Insurance Glossary

A method of valuing insured property that calculates the replacement cost minus depreciation. ACV accounts for the age, wear, and condition of the item at the time of loss.

Zach’s take included

A person or entity, other than the named insured, who is protected under the terms of an insurance policy. Additional insureds are typically added via endorsement and receive coverage for liability arising from the named insured's operations.

Zach’s take included

A professional who investigates insurance claims, evaluates the damage or loss, and determines the amount the insurance company should pay. Adjusters can be staff adjusters (employed by the insurer), independent adjusters, or public adjusters (hired by the policyholder).

Zach’s take included

An Accessory Dwelling Unit (ADU) is a secondary, self-contained residential unit located on the same parcel as a primary single-family dwelling. ADUs — also known as in-law units, granny flats, or backyard cottages — present unique insurance considerations. Depending on whether the ADU is attached or detached, owner-occupied or tenant-occupied, it may be covered under the primary homeowners policy's dwelling (Coverage A) or other structures (Coverage B) provisions, or it may require a separate dwelling fire or landlord policy.

Zach’s take included

The maximum total amount an insurance company will pay for all covered claims during a single policy period. Once the aggregate limit is reached, no further claims will be paid until the policy renews.

Zach’s take included

A temporary agreement that provides insurance coverage until a formal policy is issued. A binder contains the essential terms of the coverage and is legally enforceable.

Zach’s take included

A single insurance policy that covers multiple properties, locations, or categories of property under one combined limit, rather than assigning separate specific limits to each. The full policy limit can be applied to any single loss at any covered location, providing greater flexibility and often eliminating coinsurance penalties.

Zach’s take included

Physical harm, sickness, or disease sustained by a person, including death resulting from any of these. Bodily injury liability coverage pays for injuries you cause to others.

Zach’s take included

A specialized property insurance policy that covers buildings and structures during the course of construction, renovation, or major repair. It protects against damage from fire, wind, theft, vandalism, and other covered perils, and typically covers the structure, building materials, and equipment on site. Coverage begins at project start and ends at completion or occupancy.

Zach’s take included

Insurance coverage that replaces lost income and covers ongoing expenses when a business is unable to operate due to a covered peril such as fire, natural disaster, or other insured event.

Zach’s take included

A packaged insurance policy that combines general liability insurance and commercial property insurance into a single policy, often at a lower premium than purchasing each coverage separately. Also known as a BOP.

Zach’s take included

A document issued by an insurance company or broker that verifies the existence of an insurance policy and summarizes key coverage details including policy limits, effective dates, and named insureds. Commonly abbreviated as COI.

Zach’s take included

A formal request made by a policyholder to an insurance company for payment or coverage under the terms of an insurance policy following a covered loss or event.

Zach’s take included

Two types of liability insurance policy trigger mechanisms. An occurrence policy covers incidents that happen during the policy period, regardless of when the claim is later filed. A claims-made policy only covers claims that are both reported during the active policy period and that occurred after the policy's retroactive date. Claims-made policies require continuous coverage or a tail (extended reporting period) policy to maintain protection for past acts.

Zach’s take included

A provision in a property insurance policy requiring the policyholder to insure their property to a specified percentage of its value (typically 80%). Failure to meet this requirement results in a penalty at the time of a claim.

Zach’s take included

Auto insurance coverage that pays for damage to the insured vehicle resulting from a collision with another vehicle or object, regardless of fault. Subject to a deductible.

Zach’s take included

Insurance that covers a business's physical assets — including buildings, equipment, inventory, furniture, and fixtures — against loss from covered perils such as fire, theft, and certain natural disasters.

Zach’s take included

Auto insurance coverage that pays for damage to the insured vehicle caused by events other than collision, such as theft, vandalism, fire, natural disasters, falling objects, and animal strikes.

Zach’s take included

Covu is a licensed insurance service center that partners with independent agencies to provide dedicated support for policyholders. Operating as an extension of the agency, Covu's team of licensed insurance professionals assists with new business quoting, policy servicing, endorsements, claims support, and client inquiries — giving agency clients broader availability and faster response times while maintaining the personalized service of their local agent.

Zach’s take included

Insurance coverage designed to protect businesses from internet-based risks including data breaches, ransomware attacks, and network security failures.

