API key terms

A financial stake in the person or property being insured, such that the policyholder would suffer a genuine economic loss if a covered event occurred. It must exist when the policy starts and, for property, at the time of loss.

A principle holding that insurance should restore the policyholder to roughly the same financial position held before a loss, not create profit. It underpins limits, deductibles, and actual cash value settlements.

The mutual duty of applicant and insurer to deal honestly and disclose material facts. Breach by the applicant can allow the insurer to rescind coverage or deny a claim.

A false statement on an application or in a claim that would have influenced the insurer's decision to issue coverage or set its terms. It can lead to rescission or denial.

The deliberate withholding of a fact that the insurer needed in order to evaluate the risk properly. Unlike an innocent omission, it involves intent and can void coverage.

A statement or condition in a policy that the insured promises is true and will remain true. A breach may allow the insurer to deny a claim, though many states limit this effect.

A statement of fact made by the applicant during underwriting that is believed to be true but is not guaranteed. If it is false and material, the insurer may rescind.

The specific cause of a loss, such as fire, windstorm, theft, or collision. Policies list covered perils and exclude others.

A condition that increases the likelihood or severity of a loss, such as a frayed wire, icy steps, or a poorly maintained roof. Hazards are classified as physical, moral, or morale.

A risk condition arising from dishonesty or bad intent, such as deliberately causing a loss or exaggerating a claim. Insurers screen for it through application questions and claim investigation.

Carelessness or indifference toward loss because insurance exists, such as leaving a car unlocked. It raises loss frequency without any intent to defraud.

The chance of financial loss from an uncertain event. In insurance it usually means the possibility that a covered peril will cause a loss to an insured exposure.

A person, property, or activity that is subject to possible loss and therefore needs insurance. Underwriters measure the size and nature of each exposure when rating a policy.

The amount of a covered loss the insured must absorb before the insurer pays. Deductibles reduce small claims and lower premium.

A sharing arrangement in which the insured bears a specified percentage of each loss, or in property insurance must insure to a stated percentage of value to avoid a penalty.

The part of a policy showing key facts: named insured, address, policy period, limits, deductibles, and forms attached. It personalizes the contract to the individual risk.

Policy provisions that set rules the insured must follow, such as reporting a claim promptly, protecting damaged property, and cooperating with the investigation. Breach can affect payment.

The span of time during which coverage applies, usually shown on the declarations page. Losses occurring outside it are not covered.

A policy that covers only the perils specifically listed, such as fire, lightning, or windstorm. The insured must show the loss resulted from a listed cause.

A policy that covers all direct physical loss except what is specifically excluded. Also called all-risk; the insurer bears the burden of showing an exclusion applies.

A settlement method equal to replacement cost minus depreciation. It reflects the used value of damaged property at the time of loss.

A settlement method that pays what it costs to repair or replace damaged property with new property of similar kind and quality, without deducting depreciation.

The homeowners policy section insuring the residence structure itself, including attached additions, at the limit shown on the declarations page.

Homeowners coverage for detached structures on the residence premises, such as garages, sheds, and fences. It is typically a percentage of the dwelling limit.

Homeowners coverage for the insured's household contents and personal belongings, both at home and, within limits, while away. Special sub-limits apply to certain categories such as jewelry or cash.

Homeowners coverage for extra living costs, such as temporary housing and meals, when the residence is uninhabitable because of a covered loss.

The increase in living costs an insured incurs while unable to occupy a damaged home, above normal expenses. Often used interchangeably with loss of use.

A separate endorsement listing specific valuables, such as jewelry or art, with individual limits and often broader coverage than the standard contents sub-limits provide.

A written amendment added to a policy that changes, adds, or removes coverage. Endorsements override conflicting terms in the base forms.

Policy provisions that describe losses the insurer will not pay, such as earth movement, flood, or intentional acts. They define the outer boundary of coverage.

Obligations the insured must fulfill after a loss, such as notifying the insurer promptly, protecting property from further damage, and submitting proof of loss. Failure can reduce or void payment.

A formal, often sworn statement the insured submits detailing the amount and circumstances of a claim. Insurers use it to verify the loss before settling.

The standard auto insurance contract covering liability, medical payments, uninsured motorist, and physical damage for a personal vehicle. Part D, damage to your auto, is optional.

Auto physical damage coverage for loss caused by impact with another vehicle or object, or by overturn. A deductible usually applies.

Auto physical damage coverage for losses such as theft, fire, vandalism, hail, or animal strikes. Historically called comprehensive coverage.

Failure to exercise the degree of care a reasonable person would use, resulting in harm to another. It is the foundation of most personal liability claims.

Legal responsibility for harm caused to another person or their property, usually requiring payment of damages. Liability insurance covers sums the insured becomes legally obligated to pay.

Homeowners coverage paying damages the insured is legally obligated to pay because of bodily injury or property damage to others, plus defense costs.

Homeowners coverage paying reasonable medical expenses for guests injured on the premises, regardless of fault. It is a goodwill coverage with modest limits.

An accident or continuous exposure to harmful conditions that results in bodily injury or property damage during the policy period. It triggers liability coverage.

A legal rule that reduces an injured party's recovery in proportion to their own share of fault. Some states bar recovery entirely when the plaintiff is mostly at fault.

A policy providing liability limits above those of underlying home and auto policies, often with broader coverage. The insured must maintain required underlying limits.

The process of evaluating an applicant's risk to decide whether to insure it and on what terms and price. It relies on application data, inspections, and loss history.

The process of setting premium for an accepted risk using class, territory, and individual risk characteristics. Rating follows underwriting's decision to accept the risk.

A record of past claims and losses, often drawn from reports like CLUE or motor vehicle records. Frequent or severe losses signal higher future risk and can affect eligibility and price.

A rating of a property's fire protection based on distance to a responding fire station and available water supply. Better protection classes generally yield lower property premiums.

A report from a physical or drive-by inspection of a property, noting condition, occupancy, and hazards. Underwriters use it to verify application information and identify concerns.

The tendency for higher-risk applicants to seek or keep insurance more than lower-risk ones. Underwriting controls such as medical questions and inspections help limit it.

Insurance purchased by an insurer to transfer part of its risk to another company. It protects the insurer's solvency and lets it accept larger or more concentrated exposures.