Insurance Glossary

Hover a highlighted term anywhere on the site for a short definition — or browse the full list here.

Insurance policies are written in a dialect most people do not speak every day. This glossary covers terms Illinois families and businesses run into on auto, home, business, and Medicare conversations — deductibles, liability, actual cash value, endorsements, and more.

Highlighted terms elsewhere on the site open a short definition on hover. Click any term to jump to its full entry. These explanations are educational; they are not a substitute for your policy language or a coverage opinion on a specific claim.

80 of 80 terms

Actual cash value

Also called: ACV, actual cash value (ACV)

Actual cash value (ACV) pays what the damaged item was worth at the time of loss — typically replacement cost minus depreciation. A ten-year-old roof settled at ACV will not fund a brand-new roof by itself. Many Illinois homeowners compare ACV with replacement cost when they review dwelling and contents limits.

Additional insured

Also called: additional insureds

An additional insured is a person or organization named on your policy — often a landlord, general contractor, or client — so your liability coverage may defend them for claims that arise from your work or occupancy. Certificates of insurance are how this is usually proven. The wording of the endorsement matters as much as the certificate.

Additional living expenses

Also called: ALE, loss of use, loss of use coverage

Additional living expenses (also called loss of use) can help with hotel bills, meals, and other extra costs if a covered claim makes your house or apartment unlivable. It does not pay your normal mortgage or rent. Limits and time caps vary by policy, which is why it is worth reviewing after a serious fire or water loss.

Adjuster

Also called: claims adjuster, claim adjuster

A claims adjuster inspects the damage, reviews the policy, and recommends a settlement. Some adjusters work for the insurance company; others are independent. You can ask questions, share contractor estimates, and request a written explanation of what is covered and what is not.

Aggregate limit

Also called: general aggregate

An aggregate limit is a ceiling on all covered claims in the policy term, not just one incident. Commercial general liability often has a per-occurrence limit and a separate general aggregate. If several claims hit in one year, the aggregate can be exhausted even if each claim was under the per-occurrence number.

Agreed value

Also called: agreed amount

Agreed value (common on boats, classic cars, and some high-value items) pays a number you and the carrier set up front if the property is a total loss. That avoids an actual-cash-value argument later. It is different from replacement cost, which looks at what it would take to buy a similar item today.

Betterment

Betterment is the idea that insurance returns you to the position you were in — not a free upgrade. If a claim replaces a worn part with a new one, some policies subtract the extra value. Understanding betterment helps explain why an estimate and a check might not match dollar-for-dollar.

Binder

Also called: insurance binder

A binder is short-term confirmation that coverage is in force — useful at a real estate closing or when a lender needs proof before the policy documents arrive. It is not a substitute for reading the issued policy. Binders expire, and the final form can still be adjusted at issue.

Bodily injury

Also called: bodily injury liability, BI

Bodily injury liability pays when you are responsible for hurting someone else — medical costs, lost wages, and legal defense, up to the policy limit. Illinois auto policies split this from property damage. State minimums exist, but a serious injury claim can exceed them quickly.

Builders risk

Also called: builder's risk, course of construction

Builders risk (course of construction) covers the structure, materials, and sometimes the job site while a home or commercial building is going up. A regular homeowners or commercial property policy is often not designed for a vacant, unfinished project. Contractors, owners, and lenders may all need to be listed correctly.

Businessowners policy

Also called: BOP, business owners policy, businessowner's policy

A businessowners policy (BOP) bundles property and general liability for eligible small and mid-size firms. It is convenient, but it is not a complete program — autos, workers compensation, professional liability, and cyber are usually separate. Eligibility rules can exclude some trades and higher-hazard operations.

Cancellation

Also called: cancel a policy, policy cancellation

Cancellation stops a policy mid-term. You might cancel because you sold a car; a carrier might cancel for nonpay or underwriting reasons, following state notice rules. Cancellation is different from nonrenewal, which lets the policy run to expiration and then not continue.

