Insurance terms, in plain English.
Every word an insurer uses, defined without the fine print. Bookmark this page — it's the one we send clients before their first call.
- Actual cash valueclaims
- What your property is worth today — replacement cost minus depreciation for age and wear. A 10-year-old roof is reimbursed as a 10-year-old roof, not a new one. Compare with replacement cost.
- Adjuster
- The person who investigates a claim and decides what the insurer will pay. They inspect damage, review your policy, and calculate the settlement.
- Actuary
- The statistician who sets prices behind the scenes, using data on how often and how expensively a given risk tends to result in a claim.
- Beneficiarylife
- The person or people who receive the payout from a life insurance policy. You name them when you buy the policy and can usually change them later.
- Binder
- Temporary proof of coverage that protects you in the gap between agreeing to a policy and receiving the formal documents. Often needed to close on a home.
- Claim
- A formal request to your insurer to pay for a covered loss. Filing one starts the process of inspection, review, and settlement.
- Coinsurance
- The share of a covered cost you pay after meeting your deductible, usually a percentage. With 20% coinsurance, the insurer pays 80% and you pay the rest.
- Coverage limit
- The most your policy will pay for a covered loss. Anything above the limit comes out of your pocket, which is why setting it correctly matters.
- Declarations page
- The summary at the front of your policy — who's covered, the limits, the deductible, and the premium. The one page worth reading first.
- Deductible
- What you pay out of pocket before coverage kicks in. A higher deductible lowers your premium but means more cost when you actually file a claim. Some Texas wind and hail deductibles are a percentage of the home's value, not a flat dollar amount.
- Depreciation
- The loss of value as something ages or wears out. It's the difference between replacement cost and actual cash value.
- Endorsement
- An add-on that changes your standard policy — adding, removing, or adjusting coverage. Also called a rider.
- Exclusion
- Something your policy specifically does not cover. Flood is the classic exclusion on a standard home policy — read this section closely.
- Grace period
- The short window after a missed payment during which your coverage stays active and you can pay without penalty. Miss it and the policy can lapse.
- Lapse
- When a policy ends because the premium wasn't paid. A lapse can leave you uncovered and make future coverage more expensive.
- Liability coverage
- Pays for injury or damage you're responsible for — a guest hurt at your home, or an accident you cause while driving. It covers others' costs, not your own property.
- NFIPflood
- The National Flood Insurance Program — the federally backed source for most flood policies in the U.S., including Houston. Has a standard 30-day waiting period before coverage takes effect.
- Peril
- A specific cause of loss — fire, theft, wind, hail. Policies list which perils they cover and which they exclude.
- Policyholder
- The person who owns the insurance policy and is responsible for the premium.
- Premium
- What you pay for coverage, usually monthly or every six months. Raising your deductible typically lowers your premium.
- Quote
- An estimated price for a policy based on the details you provide. It isn't binding until you accept it and the insurer underwrites the policy.
- Replacement costclaims
- What it costs to repair or replace property with new materials of similar kind, without subtracting for depreciation. Usually costs more in premium than actual cash value, and pays more at claim time.
- Rider
- An add-on to a base policy that adds or adjusts coverage — for example, a windstorm rider on the Gulf Coast. Same idea as an endorsement.
- Subrogation
- When your insurer pays your claim and then pursues the at-fault party (or their insurer) to recover the money. It can also return your deductible to you.
- Surplus lines
- Coverage from a specialty insurer for risks standard carriers won't write — common for high-value coastal homes and unusual properties.
- Umbrella policy
- Extra liability coverage that sits on top of your auto and home limits, kicking in when those run out. Useful if you have assets to protect.
- Underwriting
- The insurer's process of evaluating your risk and deciding whether to cover you and at what price. It's what happens between your quote and your policy.
- Windstorm coverageflood
- Covers wind-driven damage, including from hurricanes — separate from flood, which covers rising water. Many Gulf Coast homes need both. In some Texas coastal counties this comes through the Texas Windstorm Insurance Association (TWIA).
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