Insurance 101: Understanding All Insurance Terms and Definitions - Investadisor (2024)

All Risk Insurance Terminology

Here are some important all risk insurance definitions and terms you might come across as you look into purchasing insurance:

Learning all Insurance terms and conditions at once can be pretty intimidating for a newbie. Unless if you’ve acquired the knowledge through working in the field. The complexities of insurance terminology and definitions require you to put in time and effort to learn it. Otherwise, it can be difficult to make sense of what your policy means.

That’s why I have compiled this user-friendly list of all risk insurance terms. It has easy to understand definitions that will boost your knowledge and confidence when its time to talk insurance.

ACTUAL CASH VALUE – The process of placing some form of value on property that has been insured. While the Actual Cash Value (ACV) cannot be equal to a replacement cost value, the replacement cost can be subtracted from the actual depreciation to find the ACV.

AMOUNT OF RISK – The premium covers a specific amount of risk like earthquake damage, flood damage, fire damage, etc. The amount of risk can be adjusted or agreed to by the insurer and the insured.

ADDITIONAL PREMIUM – A premium is a value or rate added onto the original premium, which had the original rate levied at the beginning of the insurance policy.

ASSUMED LIABILITY – The liability that one entity assumes based on contract terms. Regarding an insurance policy, it protects an insurance policyholder from losses. Contractual liability is also considered an assumed liability.

ALL PE–RILS An insurance policy that covers all the risks of a homeowner or property owner unless listed in the insurance policy. An example of exclusion could include damage to an item or property due to a nuclear disaster or acts of terrorism. Perils could include fire, smoke, lightning, flooding, earthquake, etc.

ADDITIONAL INTEREST INSURED – The party who has a vested interest in the insured property or item.

AUTOMOBILE INSURANCE – A contract between the insured driver(s) and the insurance firm that can protect drivers if a car accident, mishap, or car theft occurs. By paying a specific premium per month or at some other interval, the insurance firm will cover a specific loss amount as per the terms of the insurance policy.

ARSON – A criminal act by a person who causes damage to property with fire.

ASSURANCE – While there are many types of assurance, a company can provide financial support or other support for insurance companies on a local or national level.

ALL RISK – A type of insurance policy that covers every type of risk unless it is explicitly omitted from the policy like “no earthquake coverage.”

APPLICATION (APP) – A software program that can be downloaded and run by the end-user on a smartphone, tablet, laptop, or desktop computer.

ADJUSTER – A person that is hired by the insurance company to look into or perform an investigation into an insurance claim. This individual is hired to figure out the insurance company’s actual liability regarding an accident or mishap. The adjuster may interview the claimant, any witnesses involved in the accident, the police, a medical practitioner/hospital or clinic staff.

ACCIDENT – A mishap involving one or more parties that cause a type of physical damage.

BASIC RATE – A general price for a specific unit of insurance brokered by an insurance firm.

BUSINESS INTERRUPTION — A type of insurance known as business interruption insurance protects a business from the losses the entity has suffered due to some type of disaster.

BROKER – Is an insurance agent or representative who works as a representative for clients who purchase insurance. A broker may advise potential clients about premiums, insurance contracts, etc.

BODILY INJURY LIABILITY – A form of insurance coverage to cover you if you are responsible for causing someone bodily harm in an accident you caused.

BROAD FORM – A type of insurance coverage that covers you (one named driver). A higher premium may come with a broad form of insurance.

BODILY INJURY – This is defined as a claim made by someone against you in an accident who sustained some type of bodily injury.

BINDER – Defined as a temporary/interim policy before a permanent insurance policy is finalized. The binder can include all the terms of the insurance policy once the binder goes into effect. Not all terms of the contract may be in the binder.

Bodily Injury / Property Damage Liability Coverage , it is a type of coverage for individuals and property owners.

CLAIM – A claim made by an insurance policyholder to the insurance company for coverage for a loss or event that occurs as per terms of the insurance contract.

CLAUSE – A specific portion of an insurance contract by the indemnifier that outlines some type of provision or endorsem*nt.

CIVIL LIABILITY – The payment of damages by the liable party in a civil lawsuit as directed by a court in a lawsuit.

CONSEQUENTIAL DAMAGE – When one party fails to meet contractual obligations, which causes specified damages.

COINSURANCE – A type of insurance allows you, the insured, to pay a specific percentage of the actual costs you will have to pay after the deductible has been met.

COMPULSORY INSURANCE – A form of insurance that an individual or a business entity needs to purchase to operate a business.

COLLISION COVERAGE – Insurance coverage for incidents that occur to the insured’s vehicle due to a stationary object like a tree or fence or another driver.

