Plain-English glossary

Insurance Glossary

67 insurance terms explained in everyday language — no jargon, no sales pitch. From an independent Birmingham, AL agent who'd rather you understand your coverage than feel impressed by it.

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A

Actual Cash Value (ACV): The depreciated value of property at the time of loss — replacement cost minus depreciation for age and wear. ACV settlements pay less than replacement cost, especially on roofs and older personal property. Always check whether your policy is ACV or replacement cost.
Additional Insured: A person or business added to your policy by endorsement so they get liability protection from your coverage for a specific relationship — common on commercial GL when a customer or property owner requires it in a contract.
Agreed Value: A coverage option, common on boat, classic car, and high-value property policies, where the insurer agrees in advance to pay a specific dollar amount in a total loss — not actual cash value. Eliminates depreciation arguments at claim time.
AM Best Rating: An independent financial-strength rating for insurance carriers (A++ through D). Higher ratings indicate the carrier is more likely to pay claims long-term. We only place coverage with carriers rated A- or better.

B

Binder: A temporary insurance contract that proves coverage is in force before the formal policy is issued. Binders are commonly used for closing on a home or starting a commercial relationship on day one.
Boatowners Policy: A standalone policy covering a boat (hull, motor, trailer), marine liability, and often the dock and lift as scheduled structures. Standard homeowners watercraft coverage caps at $1,500-$2,500 — far below what real watercraft are worth.
Bodily Injury Liability: The part of an auto policy that pays for medical bills, lost wages, and pain-and-suffering claims from people you injure in an accident. Alabama's legal minimum is $25,000 per person / $50,000 per accident — almost always inadequate for a serious injury claim.
Business Interruption: Coverage that replaces lost net income and pays continuing operating expenses when a covered loss (fire, storm, etc.) shuts down a business. Often included in a BOP; frequently the most important coverage for a small business after a major claim.
Business Owners Policy (BOP): A package policy combining commercial general liability and commercial property at a discount, designed for small businesses with predictable risk. BOPs often include business interruption coverage and modest endorsements built in.

C

Certificate of Insurance (COI): A one-page document proving you carry specific coverage, typically required by a customer, landlord, or general contractor before you can do work on their site. We issue COIs for our commercial clients on request.
Claim: A formal request for payment under an insurance policy after a covered loss. We help our clients open claims, gather documentation, and follow through with the carrier to resolution.
Collision Coverage: The auto coverage that pays to repair or replace your vehicle when it collides with another object — another car, a guardrail, a tree. Required by most lenders. Subject to your collision deductible.
Commercial Auto: Auto coverage for vehicles used for business — trucks, vans, fleet cars. Personal auto policies exclude most business use, so any vehicle owned by a business or used regularly for work needs commercial auto coverage.
Commercial General Liability (CGL or GL): The foundation commercial coverage for any business — pays for bodily injury and property damage you cause to others (including slip-and-fall claims, product-related claims, and most third-party damage). Almost always required by customers and landlords.
Commercial Property: Coverage on a business's building, contents (inventory, equipment, furniture), and tenant improvements. Critical for any business that owns real property or significant equipment.
Comprehensive Coverage (Other-Than-Collision): The auto coverage that pays for damage from causes other than collision — theft, vandalism, hail, falling objects, hitting a deer. Required by most lenders. Subject to your comprehensive deductible.
Coverage A — Dwelling: On a homeowners policy, the limit that pays to rebuild your home after a covered loss. Should equal actual replacement cost — not market value, not what you paid. Standard target on most carriers' calculators is too low for current Alabama rebuild pricing.
Coverage B — Other Structures: Coverage on detached structures — garages, barns, sheds, fences, even some docks. Standard limit is 10% of dwelling, which is rarely enough for a real barn, shop, or boat house. We size Coverage B to actual outbuilding value.
Coverage C — Personal Property: Coverage on belongings inside the home — furniture, electronics, clothing, etc. Standard limit is typically 50-75% of dwelling. Sub-limits apply to jewelry, firearms, cash, and electronics; high-value items often need scheduling.
Coverage D — Loss of Use / Additional Living Expenses: Pays for hotel, restaurant meals, and other extra costs when a covered loss makes your home uninhabitable. Standard limit is typically 20-30% of dwelling.
Coverage E — Personal Liability: On a homeowners policy, the limit that pays bodily injury and property damage claims from incidents at your home (or anywhere you cause harm). Usually $100k-$500k. Foundation for personal umbrella coverage.
Coverage F — Medical Payments to Others: A small no-fault medical-bills coverage on a homeowners policy (typically $1,000-$5,000) that pays minor medical bills for guests injured at your home — without anyone needing to prove fault.

