- Deductible
- The portion of a covered loss the policyholder must pay out of pocket before the insurer pays the remainder. A higher deductible generally lowers the premium.
- Personal Lines
- Insurance coverage sold to individuals and families for personal, non-business risks — such as homeowners, renters, personal auto, and personal umbrella policies. It is distinguished from commercial lines, which cover business entities.
- Premium
- The amount of money the policyholder pays the insurer in exchange for coverage, usually billed monthly, quarterly, semi-annually, or annually. Premiums are set based on the insured's risk profile.
- Underwriting
- The process by which an insurer evaluates an applicant's risk to decide whether to issue a policy and at what premium and terms. Underwriters use factors like claims history, property condition, and location.
- Peril
- The specific cause of a loss, such as fire, theft, windstorm, or hail. Policies are written as either named-peril (covering only listed perils) or open-peril/all-risk (covering all perils except those excluded).
- Exclusion
- A provision that identifies losses, perils, property, or circumstances the policy does not cover. Common personal-lines exclusions include flood, earthquake, and intentional acts.
- Actual Cash Value (ACV)
- A method of loss settlement equal to the replacement cost of damaged property minus depreciation for age and wear. It typically pays less than the cost to buy the item new.
- Replacement Cost
- A loss-settlement method that pays to repair or replace damaged property with new property of like kind and quality, without subtracting for depreciation. It generally provides broader recovery than actual cash value.
- Endorsement (Rider)
- A written amendment attached to a policy that adds, removes, or changes coverage from the base form. Endorsements let a standard policy be tailored to an insured's specific needs.
- Subrogation
- The insurer's right, after paying a claim, to pursue a third party who caused the loss in order to recover the amount paid. It reinforces indemnity by ensuring the at-fault party ultimately bears the cost.
- Indemnity
- The principle of restoring an insured to the same financial position they held before a loss — no better and no worse. It prevents the insured from profiting from an insured event.
- Insurable Interest
- A financial or legal stake in the insured person or property such that the policyholder would suffer a genuine loss if damage or death occurred. It must exist for a policy to be valid and is what separates insurance from gambling.