COMPREHENSIVE INSURANCE – A type of insurance covering non-collision events like car theft, fire damage, or damage from trees or hail for vehicle owners.

CANCELLATION – While there are separate cancellation insurances like trip cancellation insurance and event cancellation insurance and also flight cancellation insurance, cancellation covers events unseen. Depending on the terms of the cancellation insurance, the insurance company may reimburse you up to a specific amount if an event is postponed or canceled.

DUE DILIGENCE – The act of investigating legal documents or performing thorough research that a person or business takes before signing a contract with a second party.

DIRECT WRITER – An agent or “captive agent” who sells insurance policies at one insurance firm.

DEPRECIATION – The loss of specified value determined by one or more parties.

DIRECT LOSS (OR DAMAGE) – Specified damages caused by a disaster, event, accident, or stationary object that is considered to be a “peril.”

DEDUCTIBLE — A specific payment or money threshold specified by the contract agreed to by the insurance company and the insured. The insured will have to pay the specified deductible before the insurance company pays a certain percentage of the claim.

DECLARATIONS (DEC SHEET) – A page or sheet summarizes information regarding one or more part’s insurance coverage. The information on this sheet may include a name and address, the premium, and the type of property that may be insured.

EFFECTIVE DATE – Regarding an insurance policy, the effective date is the day, month, and year that it is active for the parties involved in a contract.

ENDORsem*nT – A signature that may endorse a legal contract. An endorsem*nt may define an edit or a requested edit or amendment to an insurance policy by the insurer.

EXTENDED COVERAGE (EC) – Additional coverage not included in the general insurance that a policyholder may purchase.

EMPLOYERS LIABILITY INSURANCE – An insurance policy that protects company employees if they are injured in the workplace due to an accident or an illness. The employers’ liability insurance disburses specific funds to cover the liabilities involved with the accident or illness claim.

EXPOSURE – The designation by an insurance company about the insured’s susceptibility to being a risk. Exposure is also considered a unit that is part of an insurance premium.

EMBEZZLEMENT – The use of someone else’s money for personal use by the embezzler.

EXPIRATION – The day, month, and year an insurance policy expires or needs renewal for the policyholder.

EXCLUSIONS – One or more types of risks or liabilities that are not included in an insurance policy.

FLOOD INSURANCE – A type of coverage that homeowners and businesses may purchase from an insurance company to cover the costs of flood damage stated in a contract.

GARAGING LOCATION – The designated location of an insured vehicle as it pertains to a car insurance policy.

FORGERY – A criminal act that involves forging a copy of an official document for the purpose of deception or fraud. Forgery can also involve the criminal act of counterfeiting.

GRACE PERIOD – A designated length of time set forth in an insurance contract or a mortgage loan where a payment can be made without incurring a penalty or that delay in payment will not result in a cancellation of an insurance contract or loan.

HOMEOWNER INSURANCE – A type of insurance policy that covers certain hazards or perils that may happen for a homeowner like flooding, tree damage, fires, etc.

FLOATER POLICY – A type of insurance that covers a specific item that needs to be moved. A floater policy protects a specific item against a transportation “peril.”

FAIR MARKET VALUE (FMV) – The price of a property, item, or product that an interested party can have ample time and are not pressured to buy or sell a property, item, or product. The parties involved in the buying or selling process must be agreed to by all those involved. An FMV can be determined by comparing the benefits from two similar insurance policies sold by two different insurance companies.

HAZARD – A key factor or type of action that could cause a loss or amplify some type of situation that could cause a loss.

HOUSEKEEPING – A type of activity involving the cleaning up of issues regarding legal, professional, or personal matters.

INDIRECT LOSS (OR DAMAGE) – While insurance companies do not generally cover indirect losses in a policy, indirect losses are expenses due to damages that are not part of the scope of the general insurance policy.

INSURANCE – A type of coverage instituted by an insurance company that allows for an insurer to be compensated based on the details agreed to in the contract.

INSURANCE POLICY – An agreed to contract or policy between the insurer and the insured for specific coverage for potential hazards or perils that may affect a property, business, work, item, or person.

IN-FORCE – An insurance policy that is considered to be active regarding an agreed to coverage amount or the paid premium that is available for the insured to receive if/when the insured were to make a claim.

INLAND MARINE INSURANCE – A type of insurance that covers specific property is “in-transit,” the guardianship of a bailee, specific medical equipment, contractor equipment, etc.

INSPECTION – The act of researching or probing into an event that occurs that may lead to an insurance claim by an agent of the insurance company.

