehicle you don’t own (e.g., rental).
- SR-22 – A state-required form showing proof of insurance for high-risk drivers.
- Usage-Based Insurance (Telematics) – Premium based on your driving habits (via app or device).
- Classic/Antique Car Insurance – Specialized coverage for collector vehicles.
- Agreed Value – The insured value of a classic car, agreed upon by the owner and insurer.
Motorcycle / ATV / Snowmobile / RV
- Accessory Coverage – Covers added equipment (saddlebags, custom parts).
- Safety Apparel Coverage – Protects riding gear like helmets and jackets.
- Guest Passenger Liability – Covers passengers riding with you.
- Comprehensive – Non-collision-related damage (fire, theft, hail).
- Collision – Damage to your motorcycle/ATV in an accident.
- Transport Trailer Coverage – Coverage for trailers used to haul ATVs or motorcycles.
- Lay-Up Policy – Seasonal policy suspending coverage during non-use months.
- Medical Payments – Pays for rider and passenger injuries.
- Off-Road Vehicle Coverage – Coverage for ATV/UTV use on private or public land.
- Custom Equipment – Protects after-market upgrades on motorcycles and ATVs.
Boats & Personal Watercraft
- Hull Coverage – Pays for physical damage to the boat.
- Trailer Coverage – Covers the trailer used to transport your boat.
- Personal Effects – Covers belongings on board.
- Fuel Spill Liability – Covers accidental fuel spills.
- Wreck Removal – Pays to remove a sunken boat.
- Towing & Assistance – Pays for emergency towing on the water.
- Agreed Value – Agreed insured value for the boat (vs. ACV).
- Navigation Limits – Defines where the boat is covered to be operated.
Landlord Insurance
- Dwelling Fire (DP-3) – Standard policy for non-owner-occupied rental properties.
- Loss of Rents – Reimburses lost income if the property is uninhabitable after a covered loss.
- Landlord Liability – Protects against lawsuits by tenants or visitors.
- Vandalism Coverage – Optional protection against vandalism by tenants or others.
- Tenant Move-Back Expense – Pays costs for returning tenants after repairs.
- Ordinance or Law – Covers required code upgrades after a covered loss.
- Water Backup – Optional add-on for water damage from backups.
Umbrella Insurance
- Personal Umbrella – Provides extra liability coverage above your home, auto, and other policies.
- Excess Liability – Another name for umbrella coverage.
- Defense Costs – Legal defense provided by the umbrella policy.
- Worldwide Coverage – Covers incidents outside the U.S.
- Self-Insured Retention (SIR) – Deductible-like amount required for certain claims.
Identity Theft & Cyber
- Identity Theft Expense Coverage – Reimburses costs to restore your identity.
- Credit Monitoring – Alerts to new activity on your credit.
- Cyber Extortion – Covers ransom demands due to cyberattacks.
- Data Breach Response – Pays expenses related to personal data breaches.
- Fraudulent Transfer – Covers unauthorized electronic fund transfers.
General Terms
- Premium – The amount you pay for your policy.
- Policy Period – How long your policy is in force (usually 6 or 12 months).
- Policy Declarations Page (Dec Page) – The key summary page of your policy.
- Endorsement – A change or add-on to the policy.
- Certificate of Insurance (COI) – Proof of insurance coverage.
- Underwriting – The process of evaluating risk and issuing coverage.
- Binder – Temporary proof of insurance before the full policy is issued.
- Claim – A request to the insurer to pay for a loss.
- Adjuster – The person investigating and settling your claim.
- Subrogation – The insurer’s right to recover money from the party that caused the loss.
- Waiver of Subrogation – Gives up the right to pursue recovery — sometimes required in leases.
- First-Party Claim – A claim you file with your own insurance.
- Third-Party Claim – Someone files a claim against you and your insurance responds.
- Limits of Liability – The maximum amount your insurer will pay.
- Exclusion – A loss or situation your policy does not cover.
- Named Insured – The person or entity covered by the policy.
- Additional Insured – A person or party added for coverage.
- Aggregate Limit – The most an insurer will pay for all claims in a period.
- Moral Hazard – Increased risk caused by the insured’s behavior.
- Indemnity – Restoring the insured financially after a loss.
- Lapse – A break in coverage due to non-payment.
- Policy Renewal – Continuation of a policy after its term ends.
- Grace Period – Time allowed to make a late payment before cancellation.
- Umbrella Requirement – Many carriers require higher underlying liability limits to issue an umbrella.
- Multi-Policy Discount – A premium discount for bundling home, auto, umbrella, etc.
Final Word
Whether you’re buying your first home or adding toys like a boat, ATV, or rental property — knowing these personal insurance terms can help you shop smarter and understand what’s covered.
Want help reviewing your current policies or finding the right fit for your lifestyle? One of our trusted agents can simplify this and make sure you’re protected.