See also: Nonrenewal, Lapse, Grace period

Certificate of insurance

Also called: COI, certificates of insurance, insurance certificate, insurance certificates

A certificate of insurance (COI) summarizes who is insured, which carrier, and which limits, as of the date it is issued. It does not change the policy by itself. Job sites often also require additional-insured endorsements, waiver of subrogation, or primary and noncontributory wording — those live on the policy, not just the certificate.

Claims-made

Also called: claims made, claims-made policy

Claims-made coverage, common on professional liability and some cyber or D&O forms, responds to claims reported during the policy period — often only if the wrongful act happened after a retroactive date. Switching carriers without a tail (extended reporting period) can leave a gap. Occurrence forms work differently.

Coinsurance

Also called: co-insurance, coinsurance clause

On property policies, coinsurance says you must insure to a stated percentage of replacement value (often 80% or 90%). If you underinsure, a partial loss can be paid at a reduced amount. Health insurance uses the same word for your share of a medical bill — a different idea on a different type of policy.

Collision coverage

Also called: collision

Collision coverage repairs your car or motorcycle when it hits another vehicle or object, or rolls over. It is optional in Illinois but usually required by a lender. It is separate from comprehensive (theft, hail, hitting an animal) and from liability, which pays other people.

Combined single limit

Also called: CSL, combined single limits

A combined single limit (CSL) is a single pool of liability money rather than split limits like 100/300/100. Commercial auto is often written this way because contracts ask for $1 million CSL. Split limits cap injuries per person and per accident separately.

See also: Split limits, Liability, Umbrella

Comprehensive coverage

Also called: other-than-collision, other than collision, collision and comprehensive

Comprehensive (other-than-collision) covers many non-crash losses to your vehicle: theft, vandalism, hail, flood, fire, and animal strikes. It is paired with a deductible and is separate from collision. Motorcycles and boats have similar “other than collision” ideas under different names.

Cyber liability

Also called: cyber insurance, data breach coverage

Cyber liability can help with forensic IT work, customer notification, ransomware response, and lawsuits after a data incident. A businessowners policy usually does not replace it. The application questions about backups, multifactor authentication, and employee training affect both eligibility and claims.

Declarations page

Also called: dec page, declaration page, declarations

The declarations page (dec page) is the snapshot of your policy: named insureds, vehicles or property, limits, deductibles, endorsements, and the policy period. If something is wrong here — a missing driver, an old address, an understated rebuild cost — the rest of the form may not save you. Review it at every renewal.

Deductible

Also called: deductibles

A deductible is your share of a covered loss. A $1,000 deductible on a $6,000 roof claim means you pay the first $1,000. Higher deductibles usually lower premium. Some Illinois home policies use a percentage deductible for wind or hail, which can be much larger than a flat dollar amount.

Depreciation

Depreciation is the reduction in value for wear, age, and useful life. Actual cash value settlements subtract it. Replacement cost claims may still show depreciation until you complete repairs, then pay the recoverable amount. Roof age is a common Illinois example after hail.

Directors and officers liability

Also called: D&O, D and O, directors and officers

Directors and officers (D&O) liability responds to allegations that leaders made poor decisions, failed to disclose information, or breached duties to the organization. Nonprofits and private companies buy it as well as public firms. It is usually claims-made and is not a substitute for general liability.

Drive-other-car

Also called: DOC, drive other car

Drive-other-car (DOC) coverage can protect someone who is furnished a company vehicle and does not keep a personal auto policy, when they drive a car they do not own. Without it, borrowing a friend’s car can become a personal coverage gap. It is a commercial auto endorsement, not a substitute for listing household drivers.

Dwelling coverage

Also called: Coverage A, coverage A, dwelling

Dwelling coverage (often Coverage A) insures the structure of the home. Contents, other structures, and loss of use are separate limits. If the dwelling limit is below rebuild cost in DuPage or Cook County, a total loss will not fully rebuild. Ordinance or law coverage is a related gap when code upgrades are required.