INSURABILITY – The process of an insurance underwriter or an insurance company verifying that an applicant is eligible for insurance coverage.

INDEMNIFY – The making of a payment to one party to cover a specified loss.

INSURER – An insurance underwriter or insurance company that is responsible for insuring or indemnifying a company or individual against specific perils.

INSURED – A person who has a specific type of insurance coverage.

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JOINT TENANCY – More than two individuals are owners of a property. Two or more people must share the taxes and obligations for the designated property

LESSEE – The renter or tenant of a property that they do not own.

LIABILITY INSURANCE – Protection in the form of compensation in case of damage or personal injuries based on premiums paid for insurance.

LIMIT OF LIABILITY – The limited amount of money or award by which an insurance company can be liable for under a specific policy.

LIABILITY LIMITS – The maximum amount that an insurance firm agrees to payout due to an injury or some other peril that has affected an individual who has been covered by insurance.

LOSS – A type of damage, theft, or reduction of property as outlined by an insurance company or an insurance claimant that results in the reduction of value.

LIABILITY, COLLISION & COMPREHENSIVE – A type of automobile insurance that covers a person in case of damage or personal injuries. Comprehensive coverage had different stipulations for vehicle drivers and owners compared to collision and liability coverage.

LOSS OF USE INSURANCE – A type of insurance policy that would reimburse the property owner when there is damage to the property that the insurer cannot live in, but needs to take refuge in another housing unit. This insurance company would pay for temporary housing like a hotel for the property owner who cannot live in their house due to fire or smoke damage, water damage, etc.

LIBEL – The publishing of a statement about a person that is untrue and deemed harmful to the reputation or the name of the person.

LESSOR – The property owner who rents the property to a tenant or a joint tenant.

LAPSE – Known as a lapse in insurance coverage, benefits listed in the contract are no longer active due to a failure of the contract holder’s obligations.

MORTGAGE INSURANCE POLICY – In case of a loan default by the borrower, the borrower dies, or the borrower cannot fulfill the loan amount, a mortgage insurance policy protects the mortgage lender with the premiums

MATERIAL MISREPRESENTATION – An insurance applicant’s false statements that can make the contract “null and void.”

MORTGAGEE – An individual to whom property is mortgaged.

MARKET VALUE – The value of an asset that is insured in current market conditions.

NEGLIGENCE – An individual who is deemed irresponsible in their manner and fails to use caution under circ*mstances where damage and harm could have been avoided.

NAMED PERILS – Specific perils like fire, flood, and/or earthquakes that are listed in an insurance policy.

NO-FAULT INSURANCE – A car driver who can make an insurance claim and be awarded a claim amount whether they are responsible for the accident or not.

NAMED INSURED – The insurance policyholder’s name that is listed on an insurance contract.

OCCASIONAL DRIVER – A person that may be listed on a car insurance policy, but is covered under the insurance policy.

OCCURRENCE – An act or event that is occurring.

OCCUPANCY – The act of residing in or holding onto a property or residency.

PERSONAL PROPERTY – Property, belongings, or chattels that are moveable or temporary. Personal property is not considered the same as real property.

PERSONAL ARTICLES FLOATER – A type of inland marine policy that covers items that fall under homeowner’s forms for items like artwork, jewelry, furs, coin collections, stamp collections, silverware, etc.

PERSONAL PROPERTY FLOATER – An insurance policy that is purchased to cover a very valuable item and is separate from other insurance policies like car insurance or homeowner’s insurance.

PHYSICAL HAZARD – A physical environment or condition that can cause harm to an individual.

PERIL – A specific factor or potential event, which could cause some type of loss. A peril could be floodwater that destroys a homeowner’s property.

PERSONAL EFFECTS FLOATER – A type of insurance coverage, especially for travelers or tourists who want certain items covered like laptops, cameras, jewelry, suitcases, clothes, etc.

PHYSICAL DAMAGE COVERAGE – Insurance coverage purchased that will cover the physical damage the occurs to an individual.

PARTIAL LOSS – Damage to property that does not cause a total loss.
PERSONAL INJURY – An injury that occurs to one’s body, but not to one’s personal property.

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PERSONAL PROPERTY LIMITATIONS – Specific stipulations that restrict

POLICY EXPIRATION DATE – The specific date that insurance coverage ends for the policyholder.

POLICY LIMIT – A specific amount that an insurance company is responsible for disbursing to the policyholder based on the agreed-to terms of the contract.

POLICYHOLDER – An individual or business that purchases some type of insurance coverage.

POLICY – An agreed to contact that outlines certain actions and procedures.

