Glossary of California Insurance Terms

Spend a minute familiarizing yourself with the terms frequently used in the insurance industry. Being comfortable using these terms will add to your confidence and ability to negotiate the best insurance coverage and lowest rate. Insurance professionals are more likely to give you better service if they feel they are dealing with someone who is knowledgeable.

Actual Cash Value (ACV) - Unless otherwise defined in the policy, actual cash value in California means fair market value. The fair market value of an item is the dollar amount that a knowledgeable buyer (under no unusual pressure) is willing to pay, and a knowledgeable seller (under no unusual pressure) is willing to accept.

Agent - A licensed individual or organization authorized to sell and service insurance policies for an insurance company.

Binder - A short-term agreement that provides temporary insurance coverage until the policy can be issued or delivered.

Broker - A licensed individual or organization who transacts insurance on your behalf.

Claim - Notice to an insurance company that a loss has occurred that may be covered under the terms and conditions of the policy.

Declarations - Usually the first page of an insurance policy that contains the full legal name of your insurance company, your name and address, the policy number, effective and expiration dates, premium payable, the limits of insurance, covered property, deductibles, and any applicable lienholder information.

Deductible - The amount of loss that the policyholder is responsible to pay upfront before covered benefits from the insurance company are payable.

Depreciation - A decrease in value due to age, wear and tear, or obsolescence.

Endorsement - A written agreement that changes the terms of an insurance policy by adding or subtracting coverage.

Exclusion - A contractual provision in an insurance policy that denies or restricts coverage for certain perils, persons, property, or locations.

Insured - The policyholder who is entitled to covered benefits in case of an accident or loss.

Insurer - The insurance company that issues the insurance policy, and agrees to pay for losses and provide covered benefits.

Premium - The price of insurance paid to the insurance company for a policy.

Quote - An estimate of the cost of insurance based on information supplied to the agent, broker or insurance company.

Replacement Cost - The amount that it costs to replace lost or damaged property with new property of like kind and quality in the local market.