- Peril
- The specific cause of a loss, such as fire, theft, windstorm, or collision. Insurance policies list which perils are covered.
- Indemnity
- The principle that an insured is restored to the same financial position held before a loss, without profiting from it. It underlies most property and casualty coverage.
- Deductible
- The amount the insured must pay out of pocket on a covered loss before the insurer pays the remainder. Higher deductibles generally lower the premium.
- Premium
- The payment an insured makes to the insurer to keep coverage in force, usually paid monthly, quarterly, or annually. It is priced according to the risk assumed.
- Subrogation
- The insurer's right, after paying a claim, to pursue a third party responsible for the loss to recover the amount paid. It prevents the insured from collecting twice.
- Actual Cash Value (ACV)
- The replacement cost of damaged property minus depreciation for age and wear. It is a common basis for settling property losses.
- Replacement Cost
- The amount needed to repair or replace damaged property with new property of like kind and quality, without a deduction for depreciation. It typically pays more than actual cash value.
- Liability Coverage
- Coverage that protects an insured against legal responsibility for bodily injury or property damage caused to others. It is the 'casualty' core of a P&C policy.
- Underwriting
- The process by which an insurer evaluates a risk to decide whether to accept it and at what premium. It determines eligibility and pricing.
- Endorsement (Rider)
- A written amendment attached to a policy that adds, removes, or changes coverage. It becomes part of the contract once attached.
- Hazard
- A condition that increases the likelihood or severity of a loss from a peril, such as storing gasoline near a furnace. Hazards can be physical, moral, or morale-based.
- Insurable Interest
- A financial stake in the person or property insured, such that the policyholder would suffer a genuine loss if damage occurred. It must exist for a policy to be valid.