Blog Post 5 min read

20 Key Insurance Terms Defined

By Nina Terenzi, Nov. 02, 2021
Share this article

Whether you just made your first big purchase and need to obtain an auto insurance policy, or you’ve been working with your local agent for decades, there is a lot of insurance jargon written into your policy that you may not be familiar with. The first step in understanding your coverage and making sure it fully suits your needs is to learn the language.

At Eastern Insurance, we have over 400 trained professionals who are happy to help guide you through your policy and the claims process - we’ve also put together a list of basic terms to get you started.

Here are 20 keywords you’ll likely come across in any insurance policy you obtain and what they mean.

1. Actual cash value (ACV) — The amount equal to the replacement cost minus depreciation of lost, stolen, or damaged property, vehicles, or items. Essentially, this is the actual cost you could sell it for, which is likely less than what it would cost to replace it.

Oftentimes, actual cash value coverage is a less-expensive insurance option.

2. Adjuster — An adjuster is an individual who investigates your claim. They determine if the loss is covered, estimate damage, and can process a reimbursement if applicable.

3. Agent — An insurance agent is someone who sells insurance policies for an insurance company or carrier (insurer). They will help guide you through the insurance process, understand your needs, and find the right policy for you.

4. Bodily injury — This refers to an injury a person sustains in an auto accident, on your property, etc. that you may be liable for if found at fault.

5. Carrier — A carrier is another word for the insurance company that provides you with your policy. An insurance agency may partner with a number of carriers to help offer the best insurance solutions to their customers.

6. Claim — A claim refers to any request for payment within the bounds of an insurance policy. For example, if you experience a home fire, you would file a claim, requesting that your insurance carrier investigate and issue payment for damages and loss. Similarly, a claimant refers to the person requesting the payment.

7. Coverage — Coverage is the protections or benefits your insurance policy provides. These are outlined in your policy or contract and can be found on your declarations page (see No.10).

8. Damage — Any loss, destruction, or harm to a person or property, such as a vehicle or home, or insured valuable.

9. Damages — Unlike damage, this refers to the actual money one individual or party is required legally to pay to another in the event of liability or loss.

10. Declarations page — Your declarations page includes the essential information regarding your insurance policy. It will include policyholder information, such as name, address, and policy number, as well as coverages, limits, premiums, deductibles, and dates of coverage.

11. Deductible — A deductible is the amount of money that you, the insured, are required to pay before the insurance company takes over. For example, if you have a $1,000 deductible on your auto policy but are in an accident that results in $5,000 in damages, you would pay $1,000 and the policy would pay the remaining $4,000. Deductibles will vary across policies and your insurance agent can help determine what works best for you.

12. Endorsement — An amendment or addition to your existing policy to include extra coverage not already listed in your policy.

13. Estimate — The total amount of money required to repair or replace the covered property, vehicle, or item when damaged. This number is typically determined by the claims adjuster.

14. Insured — This refers to the person(s) that an insurance policy covers. For example, if you have a renters insurance policy, you are the insured in that contract. 

15. Liability — Any legal obligation or responsibility one party has for causing damage, injury, or loss to another party. For example, if someone slips and falls on an icy walkway at your home resulting in broken bones, you may be found liable for the bodily injury.

16. Limits — A limit refers to the maximum amount of protection your insurance company will pay for a specific coverage in any given claim. This amount is agreed upon before issuing the policy and can be found on your declaration page. For example, your insurer may have a limit of $50,000 per incident and anything beyond that will be the responsibility of the insured.

17. Loss — In the context of insurance, "loss" refers to damage caused to an insured piece of property. A "covered loss" refers to any damage or injury that an insurance policy specifically provides protection for. For example, a homeowners policy typically has hail damage slated as a “covered loss.” Flood damage, however, is typically not a “covered loss” even though the loss took place on an insured piece of property.

18. Policyholder — This is yet another term you might frequently hear or see that refers to the person or entity an insurance policy covers, like "insured," and would appear on the declarations page. A policy can have multiple insureds, yet only one policyholder.

19. Premium — This is the amount the insured pays their insurance company in exchange for coverage. These can be monthly, quarterly, or annual payments that are required regardless of loss, damage, or accident.

20. Replacement cost coverage — Unlike the actual cash value, replacement cost refers to the cost of replacing property without subtracting depreciation due to normal use or wear and tear. For example, if you have boat insurance, replacement cost coverage would pay to replace that boat with an identical model, or a model of comparable quality.

To learn more about Eastern Insurance’s coverage offerings, or to request a quote, visit our website. Or, to start working directly with a member of the Eastern Insurance Customer Service Team, call us at 1-800-333-7234 and press Option 2, or email us at customerservice@easterninsurance.com.

Share this article