Glossary

In property and auto physical damage insurance, actual cash value (ACV) is one of several possible methods of establishing the value of insured property to determine the amount the insurer will pay in the event of loss.

Additional living expense (ALE) is a type of insurance included within homeowners policies.

An appraisal clause is a property insurance provision allowing either the insurer or the insured to demand a binding appraisal of damaged property in the event of a dispute as to its value and establishing the required appraisal procedure.

An antitheft device is a device in a car that reduces the chance that the vehicle will be stolen or vandalized or increases the chance of recovering a stolen car.

All inclusive coverage is one of three approaches used for condominium insurance coverage, with the condo master policy covering all real property.

Aftermarket parts are auto crash parts produced by firms other than the manufacturer of the car.

An assigned risk (AR) plan is a method of providing insurance, especially those required by state statutes, for those risks that are uninsurable in the normal insurance market. All insurers that write that coverage in the state will be “assigned” a share of applicants from the AR plan.

An autonomous vehicle (AV) is a computer-controlled truck, bus, or auto that utilizes radar, global positioning systems, light detection and ranging, sensors, and computer vision to detect and respond to the surrounding environment and navigate safely without the need for human intervention.

The boatowners policy is the most common type of watercraft policy for individuals and families.

Book value refers to the value of an organization’s assets as carried on the balance sheet in accordance with generally accepted accounting principles (GAAP).

The broad evidence rule is a valuation rule that has evolved in some states and does not adhere to the principle that the traditional measure of actual cash value (ACV) (replacement cost less depreciation) is the sole measure of value at the time of loss.

The businessowners policy, commonly referred to as a BOP, is a package policy that provides both property and liability coverage for eligible small businesses.

Building ordinance coverage is for loss caused by enforcement of ordinances or laws regulating construction and repair of damaged buildings.

Business income coverage (BIC) is commercial property insurance covering loss of income suffered by a business when damage to its premises by a covered cause of loss causes a slowdown or suspension of its operations.

In first-party property cases involving multiple perils, courts use the “but for” test to determine whether a given peril is a cause-in-fact of the loss.

A bystander claim is a type of liability claim in which an accident bystander suffers some form of mental anguish due to witnessing this event.

Cancelable refers to the fact that most insurance contracts can be terminated by the insurer or the insured at any time.

Car sharing typically consists of short-term car rentals activated by an online or mobile device available exclusively to members.

A catastrophe is a severe loss characterized by extreme force and/or sizable financial loss.

Causes of loss are the perils that can bring about or trigger loss or damage.

Class 1 insureds is a term that is sometimes used in the context of uninsured motorists (UM) and underinsured motorists (UIM) coverage to refer to the named insured and the named insured’s family members (as opposed to all other insureds, referred to as Class 2 insureds).

Class 2 insureds is a term sometimes used in the context of uninsured motorists (UM) and underinsured motorists (UIM) coverage to refer to insureds (e.g., a guest occupant of a covered auto) other than the named insured and the named insured’s family members (referred to as Class 1 insureds).

A coinsurance provision is defined as a property insurance provision that penalizes the insured’s loss recovery if the limit of insurance purchased by the insured is not equal to or greater than a specified percentage (commonly 80 percent) of the value of the insured property.

Collapse additional coverage is coverage under the Insurance Services Office, Inc. (ISO), broad and special causes of loss forms (CP 10 20 and CP 10 30) for collapse of a building and collapse of personal property within a building due to specified causes (e.g., weight of snow, ice, or rain).

Collapse: homeowners policy is additional coverage provided by the homeowners policy.

A collision damage waiver (CDW) is an agreement with an auto rental company in which the renter is released from liability for collision damage to the vehicle in exchange for a fee, subject to the terms of the rental agreement or a state statute if one exists.

Collision insurance is a form of automobile insurance that provides for reimbursement for loss to a covered automobile due to its colliding with another vehicle or object or the overturn of the automobile.

Combined additional coverage (CAC) is an obsolete auto physical damage coverage term used to refer to hazards other than fire and theft (as in fire, theft, and CAC).

Auto insurance policies may have split limits or combined single limits.

