Reference
Insurance Glossary
34 terms, plain English. Every definition written by a licensed agent — not a content farm. Click a letter to jump, or browse all.
A
- Actual Cash Value (ACV)
- What your property is worth today — replacement cost minus depreciation. A 10-year-old roof has ACV much lower than a new one. ACV policies are cheaper but pay less at claim time.Home insurance guide →
- Additional Living Expenses (ALE)
- Pays your hotel, meals, and temporary housing if a covered loss makes your home uninhabitable. Standard on most homeowners policies. Check your limit — it's often 20-30% of your dwelling coverage.
B
- Bodily Injury Liability (BI)
- Pays for other people's medical bills and lost wages when you cause an accident. Expressed as per-person/per-accident limits (e.g., $100,000/$300,000). Does not cover your own injuries.Minnesota auto insurance →
C
- Claim
- A formal request to your insurance company to pay for a covered loss. You can file a claim by phone, app, or online. Filing frequency affects your rates — small claims you can self-pay often shouldn't be filed.
- Collision Coverage
- Pays to repair or replace your vehicle when you hit another vehicle or object, regardless of fault. Required by lenders. Optional if your car is paid off. Paired with comprehensive — the two together are 'full coverage.'Ohio auto insurance →
- Comprehensive Coverage
- Pays for vehicle damage from events other than collisions — hail, theft, flooding, fire, deer strikes, falling objects. Critical in MN, WI, IA, and ND where deer and hail are common. Required by lenders.Wisconsin auto insurance →
- Coverage Gap
- A period between policies with no insurance. Even a single day's gap can affect your rates for 3 years. If you cancel one policy, start the new one the same day.
D
- Declarations Page (Dec Page)
- The summary page of your policy — lists coverages, limits, deductibles, premium, and policy period. If you're unsure what you have, start here. Your lender requires a copy.
- Deductible
- What you pay before insurance kicks in. Higher deductible = lower premium. A $1,000 deductible means you pay the first $1,000 of any claim. Choose a deductible you can comfortably pay out of pocket.
- Dwelling Coverage
- The part of homeowners insurance that pays to rebuild your house structure. Should equal the full cost to rebuild — not market value or what you paid. Underinsurance is the most common homeowners mistake.Ohio home insurance →
E
- Endorsement (Rider)
- An add-on that modifies your base policy. Common examples: sewer backup coverage, scheduled jewelry, home business liability, identity theft, equipment breakdown. Often costs $5-30/month and fills meaningful gaps.
- Exclusion
- What your policy specifically does NOT cover. Exclusions are why claims get denied. Common exclusions: flood (requires separate NFIP policy), earthquake, wear and tear, intentional damage, nuclear events.
F
- Full Coverage
- Not a technical term — but generally means carrying liability + comprehensive + collision. Your lender requires it. After payoff, review whether keeping comp/collision is worth the premium on your vehicle's current value.
G
- Gap Insurance
- Covers the difference between what you owe on your car loan and what the car is worth (ACV) if it's totaled. Critical if you financed most of the vehicle or rolled negative equity into the loan.
- Guaranteed Replacement Cost
- Pays whatever it actually costs to rebuild your home — even if construction costs exceed your coverage limit. Better than standard replacement cost. Worth the extra premium in high-inflation construction environments.
H
- Hail Deductible
- Some policies — especially in MN, IL, MO, IA — have a separate, higher deductible for hail claims (often 1-2% of dwelling value). On a $350,000 home, a 1% hail deductible means you pay $3,500 before coverage applies.MN homeowners guide →
I
- Ice Dam
- Ice buildup at the roof edge that forces water under shingles and into the home. Extremely common in MN, ND, WI. Most standard homeowners policies cover resulting water damage but NOT the ice dam removal itself. A maintenance item.MN homeowners guide →
L
- Liability Coverage
- Pays when you're legally responsible for someone else's injury or property damage. Present in auto, homeowners, renters, and business policies. Never carry minimum limits — the gap between minimums and what courts award is your personal financial exposure.