Employment practices liability

Also called: EPLI, employment practices

Employment practices liability (EPLI) responds to workplace claims: harassment, discrimination, retaliation, and wrongful termination. General liability typically does not. Many small Illinois employers first meet EPLI when a handbook, a firing, or a wage dispute turns into a demand letter.

Endorsement

Also called: endorsements

An endorsement (sometimes called a rider) amends the base policy. Sewer backup, scheduled jewelry, additional insureds, and named-driver exclusions are all endorsements. If a certificate or a conversation promised something, it needs to appear as an endorsement — not just in an email.

Excess liability

Also called: excess policy

Excess liability increases the dollar limit of a specific underlying policy and typically follows that form. An umbrella can be broader. Commercial accounts and high-net-worth households use both, depending on the contract and the risk. The difference is in what extra situations, if any, are covered.

Exclusion

Also called: exclusions

An exclusion is a listed no. Flood, wear and tear, and certain business activities are common examples on personal policies. Reading exclusions is as important as reading what is covered. Some exclusions can be bought back with an endorsement; others cannot.

Experience modification

Also called: experience mod, E-mod, emod, experience modifier

An experience modification (E-mod) compares your workers compensation losses with similar businesses. A mod above 1.00 usually increases premium; below 1.00 can decrease it. Safety programs and claim reporting habits show up here over time. It is not used on every small policy.

Extended replacement cost

Also called: extended replacement

Extended replacement cost adds a cushion — often 20% to 50% — above the dwelling limit when labor and materials jump after a catastrophe. It is not a blank check, and the home still needs to be insured close to rebuild value. Guaranteed replacement cost, where still offered, is a stronger version.

Flood insurance

Also called: flood coverage, NFIP

Flood insurance — often through the National Flood Insurance Program (NFIP) or a private market — is not part of a typical homeowners or renters policy. Overflow of a river, storm surge, and surface water are flood. A burst pipe inside the house is usually not. Basement backups are a third conversation (sewer backup).

See also: Sewer backup, Exclusion, Named peril

Gap insurance

Also called: gap coverage

Gap coverage can pay the leftover loan or lease balance when a total loss settlement is less than what you still owe. It matters most on new cars, long loans, and low-down-payment deals. It is not collision coverage and does not repair the vehicle.

General liability

Also called: CGL, commercial general liability

Commercial general liability (CGL) is the core third-party coverage for a business: slip-and-falls, damage to someone else’s property, and advertising injury, depending on the form. It does not cover your own building, your autos, or employee injuries. Contracts often require specific limits and additional-insured status.

Grace period

A grace period is extra time to pay before cancellation for nonpay. It is not a free month of coverage you can plan on. Life and health forms often have clearer grace rules than property policies. If you are late, call the agency — do not assume a claim during that window will be paid.

Guaranteed replacement cost

Also called: guaranteed replacement

Guaranteed replacement cost, where a carrier still offers it, can rebuild the house even if the bill exceeds the limit on the declarations page, as long as you insured to the agreed value and meet other conditions. It is less common than it used to be. Extended replacement cost is the more typical cushion today.

Hired auto

Also called: hired autos, hired automobile

Hired auto coverage applies when the company rents or leases a vehicle in its name. Personal auto does not reliably follow a U-Haul used for a job. It is often paired with non-owned auto (employee errands in personal cars) as hired and non-owned auto, or HNOA.

Hull coverage

Also called: hull

Hull coverage repairs or replaces the boat after a covered loss — collision, sinking, fire, or storm. Agreed value versus actual cash value is a major choice on larger recreational boats. It is not the same as liability for guests or pollution, and it is not automatic coverage for a trailer.

Independent agent

Also called: independent agency, independent insurance agent, independent insurance agency, independent agents, independent insurance agents

An independent agent or agency represents multiple carriers rather than a single company. Hausman-Kunkel is an independent agency: we shop markets for Illinois families and businesses instead of offering only one menu. That is different from a captive agent, who usually writes for one insurer.