Zach’s take included

The front page of an insurance policy that summarizes key information including the named insured, policy period, coverage limits, deductibles, premium amount, and property or vehicle descriptions. Often called the 'dec page.'

Zach’s take included

The amount of money a policyholder must pay out of pocket before the insurance company begins to pay on a covered claim. Deductibles can be a flat dollar amount or a percentage of the insured value.

Zach’s take included

The decrease in the value of property over time due to wear, age, and obsolescence. In insurance, depreciation is used to calculate the actual cash value of a damaged or destroyed item.

Zach’s take included

A supplemental insurance policy that provides coverage for perils excluded by standard property insurance policies. DIC policies most commonly fill gaps for flood and earthquake coverage on commercial properties, and can also cover other excluded perils. They are typically written on a broader, all-risk basis.

Zach’s take included

Liability insurance that protects the personal assets of corporate directors and officers when they are sued for alleged wrongful acts in their capacity as company leaders. Covers defense costs, settlements, and judgments arising from claims of mismanagement, breach of fiduciary duty, regulatory violations, or investor lawsuits. Policies typically include Side A (individual coverage), Side B (corporate reimbursement), and Side C (entity coverage).

Zach’s take included

The portion of a homeowners insurance policy that covers the physical structure of the home, including walls, roof, foundation, and attached structures like a garage, against covered perils.

Zach’s take included

A dwelling fire policy (DP policy) is a property insurance policy designed for residential structures that do not qualify for a standard homeowners policy — most commonly tenant-occupied (landlord-owned) properties, vacant homes, or properties under renovation. Dwelling fire policies come in several forms (DP-1, DP-2, DP-3), offering progressively broader coverage. Unlike a homeowners policy, a standard dwelling fire policy does not include personal liability or personal property coverage for the owner, though these can sometimes be added by endorsement.

Zach’s take included

A specialized form of property insurance that covers damage to buildings and personal property caused by earthquakes. Standard homeowners policies exclude earthquake damage, requiring a separate policy or endorsement.

Zach’s take included

The date on which an insurance policy begins providing coverage. Claims for losses occurring before the effective date are generally not covered.

Zach’s take included

A written amendment or addition to an existing insurance policy that modifies the terms, conditions, or coverage of the original policy. Also known as a rider.

Zach’s take included

Employment Practices Liability Insurance protects employers against claims made by employees alleging discrimination, wrongful termination, harassment, retaliation, or other employment-related issues.

Zach’s take included

Professional liability insurance that protects businesses and individuals against claims of negligence, mistakes, or failure to perform professional duties. Also known as E&O insurance.

Zach’s take included

A document that provides proof that an insurance policy exists and is currently in force. An EOI typically includes the insured's name, policy number, type of coverage, effective dates, and policy limits. Commonly requested by landlords, mortgage lenders, employers, and other third parties.

Zach’s take included

A provision in an insurance policy that eliminates coverage for specific risks, perils, or circumstances. Common exclusions include flood, earthquake, intentional acts, and wear and tear.

Zach’s take included

A homeowners insurance endorsement that pays above the dwelling coverage limit to rebuild or repair the home after a covered loss, typically 25% to 50% above the stated policy limit. This provides a buffer against unexpected increases in construction costs following widespread disasters.

Zach’s take included

Insurance coverage that protects against property damage caused by flooding. Standard homeowners and commercial property policies exclude flood damage, requiring a separate policy through the National Flood Insurance Program (NFIP) or private insurers.

Zach’s take included

Coverage that pays the difference between the actual cash value of a vehicle and the outstanding balance on an auto loan or lease when a vehicle is declared a total loss. Standard auto insurance only pays the depreciated market value, which may be significantly less than the remaining loan balance.

Zach’s take included

Commercial insurance that protects a business against claims of bodily injury, property damage, and personal/advertising injury caused by the business's operations, products, or premises.

Zach’s take included

Commercial auto liability coverage that protects a business when employees use personal vehicles for business purposes (non-owned auto) or when the business rents or hires vehicles (hired auto). This coverage applies to liability claims arising from accidents during business use and is typically added as an endorsement to a commercial general liability or business auto policy.

Zach’s take included

A licensed insurance professional who represents multiple insurance companies and can offer quotes from various carriers, as opposed to a captive agent who represents only one company. Also known as an independent broker.

