The most important insurance terms to know

Understanding your coverage options should be simple. We've worked to simplify the jargon below, helping you to better determine the right coverage for your car, your home, and more.

Insurance terms to know

From A-Z, we’ll help you understand the trickiest insurance terms in the business.

  • Actual Cash Value: This is how much you would receive for an item at today's replacement value, minus depreciation.
  • Additional Living Expenses: Covers any necessary increase in living expenses incurred by you and your house so that you can maintain your normal standard of living.1
  • Bodily Injury Liability: If you're responsible for an accident and someone gets hurt, this coverage pays for their medical costs and other out-of-pocket expenses. Plus, it covers any associated legal defense costs.
  • Collision: Repairs or replaces your car when it's damaged in collisions with another vehicle or object. This includes damage caused by another car, or another object (like a guardrail or tree).
  • Comprehensive: Repairs or replaces your car when it's damaged in an incident other than a collision. This includes damage caused by storms, floods, fires, vandalism, and/or theft.
  • Deductible: This is the initial amount you pay out-of-pocket before your coverage kicks in. In most cases, you'll need to pay your deductible up front, even if the claim wasn't your fault.
  • Depreciation: This is a reduction in value over time due to age, use, and condition of an item based on your market area.
  • Dwelling: Another term to describe the part of your home insurance policy that covers the physical structure of the primary residence on your property.
  • Liability Insurance: If someone else is injured or has their belongings damaged on your property, this covers any claims against you, as well as any reasonable and necessary medical expenses.
  • Premium: The total price you pay for your policy.
  • Scheduled Items: These are belongings (jewelry, art, etc.) that typically require additional coverage, since the standard home policy limits the amount you can claim per item.

1Stated policy limits apply; not available in all states.