A commercial package policy is a package insurance policy that provides both liability and property coverage for businesses and other organizations.

Community property is a law (which applies in only a minority of states) stipulating that at the time of divorce, spouses are each entitled to one-half of the total earnings and property acquired during marriage.

A community rating system (CRS) is a voluntary program for the National Flood Insurance Program’s (NFIP’s) participating communities.

Comprehensive personal liability (CPL) coverage is liability coverage typically found under section II of the homeowners policy.

Concurrent causation is defined as a tort doctrine that imposes joint liability on two or more parties if their negligence combines to produce the same loss.

A property damage (PD) loss that is a “constructive total loss” is treated as a total loss because the cost of repairing the damaged property exceeds the value of the property.

Covenants, conditions, and restrictions (CC&R) are the part of a homeowners’ association agreement that stipulates various rules, regulations, and promises by which a homeowner agrees to abide when purchasing a residence.

Crop-hail insurance is an insurance policy, marketed and underwritten by private insurers, that covers hail damage to insured crops.

Debris removal is coverage for the cost of removal of debris of covered property damaged by an insured peril.

Depreciation is the decrease in the value of property over a period of time, usually as result of age, wear and tear from use, or economic obsolescence.

A digital flood insurance rate map (DFIRM) is a flood insurance map developed by the Federal Emergency Management Agency (FEMA) for use with Geographic Information Systems (GIS) technology.

Diminution in value (auto) is a measure of the perceptual and/or actual lost market value for automobiles involved in major accidents, even if the automobile or vehicle is repaired properly.

Diminution in value (property) is a measure of the loss of use of property that has not been physically injured but that is less marketable because of the presence in it of a known defect.

Direct damage is physical damage to property, as distinguished from time element loss, such as business interruption or extra expense, that results from the inability to use the damaged property.

Direct damage coverage is property insurance that pays the value of property, or the cost to repair or replace it, when it has been damaged by a covered cause of loss.

Direct loss is incurred due to direct damage to property, as opposed to time element or other indirect losses.

Dwelling is a homeowners and dwelling property term denoting the structure on the residence premises that is listed in the declarations and used principally as a private residence, including attached structures.

Dwelling property coverage forms are alternatives to homeowners policies that may be used to insure physical damage to dwellings and personal property.

The earth movement (or earthquake) exclusion is found in most property insurance policies (even all risks policies) eliminating coverage for loss resulting from earthquake and usually all other forms of earth movement, except ensuing fire.

An ensuing loss clause is an exception to an exclusion in a first-party property policy that applies in a special type of fact pattern where the damage caused by an excluded peril operates as a link in the “chain of events” that enables a covered peril to damage other property.

Fair rental value coverage is provided as part of additional living expense (ALE) under a homeowners policy and as Coverage D under a dwelling policy.

False pretense, trick, and device refers to an exclusion in the physical damage coverage portion of a garage coverage form eliminating coverage for losses the insured suffers due to the fraudulent acts of others.

A farmers personal liability endorsement (found under a homeowners form) covers farm liability exposures but only if (1) farming is not the insured’s primary occupation, and (2) the farm is away from the residence’s premises.

Farmowners insurance, sometimes referred to as farm insurance, provide homeowners, commercial property, and commercial liability coverage.

A farm umbrella policy provides high limits of liability to protect an insured farmer against a catastrophic liability loss.

Federal crop insurance provides coverage for farmers that is overseen and subsidized by the federal government and marketed and serviced by private insurers and agents.

The Federal Emergency Management Agency is an agency of the US Department of Homeland Security that provides a single point of accountability for all federal emergency preparedness, mitigation, and response activities.

Financial responsibility is the legal requirement for an owner of an automobile to evidence ability to pay losses, either through purchase of insurance or by providing other proof of financial strength.

Financial responsibility law is a statutory provision requiring owners of automobiles to provide evidence of their ability to pay damages arising out of the ownership, maintenance, or use of an automobile.

Fire department service charge coverage in a property insurance policy pays for charges imposed by a fire department for their services in fighting a fire, usually subject to a separate limit of insurance, such as $1,000.