Zach’s take included

A homeowners insurance endorsement that automatically increases the dwelling coverage limit by a specified percentage throughout the policy period to keep pace with rising construction costs. Typical increases range from 2% to 4% annually. This helps prevent the insured from becoming underinsured due to inflation in building materials and labor.

Zach’s take included

A type of property insurance that covers goods in transit, movable property, and specialized equipment that may not be adequately covered under standard commercial property policies. Despite the name, it covers land-based property.

Zach’s take included

Insurance coverage that protects the insured against claims resulting from injuries and damage to other people or property. Liability insurance covers legal costs and payouts for which the insured would be responsible if found legally liable.

Zach’s take included

The amount of financial damage suffered by an insured as a result of a covered event. In insurance, a loss triggers the claims process and determines the payout amount.

Zach’s take included

Coverage that pays for a policyholder's share of a loss assessment charged by a homeowners association (HOA) or condo association when a covered peril damages common areas or when the association's master insurance policy is insufficient to cover a loss. Standard homeowners and condo policies include a base amount, but higher limits are available by endorsement.

Zach’s take included

Coverage that pays for additional living expenses or lost rental income when a covered peril makes the insured property uninhabitable. Also known as Coverage D on a homeowners policy or Additional Living Expense (ALE).

Zach’s take included

The ratio of claims paid by an insurance company to premiums earned, expressed as a percentage. A loss ratio above 100% indicates the insurer is paying out more in claims than it collects in premiums.

Zach’s take included

A report generated by an insurance company that provides a detailed history of all claims filed under a policy, including dates of loss, types of claims, amounts paid, amounts reserved, and claim status. Loss runs are typically required by prospective insurers when quoting new coverage and are used to evaluate the risk profile of an applicant.

Zach’s take included

Coverage that pays for medical expenses incurred by the insured or passengers regardless of fault. On auto policies, it covers medical bills for the policyholder and passengers after an accident. On homeowners policies, it covers medical expenses for guests injured on the insured property without requiring a liability claim.

Zach’s take included

The individual or entity specifically identified by name on the insurance policy as the primary policyholder. The named insured has the broadest coverage rights and is responsible for paying premiums and reporting claims.

Zach’s take included

Coverage that pays for the increased cost to rebuild or repair a property to comply with current building codes and ordinances that were not in effect when the structure was originally built. Includes three components: coverage for the loss in value of the undamaged portion of a building that must be demolished, the cost of demolition, and the increased cost of construction to meet current codes.

Zach’s take included

Other Structures coverage (Coverage B on a standard homeowners policy) protects detached structures on the insured's property that are not the primary dwelling — such as detached garages, sheds, fences, gazebos, and guest houses. It is typically set at 10% of the dwelling coverage limit (Coverage A), though this can be adjusted by endorsement. The structure must be separated from the main dwelling by clear space or connected only by a fence, utility line, or similar connection.

Zach’s take included

A specific event or cause of loss that may trigger an insurance claim. Common perils include fire, theft, windstorm, hail, vandalism, and lightning. Policies may be 'named peril' (covering only listed perils) or 'open peril' (covering all perils except those specifically excluded).

Zach’s take included

In insurance, personal injury refers to non-physical harm such as libel, slander, defamation, false arrest, invasion of privacy, and wrongful eviction. This differs from bodily injury, which involves physical harm.

Zach’s take included

The portion of a homeowners or renters insurance policy that covers personal belongings such as furniture, clothing, electronics, and appliances against covered perils. Also known as Coverage C.

Zach’s take included

The maximum amount an insurance company will pay under a policy for a covered loss. Limits can be per-occurrence, per-person, aggregate (total for the policy period), or a combination.

Zach’s take included

The duration of time during which an insurance policy provides coverage, defined by a start date (effective date) and an end date (expiration date). Most policies run for 6 months or 12 months.

Zach’s take included

The amount of money charged by an insurance company for an insurance policy. Premiums can be paid monthly, quarterly, semi-annually, or annually, and are determined by factors including risk, coverage amount, deductible, and claims history.

Zach’s take included

Physical damage to or destruction of tangible property belonging to others, including loss of use of that property. Property damage liability coverage pays for damage you cause to someone else's property.

Zach’s take included

Insurance coverage for tenants that protects personal property against covered perils, provides personal liability coverage, and covers additional living expenses if the rental becomes uninhabitable. Does not cover the building structure itself.

