Glossary Of Property & Casualty Insurance Terms

Below is a an easy-to-use glossary for common Property & Casualty Insurance terms. Click here if you prefer a more-detailed glossary that you can use for studying for your Property & Casualty licensing exam.

• Actual Cash Value (ACV)

  Method of valuation: replacement cost minus depreciation.

• Additional Insured

  A person or entity added to a policy who receives some level of coverage.

• Additional Living Expense (ALE)

  Coverage that pays the increased cost of living after a covered loss (e.g., hotel, meals).

• Adjuster

  Person who investigates and settles claims.

• Adverse Selection

  Higher-risk individuals seek insurance more often than low-risk individuals.

• Agent / Producer

  Licensed individual who sells, solicits, or negotiates insurance on behalf of an insurer.

• Aggregate Limit

  Maximum total amount the insurer will pay during a policy period.

• Bailee

  Person who has temporary possession of someone else's property (e.g., dry cleaners, auto shop). Bailees are legally liable for customer property.

• Binder

  Temporary proof of insurance until a formal policy is issued.

• Blanket Insurance

  Single limit covering multiple locations, multiple types of property, or multiple insureds.

• Burglary

  Theft involving forcible entry or exit.

• Casualty Insurance

  Covers liability exposures such as auto, workers comp, and general liability.

• Claim

  A request for payment under the policy.

• Coinsurance (Property)

  Requires insured to carry a percentage (often 80%) of property value.

• Collision

  Auto coverage for impact with another vehicle or object.

• Commercial Package Policy (CPP)

  Modular policy combining two or more commercial coverages (e.g., property + liability).

• Comparative Negligence

  Fault is shared among parties; damages reduced by each party's degree of fault.

• Declarations Page

  Summary of key policy information: name, limits, deductibles, property description.

• Deductible

  Amount insured must pay out of pocket before insurance pays.

• Direct Loss

  Immediate damage to property (e.g., fire destroys building).

• Dwelling Policy

  Property insurance for residences that do not qualify for homeowners (e.g., rentals, older homes).

• Endorsement

  Written amendment that changes policy terms.

• Equipment Breakdown

  Coverage for mechanical or electrical breakdown.

• Exclusion

  What the policy does not cover.

• Expediting Expenses

  Costs to speed up repair or replacement of damaged property.

• First-Party Loss

  Loss suffered by the insured for their own property.

• Flood Insurance

  Coverage for overflow of inland/tidal waters; backed by NFIP.

• Friendly Fire

  Fire that stays where it is intended (e.g., fireplace).

• Garage Liability

  Covers businesses that sell, service, store, or park vehicles.

• General Average

  Marine principle: all parties share loss voluntarily sacrificed to save vessel/cargo.

• Good Faith (Uberrimae Fidei)

  Both parties must act honestly in an insurance contract.

• Hazard

  Condition that increases the chance of a loss (physical, moral, morale).

• Homeowners Policy

  Package policy combining property and liability for owner-occupied residences.

• Indemnity

  Restores the insured to their financial position before the loss; no profit allowed.

• Indirect Loss

  Consequential loss resulting from direct damage (e.g., rental income lost after fire).

• Insurable Interest

  Legal or financial interest in property at the time of loss.

• Inland Marine

  Covers mobile or movable property (e.g., equipment, jewelry, cameras).

• Joint and Several Liability

  One defendant can be held responsible for the full amount of damages regardless of degree of fault.

• Liability Insurance

  Coverage for injuries or damage the insured causes to others.

• Liberalization Clause

  Automatically broadens coverage if insurer broadens forms with no additional premium.

• Loss Ratio

  Incurred losses divided by earned premiums.

• Medical Payments (MedPay)

  No-fault coverage for medical expenses of occupants and sometimes pedestrians.

• Misrepresentation

  False statement on an application; if material, may void the policy.

• Monoline Policy

  Policy containing only one type of coverage (e.g., property only).

• Named Perils

  Policy covers only perils specifically listed.

• Negligence

  Failure to act as a reasonable person would.

• No-Fault Insurance

  Each party's insurer pays their own damages regardless of fault.

• Occurrence

  An accident or repeated exposure to the same harmful conditions.

• Open Perils (All-Risk)

  Covers everything except exclusions.

• Personal Lines

  Insurance for individuals (e.g., auto, homeowners).

• Personal Injury

  Libel, slander, wrongful eviction, false arrest — not bodily injury.

• Personal Property

  Movable property (“contents”), not permanently attached to the structure.

• Proximate Cause

  The initial event that sets off a chain of events leading to a loss.

• Quoted Premium

  Estimated premium issued before formal underwriting is completed.

• Replacement Cost (RC)

  Pays cost to replace the item without deduction for depreciation.

• Risk

  Chance of loss occurring.

• Robbery

  Taking property by force or threat from a person.

• Salvage

  Leftover property an insurer sells after paying a claim.

• Special Damages

  Compensation for actual financial losses (medical bills, lost wages).

• Strict Liability

  Liability without negligence (e.g., hazardous activities, defective products).

• Subrogation

  Insurer seeks repayment from the party responsible for the loss.

• Third-Party Loss

  Loss suffered by someone else for which the insured is liable.

• Theft

  Any unlawful taking of property (burglary + robbery).

• Tort

  Wrongful act resulting in civil liability.

• Underwriting

  Process of evaluating risks and setting premiums.

• Unoccupied

  No people present; property contains furniture
  Vacant

• No people and no contents; higher risk

  Valued Policy

• Pays full policy limit in a total loss (commonly in fire policies in some states).

  Vandalism

• Intentional destruction of property.

  Workers’ Compensation

• Mandated insurance covering employee job-related injuries.

• Yacht or Boatowners Policy

  Marine policy covering liability, hull damage, and medical payments for pleasure craft.

• Zone Rating

  Premium rating system used for commercial autos based on geographic zones.