FIRMette is a section of a flood insurance rate map (FIRM) developed by the Federal Emergency Management Agency (FEMA) that can be created online by selecting the desired area from an image of a FIRM.

First bite is used in reference to auto financial responsibility laws that do not require motorists to furnish evidence of financial responsibility until after a serious traffic violation or an accident involving bodily injury (BI) or property damage (PD) over a certain amount.

Used for classifying commercial vehicles under the business auto policy (BAP); five or more automobiles is a fleet.

A fleet policy is an insurance contract applying to a number of vehicles, usually with the requirement that they be under common ownership.

A floater policy is an inland marine property insurance policy that covers personal property wherever it may be within the policy territory.

Flood coverage is insurance for damage to property caused by a flood.

A flood exclusion is a provision found in nearly all property insurance policies (even in all risks policies) eliminating coverage for damage by flood.

The flood insurance rate map is the official flood insurance map of a community on which the Federal Emergency Management Agency (FEMA) has indicated both the special flood hazard areas and the risk premium zones for the designated community.

A friendly fire is an intentionally kindled fire that remains within its intended confines, such as in a furnace or fireplace.

A functional replacement cost provision or endorsement changes the valuation basis otherwise applicable (actual cash value (ACV) or replacement cost (RC) value) to valuation at the cost to replace the damaged or destroyed property with property that serves the same function.

Functional replacement cost is the cost of acquiring another item of property that will perform the same function with equal efficiency, even if it is not identical to the property being replaced.

A good student discount is provided by some auto insurers if a student driver maintains a certain grade point average (e.g., 3.0) or is named to the honor roll or dean’s list. Such discounts can range from 5 percent to 15 percent.

Graduated drivers licenses are issued to young drivers that allow them to improve their driving skills over time.

Gross vehicle weight is the value specified by the manufacturer as the maximum total loaded weight of a single vehicle.

Guaranteed auto protection is insurance covering the difference between the actual cash value (ACV) of a damaged or stolen vehicle and the amount owed on the car under a loan or lease.

Guaranteed replacement cost is a property insurance valuation option found in some homeowners policies.

Guest statutes concern laws governing the rights of guests to sue a host-driver.

The Homeowners Modified Form 8 (HO 8) is part of the Insurance Services Office, Inc. (ISO), homeowners portfolio. The HO 8 form provides basic named perils coverage for direct damage to property, personal liability coverage, and medical payments to others as respects owner-occupied dwellings.

The homeowners policy is a package insurance policy providing property and liability coverages tailored to the needs of most homeowners, condominium owners, and apartment tenants.

The Homeowners Policy Basic Form 1 (HO 1) provides basic named perils coverage for direct damage to property, personal liability coverage, and medical payments to others coverage.

The Homeowners Policy Broad Form 2 (HO 2) is part of the Insurance Services Office, Inc. (ISO), homeowners forms portfolio. The HO 2 insures the described dwelling, private structures in connection with the dwelling, unscheduled personal property on and away from the premises, and loss of use.

The Homeowners Policy Comprehensive Form 5 (HO 5) is part of the Insurance Services Office, Inc. (ISO), homeowners forms portfolio. The HO 5 form insures the described owner-occupied dwelling, other structures in connection with the dwelling, unscheduled personal property on and away from the premises, and loss of use.

The Homeowners Policy Contents Broad Form 4 (HO 4) is part of the Insurance Services Office, Inc. (ISO), homeowners forms portfolio. The HO 4 form insures a tenant for direct damage to unscheduled personal property on a broad named perils basis. This policy also provides personal liability coverage and medical payments coverage.

The Homeowners Policy Special Form 3 (HO 3) is part of the Insurance Services Office, Inc. (ISO), homeowners forms portfolio. The HO 3 insures the described owner-occupied dwelling, private structures in connection with the dwelling, unscheduled personal property on and away from the premises, and loss of use.

An inflation guard provision gradually and continuously increases the limit of insurance by a specified percentage over a specified time period (such as 3 percent every 3 months).

Inherent vice is an exclusion found in most property insurance policies eliminating coverage for loss caused by a quality in property that causes it to damage or destroy itself.

Injunctive relief is a legal alternative to monetary damages in a civil suit.

