Decoding the Terminology: Common Insurance Terms Explained

If you’re doing your annual review of your insurance policy, you might be encountering terms that you knew 12 months ago, but now seem like a distant memory of a forgotten language. We get it–insurance is rife with jargon and legalese. That’s why your friendly agency offering auto, life, home, and small business insurance in Ohio–BK Insurance & Financial Services–is here to help, with a glossary of sorts. Now, this list of terms and coverage options is by no means exhaustive, but it does cover some common terms and key coverage definitions. Let’s get into it.

Common Insurance Terms And Definitions

Here are some of the more common terms that you may encounter when shopping for or evaluating personal and commercial coverage options.

Terms Defined

Actual cash value (ACV): value of property minus depreciation for wear, tear, and age; current market value of property as-is

Adjuster: an insurance company employee who investigates and assesses claims

Carriers: another word for the insurance companies that provide a given insurance policy

Claim: a request from the insured party or an affected third party to an insurance provider for compensation of losses covered by insurance

Declarations Page: a summary document at the beginning of a policy statement that outlines key details about the insured and what is covered or excluded, along with premiums, deductibles, coverage limits, and more

Deductible: the agreed-upon amount that the insured is responsible for paying before the insurer will step in to pay for a claim

Depreciation: decrease in property value due to wear, age, or any other cause

Endorsement: a document or statement that adds to or changes the original coverage of a given policy; oftentimes called a “rider.”

Exclusions: conditions and/or circumstances that a policy will not cover

Hazard: a circumstance that may increase the probability or severity of a loss

Insured: person or entity protected by the policy; the policyholder

Liability: an insured’s legal responsibility for damage caused to others, whether in the form of bodily injury, property damage, etc.

Loss: damage to an insured’s property

Market Value: the value for which property can be sold in the open market

Mitigation: steps taken on the part of the insured to prevent or reduce the likelihood of loss

Named Peril: covered losses that are explicitly named and defined in the policy

Negligence: failure on the part of the insured to use reasonable care

Real Property: owned land and anything permanently attached to it (e.g. houses, garages, fences, trees)

Replacement Cost (RC): cost of replacing damaged or destroyed property with new items

Risk: the possibility that a loss will occur

Subrogation: a process where an insurer pays for a loss and then pursues a third party that caused the loss to obtain reimbursement

Underwriting: a process through which the insurer decides on policy rates, terms, and limits

Maybe you’re wondering if it’s even necessary to know these terms. And honestly, when you work with an expert but relatable team like the folks at BK Insurance & Financial Services, you won’t need to decipher terminology on your own. But should you ever want to review policy limits or investigate insurance options after hours, this rundown of common terms can really be a helpful resource. Think of it as an extension of our regular services. But, as always, we love hearing from clients, so please do get in touch with questions.

Types Of Insurance Explained

Builders' Risk: typically covers the owner, the lending institution, the contractor(s) performing the work, and other related parties from damage to a building in the middle of being built

Business Auto: insurance coverage for motor vehicles used by individuals engaged in commerce; also often called Commercial Auto and related to Fleet Insurance and other more specific commercial auto policies

Business Interruption: covers a loss of income that results from business property damage and resulting downtime

Business Owners Policy: a business insurance that typically groups property, liability, and business interruption coverages together for comprehensive protection

Collision Coverage: compensates for the repair of damage to the insured’s vehicle that results from a collision with another vehicle or object

Commercial Property: property insurance coverage for businesses’ inventory, premises, etc.

Comprehensive Coverage: assistance with repairs resulting from damage to a vehicle that was not caused by collision, such as theft, vandalism, weather events, and animals

Employment Practices Liability Coverage: liability insurance for employers to protect against and pay for claims of wrongful termination, discrimination, sexual harassment, etc.

Errors and Omissions: liability coverage for a professional individual that pays for liability arising out of the performance of professional or business-related duties or negligence thereof; often profession-specific

Inland Marine: protects business property when in transit

Loss of Use Insurance: protection for homeowners and renters who cannot stay in their home while repairs are made following a covered loss

Mechanical Breakdown Insurance: coverage for lost income due to mechanical breakdowns, as well as faulty machinery and vehicles

Medical Professional Liability: coverage for a licensed health care provider or health care facility that protects against legal liabilities brought about by misconduct, negligence, or incompetence

Umbrella and Excess: coverage for commercial or personal liabilities that goes beyond standard policy limits

Underinsured/Uninsured Motorist Coverage: auto policy coverage that extends to cover bodily injury or property loss caused by an uninsured or underinsured motorist

Workers Compensation: insurance that covers an employer's liability for employees’ work-related injuries and resulting lost wages

This is by no means a comprehensive list of all potential forms of personal or commercial insurance coverage options–at BK Insurance & Financial Services, our offerings are vast. We even have industry-specific coverages for your niche work-related risks and liabilities. These are just some common terms and types of coverage that we find may not be clear or obvious for our customers. But if the type of coverage you’re looking for or have questions about is not listed above, please contact us! We are happy to chat and will help you find coverage for any and all insurance needs.

Personal and Small Business Insurance In Ohio

We all carry risk in our personal or business life, but there’s no need to take chances–a yearly risk assessment and policy evaluation can ensure that you and yours are always protected. If you’re unsure of how big a safety net you need or which policies are best suited to your specific risks, your local provider of personal and small business insurance in Ohio is here to help. At BK Insurance & Financial Services, we understand risk and liability, and we know what’s at stake when coverage falls short. That’s why, for the past two decades, neighbors in the Ravenna, Kent, and surrounding Northeast Ohio communities have depended on our expertise.

Contact BK Insurance & Financial Services to learn more about our personal and commercial insurance offerings, and feel free to get in touch when jargon and insurance-speak get you down–we keep things real.