Inland marine

Also called: inland marine insurance, floater, floaters

Inland marine is the oddly named form that insures property in transit or off-premises: contractors’ equipment, scheduled jewelry, fine art, or cargo. Homeowners “special limits” on jewelry and business property are often too small. A floater or inland marine schedule is how you raise those limits.

Lapse

Also called: lapsed, policy lapse

A lapse is a break in coverage. Claims during a lapse are generally not paid, and a lapse on auto or home can make the next policy harder or more expensive. If a payment bounced, fix it immediately and ask whether coverage can be reinstated without a gap.

Lay-up period

Also called: laid-up, lay up, laid up

A lay-up period is when a watercraft or seasonal vehicle is stored and not navigating. Operating outside those dates, or storing the boat differently than the form assumed, can create a coverage argument. Illinois winters make lay-up dates a real part of a boat quote, not fine print.

Liability

Also called: liability coverage, liability insurance

Liability coverage protects you from claims by other people: injuries, damaged property, and the cost of defending a lawsuit, up to the limit. It does not repair your own house or car. Auto, home, boat, and commercial policies each have their own liability section, and an umbrella can sit above them.

Loss assessment

Also called: loss assessments

Loss assessment coverage can help if a homeowners association or condo board charges unit owners for a large shared loss — a clubhouse fire, a lawsuit, or a master-policy deductible. Limits on a standard condo form are often modest. It does not replace the association’s master policy.

Material misrepresentation

Also called: misrepresentation

A material misrepresentation is a false or omitted fact that would have changed the carrier’s decision to write the policy or set the price — undisclosed drivers, a business in the home, prior claims. It can lead to a denied claim or a rescinded policy. Accuracy on the application is part of keeping coverage honest.

Medical payments

Also called: med pay, MedPay, medical payments coverage

Medical payments (MedPay) can help with doctor and hospital bills for you or passengers after a car or home accident, depending on the form, without first proving who was at fault. Limits are usually modest. It is not a substitute for health insurance or for high liability limits.

Named insured

Also called: named insureds, first named insured

The named insured is who the contract is with. Additional insureds, drivers, and household members can have rights, but the named insured controls cancellations, changes, and often the claim check. On commercial policies the first named insured is who the carrier sends notices to.

Named peril

Also called: named perils, named-peril policy

Named-peril coverage pays only if the cause is on the list — fire, lightning, wind, theft, and so on. Open-peril (or “special form”) covers unless an exclusion applies. Older dwelling fire policies and some cheap contents forms are named peril. The difference shows up the first time an odd loss is denied.

Navigational territory

Also called: navigation territory, navigational limits

Navigational territory is the geographic limit on a watercraft policy. A form written for inland lakes may not contemplate the Great Lakes or a trip to Wisconsin. If you leave the waters described on the page, you can have a coverage problem even if the hull and liability limits look adequate.

Non-owned auto

Also called: nonowned auto, non-owned automobile, HNOA

Non-owned auto covers the company’s liability when someone runs a work errand in a car the business does not own. The employee’s personal policy is usually primary. Hired auto covers rentals; together they are often called hired and non-owned auto (HNOA).

Nonrenewal

Also called: non-renewal, nonrenewed

Nonrenewal means the carrier will not continue the policy at expiration. Illinois has notice rules. Claims history, roof age, or a change in the risk are common reasons. It is not the same as mid-term cancellation. An independent agency can shop other markets before the expiration date.

Occurrence form

Also called: occurrence policy, occurrence coverage

An occurrence form, typical of general liability and auto, looks at when the accident happened. If you had the policy in 2024 and a lawsuit arrives in 2027 over a 2024 slip-and-fall, the 2024 occurrence policy is the one that usually responds. Claims-made forms instead look at when the claim is made.

Open peril

Also called: all-risk, all risk, special form, open-peril

Open-peril (often called special form) covers sudden accidental losses except those listed as exclusions. It is broader than named-peril. Flood and earthquake are still usually excluded and sold separately. “All-risk” is casual language for this idea — the form still has exclusions.