- Loss of Use
- Same as Additional Living Expenses — pays temporary housing when your home is uninhabitable after a covered claim. On renters insurance, it pays for a hotel while your apartment is repaired.Renters insurance guide →
M
- Medical Payments (MedPay)
- Pays your medical bills regardless of fault — on auto policies in at-fault states (IL, OH, WI, MO, IA), MedPay fills the gap your health insurance deductible leaves. Inexpensive (usually $5-15/month) and underutilized.Illinois auto insurance →
N
- Named Peril vs. Open Peril
- Named peril policies cover only specifically listed events (fire, theft, wind, etc.). Open peril (all-risk) covers everything except listed exclusions. Open peril is broader — and standard on most quality homeowners policies.
- No-Fault Insurance
- A system where each driver's own insurance pays their medical bills regardless of who caused the accident. Minnesota is a no-fault state. Requires Personal Injury Protection (PIP). Reduces litigation but adds a required coverage cost.MN no-fault explained →
P
- Personal Injury Protection (PIP)
- Required in no-fault states like Minnesota. Pays your medical bills and lost wages regardless of fault, up to the policy limit. MN requires $40,000 minimum. Often insufficient for serious injuries.Minnesota PIP explained →
- Personal Property Coverage
- Covers your belongings — furniture, electronics, clothes, appliances — inside your home or apartment. On homeowners policies it's a percentage of dwelling coverage. On renters insurance it's the main coverage. Check whether your policy uses ACV or replacement cost.Renters insurance guide →
- Premium
- What you pay for insurance — monthly, quarterly, or annually. A higher deductible lowers your premium. More coverage raises it. Premium is not what you get paid at claim time — that's determined by your coverage and deductible.
- Property Damage Liability (PD)
- The part of auto liability coverage that pays for damage you cause to someone else's property — their car, fence, building, etc. Ohio's $25,000 minimum and Wisconsin's $10,000 minimum are frequently insufficient for modern vehicle values.Ohio auto minimums →
R
- Replacement Cost Value (RCV)
- Pays what it costs to replace your property at current prices — without depreciation. More expensive than ACV but dramatically better at claim time. Worth the premium difference for both home and contents coverage.
S
- Sewer Backup / Water/Sewer
- Standard homeowners policies exclude sewer backup and drain overflow damage. A separate endorsement (usually $50-150/year) covers it. Highly recommended — especially in older Midwest homes with clay tile sewer lines.Ohio home coverage gaps →
- SR-22
- A certificate your insurer files with your state confirming you carry the required minimum coverage — required after DUI, serious violations, or license suspension. Not insurance itself. Stays on your record 3-5 years and raises rates 40-80%.Car insurance after DUI →
U
- Umbrella Policy
- Extra liability coverage that sits on top of your auto and homeowners policies. $1 million of coverage typically costs $200-300/year. Protects your assets if you're sued for more than your base policy limits cover.Umbrella insurance explained →
- Underinsurance
- When your coverage limit is lower than what a claim would actually cost. The most common problem in homeowners insurance — homes are insured for market value instead of rebuild cost. Your rebuild cost is almost always higher.
- Underinsured Motorist (UIM)
- Covers you when the at-fault driver has insurance — but not enough. If they carry $25,000 liability and you have $80,000 in injuries, your UIM pays the $55,000 gap. Separate from uninsured motorist. Not required in all states but strongly recommended.
- Uninsured Motorist (UM)
- Pays your damages when you're hit by a driver with no insurance. Required in MN, IL, WI, MO. About 10-16% of drivers are uninsured depending on state. Don't carry the minimum — if you're in a serious accident with an uninsured driver, you want real coverage.Missouri UM explained →
W
- Wind/Hail Deductible
- A separate, percentage-based deductible that applies specifically to wind and hail claims. Common in tornado/hail-prone states like MO, IA, IL. On a $300,000 home with a 2% wind/hail deductible, you pay $6,000 before coverage applies.Iowa insurance guide →