Inland marine coverage is property insurance for property in transit over land, certain types of movable property that may not remain at a fixed location, instrumentalities of transportation (such as bridges, roads, and piers), instrumentalities of communication (such as television and radio towers), and legal liability exposures of bailees. Many inland marine coverage forms provide coverage without regard to the location of the covered property; these are sometimes called “floater” policies. As a group, inland marine coverage forms are generally broader than property coverage forms.

An insurable interest is an interest by the insured person in the value of the subject of insurance, including any legal or financial relationship, that makes it appropriate for the insured to purchase or be protected by that insurance.

The Insurance Institute for Highway Safety is a nonprofit research and communications organization funded by automobile insurers.

Insurance to value is written in an amount approximating the value of the subject of insurance or that meets coinsurance requirements.

Medical payments, homeowners, is coverage designed to pay for medical expenses to others who are accidentally injured on an insured location or by the activities of an insured, resident employee, or an animal owned by or in the care of an insured.

Miscellaneous type vehicles are property that has limited coverage under the unendorsed personal auto policy.

A mobile home policy is a specialized form designed to meet the unique needs of mobile home or manufactured housing owners.

A mortgagee is a financial institution that is the lender in a mortgage, holding a financial interest in the property.

A mortgagee clause is a property insurance provision granting special protection for the interest of a mortgagee (e.g., financial institution that has an interest in the property) named in the policy, in effect setting up a separate contract between the insurer and the mortgagee.

Mortgage impairment insurance is specialty property insurance for mortgage companies that provides coverage for the lender’s interest in mortgaged property in the event of uninsured or underinsured damage to the property—typically, because the borrower has failed to maintain the required property insurance and name the lender as mortgagee.

A mortgagor is the borrower in a mortgage, either a homeowner or another entity.

Motor vehicle is a term commonly used in vehicle registration and financial responsibility statutes and is generally defined to mean a device capable of transporting people or property and that is self-propelled by mechanical or electrical power.

Motorcycle insurance is a stand-alone form designed to provide appropriate coverage for a variety of motorcycles and related vehicles, such as trikes, mopeds, scooters, dirt bikes, all-terrain vehicles, Segway® personal transporters, golf carts, and snowmobiles.

A motor vehicle record (MVR) is a summary of a driver’s convictions and accidents on file with their home state.

Motor vehicle registration law is a statute that sets out the requirements for motor vehicles to be registered and/or licensed in the state.

Named perils coverage is a property insurance term referring to policies that provide coverage only for loss caused by the perils specifically listed as covered.

No-fault or personal injury protection (PIP) is a type of auto insurance coverage mandated by statute in some jurisdictions.

No-pay, no-play laws are state laws that prohibit uninsured drivers from collecting certain types of damages from negligent insured drivers.

Nonowned automobile is described in commercial auto policies as an auto that is used in connection with the named insured’s business but that is not owned, leased, hired, rented, or borrowed by the named insured.

Nonstandard auto insurance provides coverage for drivers with poor driving records, who may have been denied coverage from standard insurers offering standard auto coverage forms.

Omnibus clause in a standard automobile liability policy embraces within the definition of “insured” certain persons without the necessity of naming them or designating them specifically.

Ordinance or law coverage is for loss caused by enforcement of ordinances or laws regulating construction and repair of damaged buildings.

Other-than-collision (OTC) coverage is available under the personal auto policy (PAP). OTC coverage provides a form of “all risks” protection for damage to a covered auto from perils other than collision.

Other structures coverage is found under standard homeowners policies. It covers structures on the residence premises separated from the dwelling by a clear space or connected to the dwelling by a fence, utility line, or related connection.

A peril is a cause of loss—for example, fire, windstorm, collision

A personal auto policy is a standard form promulgated by Insurance Services Office, Inc. (ISO), for insuring private-passenger-type autos owned by individuals. Private insurers also offer the PAP.

A personal effects floater is Insurance designed for tourists who desire worldwide coverage on their personal effects, which refers to transportable property of the type carried by tourists or travelers.

Personal injury coverage is found under the commercial general liability and homeowners policies. This coverage pertains to a category of insurable offenses that produce harm other than bodily injury (BI).