Ordinance or law

Also called: ordinance and law, building ordinance

Ordinance or law coverage helps with the extra expense of meeting today’s codes after a loss — electrical upgrades, roof sheathing rules, or demolition of undamaged parts the village will not let you keep. Rebuild cost on the dwelling limit often does not include this. Older Chicagoland homes are frequent candidates.

Per-occurrence limit

Also called: per occurrence, each occurrence

A per-occurrence (or each-occurrence) limit is the cap on one accident or claim. The aggregate limit caps all claims for the year. A $1 million per-occurrence / $2 million aggregate liability form can pay $1 million on a single lawsuit but not two full $1 million payouts if the aggregate is already used.

Peril

Also called: perils

A peril is what actually caused the damage. Policies are organized around perils: some list them (named peril), some cover them unless excluded (open peril). Matching the peril to the policy is how an adjuster starts a claim — wind versus flood versus sewer backup are different answers in Illinois storms.

Personal injury protection

Also called: PIP

Personal injury protection (PIP) pays medical bills, and sometimes lost wages, after a car accident without first assigning fault. Illinois is not a full no-fault PIP state the way Florida or Michigan is; medical payments is the closer optional coverage here. If you also insure a car in a no-fault state, the forms can differ.

Premium

Also called: premiums

Premium is the cost of the insurance contract. It is not a savings account. Deductible choice, credit-based insurance scores where permitted, claims, and the carrier’s appetite all affect it. An independent agency compares premium next to coverage — the cheapest form is not always the one that pays.

Professional liability

Also called: errors and omissions, E&O, E and O

Professional liability (errors and omissions, or E&O) covers claims that you made a mistake in your professional work — a design error, a tax filing issue, a consulting recommendation. General liability covers bodily injury and property damage, not typically a pure financial-advice error. These policies are often claims-made.

Proof of loss

Also called: sworn proof of loss

A proof of loss is a formal, often sworn, statement of the claim: what happened, what was damaged, and how much you are asking. Carriers can require it within a stated number of days. Keep inventories, photos, and receipts. It is not the same as the first phone call that opens the claim.

Property damage liability

Also called: property damage, PD

Property damage liability pays when you are responsible for breaking someone else’s things — another vehicle, a storefront, a neighbor’s fence. On auto it is a separate limit from bodily injury in a split-limit policy. It does not pay to fix your own car; that is collision or comprehensive.

Replacement cost

Also called: RCV, replacement cost value

Replacement cost aims to put you back with new materials of similar quality, without deducting depreciation (a deductible still applies). Many home policies pay ACV first and the recoverable depreciation after you complete repairs. It is not agreed value, and it does not automatically include code upgrades.

Reservation of rights

Also called: reserving rights

A reservation-of-rights letter means the company is not fully accepting the claim yet. They may assign a defense attorney while they decide whether an exclusion applies. Read it carefully and send it to the agency. It is a procedure, not an automatic denial.

See also: Adjuster, Exclusion, Proof of loss

Retroactive date

Also called: retro date

The retroactive date is the starting line for claims-made coverage. Acts before that date are not covered even if the claim arrives while the policy is active. When you change carriers, matching or keeping the retro date is one of the most important parts of the switch.

Salvage

Salvage is the leftover wreck or damaged goods. After a total-loss auto claim, the carrier usually owns the salvage and sells it. If you want to keep a totaled car, the settlement is reduced and the title is branded. The same idea can apply to other property.

Scheduled personal property

Also called: scheduled jewelry, personal articles, personal articles floater

Scheduling jewelry, cameras, fine art, or instruments gives those items their own limit and often broader coverage than the small special limits inside a homeowners policy. Appraisals help. Unscheduled contents coverage is not designed for a $15,000 ring.

Self-insured retention

Also called: SIR

A self-insured retention (SIR) is money you must pay before an umbrella or excess policy responds, especially on uncovered underlying losses. It behaves like a deductible but can have different defense rules. Ask whether the umbrella is following form or dropping down.

Sewer backup

Also called: sewer back-up, backup of sewer, water backup

Sewer backup coverage can pay when water comes up through drains or a sewer line into the house. A standard homeowners policy often excludes it. Flood insurance addresses overflow of water bodies, not this drain backup. In Chicagoland after heavy rain, the distinction is one of the most common claim surprises.