Zach’s take included

A method of valuing insured property at the cost to replace or repair it with materials of similar kind and quality, without deducting for depreciation. Provides higher payouts than actual cash value.

Zach’s take included

An endorsement that provides additional coverage for specific high-value items that exceed the sub-limits of a standard homeowners or renters policy. Items are individually listed (scheduled) with appraised values and covered for their full worth. Also known as a floater or inland marine endorsement. Common items include jewelry, fine art, musical instruments, firearms, and collectibles.

Zach’s take included

A secondary home (also called a second home or vacation home) is a dwelling that the owner occupies for part of the year but is not the primary residence. Insurers distinguish secondary homes from primary residences and rental properties because occupancy patterns affect risk. Secondary home policies may carry higher premiums or different underwriting requirements, and carriers typically require that the home not be rented out for more than a specified number of days per year to qualify for secondary home rather than landlord or rental dwelling coverage.

Zach’s take included

A short-term rental is a residential property rented to guests for periods typically less than 30 days, often through platforms such as Airbnb, Vrbo, or similar services. Standard homeowners policies generally exclude or severely limit coverage for properties used as short-term rentals because the transient occupancy increases liability exposure and property damage risk. Owners may need a specialized short-term rental policy, a landlord policy, or a specific endorsement to maintain proper coverage. Host platform liability programs (e.g., Airbnb's AirCover) provide limited protection but are not a substitute for a comprehensive insurance policy.

Zach’s take included

A certificate of financial responsibility filed by an insurance company with the state DMV on behalf of a driver, proving that the driver carries at least the state-required minimum auto insurance. Typically required after serious traffic violations such as DUI, driving without insurance, or accumulating multiple at-fault accidents.

Zach’s take included

The legal right of an insurance company to pursue a third party that caused a loss to the insured in order to recover the amount paid on the claim. This prevents the insured from collecting twice for the same loss.

Zach’s take included

Surplus lines insurance (also called Excess & Surplus or E&S) refers to coverage placed with non-admitted carriers — insurers not licensed in the state where the risk is located but authorized to write business through surplus lines regulations. E&S carriers are used when the standard (admitted) market is unwilling or unable to provide coverage due to the nature, size, or risk profile of the exposure. Unlike admitted carriers, E&S insurers are not backed by state guaranty funds, and their rates and forms are not subject to prior approval by state insurance departments, giving them greater flexibility in pricing and policy design.

Zach’s take included

A personal liability insurance policy that provides additional coverage beyond the limits of the insured's existing homeowners, auto, or boat policies. Umbrella policies typically start at $1 million in coverage.

Zach’s take included

A condition in which the amount of insurance coverage is insufficient to cover the full value of the insured property or the potential liability exposure. Being underinsured can result in significant out-of-pocket costs after a loss.

Zach’s take included

The process by which an insurance company evaluates the risk of insuring a person, property, or business and determines whether to offer coverage, at what price, and under what terms.

Zach’s take included

Auto insurance coverage that protects you if you're injured in an accident caused by a driver who has no insurance (uninsured) or insufficient insurance (underinsured) to cover your damages.

Zach’s take included

A vacant property is a dwelling or structure that is unoccupied and devoid of furnishings or personal property sufficient for normal habitation. Most insurance carriers define a property as vacant if it has been unoccupied for a specified period — commonly 30 to 60 consecutive days. Vacancy significantly increases risk (vandalism, undetected damage, liability), and most standard homeowners and dwelling fire policies include a vacancy clause that limits or eliminates coverage after the vacancy threshold is met. Insuring a vacant dwelling or vacant land typically requires a specialized vacancy permit endorsement or a standalone vacant property policy.

Zach’s take included

An endorsement in which the insured gives up the right of their insurance company to seek recovery from a third party responsible for a loss. Often required in contracts between businesses, landlords, and tenants.

Zach’s take included

An endorsement that covers property damage caused by water that backs up through sewers, drains, or sump pumps into the insured property. Standard homeowners policies typically exclude this type of water damage, which is distinct from both plumbing leaks (usually covered) and external flooding (requires separate flood insurance).

Zach’s take included

Insurance that provides wage replacement and medical benefits to employees who are injured or become ill as a direct result of their job. In most states, workers comp is legally required for businesses with employees.

Zach’s take included