Personal liability coverage is provided by the homeowners policy and other personal lines forms that protects the insured against the financial consequences of liability to others for bodily injury (BI) and property damage (PD).

A personal umbrella policy provides high limits of liability to protect an insured against a catastrophic liability loss.

Pluvial flooding, commonly referred to as “flash floods,” is principally caused by downpours in areas without adequate drainage.

Private crop-hail insurance is the first type of crop insurance written in the United States. It typically covers the single peril of hail.

Public or livery conveyance use involves the transporting of people and/or goods for hire, such as by a taxi service, motor carrier, or a delivery service.

Redhibitory defects are defects that render the home useless or are otherwise so material that the purchaser would only have purchased for a discounted price had he or she been made aware of the issue.

Rental reimbursement coverage endorsement (CA 99 23) is an optional commercial auto coverage endorsement that adds coverage for an additional amount incurred for the cost of renting an auto in the event of covered damage to the covered auto.

Renters insurance, similar to homeowners insurance, covers the contents of the home, apartment, or a condo the tenant rents but does not own. It also provides personal liability and medical payments coverage.

Repossessed autos endorsement (CA 20 19) is an automobile policy endorsement providing coverage for autos that have become the property of the financing institution because of the failure of the purchaser to comply with the terms of the financing agreement.

A residence employee is an employee of an insured (or an employee leased to an insured by a labor leasing firm) whose duties are related to the residence premises or one who performs comparable (and nonbusiness) duties elsewhere, as defined in the homeowners policy.

A residual market is an insurance market systems for various lines of coverage (most often workers compensation, personal automobile liability, and property insurance). It serves as a coverage source of last resort for firms and individuals who have been rejected by voluntary market insurers.

Ridesharing consists of mobile device applications available to members to link automobile owners driving their personal autos to transport fee-paying passengers for short trips (examples are Uber and Lyft).

Road rage is an event in which an angry motorist harms or threatens to harm another driver, a pedestrian, or a passenger.

In commercial auto insurance rating, the secondary classification is based on the specific industry for which the vehicle is being used.

Single entity coverage is one of three approaches used for condominium insurance coverage.

Slabbed is a term arising out of Hurricane Katrina claims. It means near complete destruction of a structure and elimination of the remains from its location.

A special personal auto policy that provides limited auto coverage, particularly for nonowned auto and permissive use situations.

Specified causes of loss coverage is a type of auto physical damage coverage that is an alternative to comprehensive coverage.

Specified perils coverage is an obsolete auto physical damage term.

Many auto insurance policies use the split limits approach, which combines the per person and the per occurrence to display the automobile liability limits that apply to an accident.

An SR-22 is also called a “financial responsibility filing.” It is a form that many states require a high-risk driver to file to prove that they have auto insurance.

A storm surge is water that is pushed toward the shore due to the force of winds swirling around a storm advancing across a body of water.

Suability factor signifies the likelihood of a legally liable insured being sued for alleged injuries or damage to a third party.

Substandard refers to “less than standard” risk.

An SR-22 is also called a “financial responsibility filing.” It is a form that many states require a high-risk driver to file to prove that they have auto insurance.

A sump pump is found at the lowest level of a building. Its purpose is to pump water away from the foundation.

A commercial and personal auto coverage endorsement, the Suspension of Coverage Endorsement (CA 02 04, PP 02 01) suspends certain coverages for specified vehicles when the vehicles will not be used for a period of 30 days or more.

A total pollution exclusion eliminates virtually all coverage for pollution incidents, including those retained in the standard commercial general liability (CGL) policy despite its “absolute” pollution exclusion.

Transportation expenses are the additional expenses paid under the personal auto policy (PAP) and the commercial auto policies.

A transportation network company is a business model that offers prearranged rides or car rentals for a fee, utilizing an online application (app) via a mobile device to connect passengers or automobile renters with drivers/car owners.

Uninsured motorists (UM) coverage applies to bodily injury and, in some states, property damage incurred by an insured when an auto accident is caused by a motorist who is not insured.

Usage-based insurance is a type of auto insurance that tracks driving behavior via (a) devices installed in a vehicle or (b) a smartphone.