Split limits

Also called: split limit, 100/300/100

Split limits look like 100/300/100: $100,000 bodily injury per person, $300,000 per accident, and $100,000 property damage. A combined single limit instead uses one pool. Illinois minimums are split limits; many households choose higher numbers or add an umbrella.

Stated value

Also called: stated amount

Stated value is a number you declare — common on collector cars. At claim time the company may still pay the lesser of stated value, actual cash value, or repair cost, depending on the form. Agreed value is the stronger “we will pay this number” version. Read which one you bought.

Subrogation

Also called: subrogate

Subrogation is the company’s right to step into your shoes and collect from an at-fault party after they pay your claim. You usually must cooperate and not sign away those rights. A waiver of subrogation endorsement is often required on construction contracts so the carrier will not chase the other party.

Surplus lines

Also called: non-admitted, nonadmitted, excess and surplus

Surplus lines (non-admitted) insurers write risks the standard market will not take — certain buildings, new ventures, or unusual liability. They are still legitimate, but they are not backed by the same state guaranty fund as admitted carriers. An independent agency will tell you when a quote is surplus lines.

Tail coverage

Also called: extended reporting period, ERP

Tail coverage, or an extended reporting period, lets you report claims after a claims-made policy is canceled or nonrenewed, for acts that happened while you were insured. It is often expensive and time-limited. Retiring professionals and firms that close or merge should ask about tail before the policy expires.

Telematics

Also called: usage-based insurance, usage based insurance

Telematics programs measure braking, mileage, time of day, and phone use. Safer, lower-mileage drivers may earn a discount. The data can also affect the renewal. It is optional with most carriers we compare; it is not a substitute for liability limits.

Total loss

Also called: totaled, totalled

A total loss is declared when repairs plus salvage math exceed the actual cash value (or agreed value, on some forms). You receive the value minus deductible, and the carrier typically takes the salvage. Gap insurance is how you cover a loan that is larger than that value.

Umbrella

Also called: umbrella policy, umbrella insurance, personal umbrella

An umbrella adds another layer of liability — often $1 million or more — above auto, home, and sometimes boat or personal excess. It can also cover some claims the underlying policies do not, subject to a self-insured retention. Underlying limits usually must meet a minimum before the umbrella attaches.

Underwriting

Also called: underwriter, underwritten

Underwriting is how a carrier evaluates the risk: claims history, roof age, driving record, type of business, and the information on the application. An independent agency’s job is to present the risk accurately and find a market that will take it. After a claim or a renovation, underwriting can change at renewal.

Uninsured motorist

Also called: UM, UIM, UM/UIM, UM-UIM, underinsured motorist, underinsured motorists, uninsured motorists, uninsured / underinsured motorist

Uninsured and underinsured motorist (UM/UIM) coverage can pay your bodily injury when the at-fault driver has no liability insurance, not enough insurance, or hits you and leaves. Illinois has rules about offering and rejecting it. For motorcyclists it is often the most important optional coverage on the policy.

Waiver of subrogation

Also called: waive subrogation, waiver of subro

A waiver of subrogation tells your carrier it cannot recover from a specified other party — a general contractor, a tenant, or a landlord — after paying your claim. Construction and lease contracts ask for it constantly. Adding it after a loss is usually too late; it belongs on the policy before the job starts.

Workers compensation

Also called: workers' compensation, worker's compensation, workers comp, work comp

Workers compensation is a state-regulated system that pays employee injury costs and generally protects the employer from those injury lawsuits. Illinois has its own rules on who must carry it. It does not replace general liability, and office-only businesses are not automatically exempt from needing advice.

Have a policy question?

Definitions help, but your coverage is in the form. Talk with a local advisor.

Get a Quote Contact Us

Insurance Glossary

Have a policy question?

Trusted Insurance Partners

Contact Hausman-Kunkel Insurance

Get a Quote