PREFERRED RISK – A policyholder that an insurance company deems is much less likely not to file an insurance claim.

PREMISES – Real estate or property that may include shops, buildings, housing, or one other designated structures.

PREMIUM – A specified payment on a monthly or periodic basis for insurance policyholders for an agreed-to amount of coverage in case of personal property damage, real property damage, etc.

PROOF OF LOSS – A legal file that a policyholder has to submit to their insurance company to make a claim of coverage when a loss occurs while their policy is active.

PROHIBITED RISK – A business entity that is excluded by underwriters who work for an insurance firm.

PROPERTY DAMAGE UNINSURED – A type of coverage that pays for vehicle damage that has occurred due to an accident a driver has had with an uninsured driver.

PRINCIPAL DRIVER – The main driver of a vehicle. The principal driver may be listed on the car insurance contract.

PROTECTION – A specific type of coverage for the policyholder by an insurance company. The type of protection may range from one item or piece of property to one or more individuals.

POLICY PERIOD (OR TERM) – A defined time frame o term of a contract that a policyholder and an insurance company agreed to that provides specific coverage for the policyholder.

PROPERTY DAMAGE LIABILITY – A payout by your car insurance company for damage that you caused to another person’s car or property that requires repairs.

PROPERTY INSURANCE – A type of insurance that covers a specific type of physical property.

QUOTE – A financial number that is part of an insurance contract. A quote may be the type of premium the policyholder must pay.

PROFESSIONAL LIABILITY INSURANCE (PLI) – A type of insurance coverage for doctors, lawyers, dentists accountants, and other professionals against negligence or other claims.

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REINSTATEMENT – The returning of a thing or a person to a former position. Regarding life insurance, the reinstatement of the policy may occur after the grace period has ended.

REPLACEMENT COST – The amount of money that a corporation or organization must spend to replace a key asset at cost or higher value. These assets may include property, securities, tax lien, etc.

RENEWAL – The continuance of an insurance policy or edited insurance policy at a specific monthly premium.

REIMBURsem*nT – An specific amount of money that is paid out by a company or organization for an expense or an overpayment to one or more parties.

REINSURANCE – A type of insurance coverage bought by the insurer regarding one or many risks. There are two types of reinsurance available for purchase: facultative reinsurance and treaty reinsurance.

RISK MANAGEMENT – The process by which a business or organization can pinpoint hazards or perils that can lessen the chance of financial losses, property losses, etc.

RIDER – This is an additional benefit to life insurance to amend or change the terms of life insurance policy that gives policyholder supplementary coverage. Gives you options to amend the existing policy to a different type.

SPECIFIED PERILS – A type of peril listed in the insurance policy like flood damage, earthquake, or car accident. The insurance company may have excluded perils that are not covered by an insurance policy

SUBROGATION – A situation when one entity takes the place of another entity to pursue a settlement from a third-party. Subrogation can involve vehicle insurance policy claims, healthcare policies, and casualty/property policies.

SETTLEMENT – A money amount that is awarded to one or many parties by order of the court.

THIRD-PARTY INSURANCE – A policy purchased to protect against claims from another party. A popular third-party insurance policy is car insurance.

TOTAL LOSS – Also known as “actual total loss,” it is a property or other insured item that considered damaged beyond repair or any type of value.

TRANSFER OF RISK – The act or process of one party compensating another party to take on key responsibilities for the specific party. The process includes one party mitigating the specific risks of another party.

TENANTS POLICY – A type of insurance that covers renters if there is a property loss, someone being harmed on the property, or direct damage to the property.

UNDERWRITING – An institution that is willing to take on a specified risk for a certain amount of money through a fee.

UNDERWRITER – An entity or party that takes over the other party’s risks for some type of fee as a commission or interest.

UMBRELLA LIABILITY POLICY – Additional liability coverage that provides a broad spectrum of coverage.

VALUATION – The specified amount in an insurance policy that will be given to the policyholder in case of damage, theft, or loss of specified items or property detailed in an insurance contract.

WAIVER – A legal document that releases a specific party or entity from any liability.

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In conclusion for all risk insurance terms and definitions

As you grow, get married, start a family eventually two become three or four, and over time you also accumulate assets. Family and asset growth necessitates the need to purchase insurance to protect your life, health, automobile, or home insurance.

All risk insurance terms and definitions will help you to comfortably navigate the insurance purchase process. Also, improve your knowledge and put you in a position to ask the right questions before signing the insurance contract.

This is a fantastic guide to get you started to learn about all-risk insurance terms and definitions.

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Let me know your thoughts in the comments below!!