D

Declarations Page (Dec Page): The summary page at the front of an insurance policy listing the insured, covered property, coverage limits, deductibles, premium, and policy period. The single most important page to keep on file.
Deductible: The amount you pay out of pocket on a claim before insurance pays. Higher deductibles lower premium; lower deductibles raise it. Wind/hail policies frequently carry a separate, higher deductible expressed as a percentage of dwelling.
Depreciation: The reduction in property value over time due to age, wear, and condition. Actual-cash-value claim settlements deduct depreciation; replacement-cost settlements don't. Roofs older than ~10 years often face significant depreciation on ACV settlements.
DP-3 (Landlord Policy): The standard policy form for a non-owner-occupied rental property. Replaces a homeowners policy for landlords — covers the structure, loss of rent, and liability tied to the rental, but doesn't cover tenant belongings.

E

Endorsement: A formal change to a policy — adding coverage, removing coverage, raising a limit, scheduling a high-value item. Some endorsements add premium; some are no-cost.
Exclusion: Something a policy specifically does not cover — flood and earthquake on standard homeowners, business use on standard auto, intentional acts on every policy. Read your exclusions before assuming you have coverage.
Extended Replacement Cost: A homeowners endorsement (carrier-dependent) that pays a percentage above your dwelling limit (commonly 25%-50%) to cover rebuild cost overruns from material/labor inflation or code-required upgrades.

F

FAQPage Schema: A type of structured data search engines use to display frequently-asked-question answers as rich results. Our coverage and city pages emit FAQPage schema so common questions get surfaced directly in search.
Flood Insurance: Separate coverage for damage from rising surface water. Always excluded from homeowners policies. Available through the National Flood Insurance Program (NFIP) and an increasing number of private flood carriers.

G

Guaranteed Replacement Cost: An optional homeowners endorsement (carrier-dependent) that pays full rebuild cost even if it exceeds your dwelling limit, often subject to certain conditions. Most useful when rebuild cost has climbed faster than the policy limit.

H

Homeowners Policy (HO-3 / HO-5): The standard policy form for owner-occupied homes. HO-3 is the most common form (covers dwelling on an open-perils basis, contents on named-perils); HO-5 is a richer form covering both on open-perils.

I

Independent Agent: An insurance agent licensed with multiple carriers who shops the market on your behalf. Contrasts with a captive agent who works for and represents only one carrier. Miller Insurance Agency is independent.
Inland Marine: A category of property coverage that follows movable property — contractor tools, jewelry, fine art, mobile equipment. Pays replacement cost on tools rather than the depreciated value a homeowners policy would settle at.
Insured: The person or entity covered by an insurance policy. Most policies cover a named insured plus household family members or specifically named additional insureds.

L

Lapse in Coverage: Any period without active insurance coverage. Even short lapses (a few days) can significantly raise auto and home premiums at renewal and trigger reinstatement fees. We work hard to prevent lapses on every account we manage.
Liability Coverage: Any coverage that pays for harm you cause to other people or their property — auto liability, homeowners personal liability, commercial GL, professional liability, and umbrella all qualify. The most important type of insurance for protecting net worth.
Life Insurance: A policy that pays a death benefit to beneficiaries when the insured dies. Term life covers a set period at low cost; whole and universal life build cash value and last for life at higher premiums.
Loss of Rent: Coverage on a landlord (DP-3) policy that replaces rental income while a covered loss makes the property uninhabitable. Critical for landlords whose mortgage payment depends on rent.
Loss Settlement: How a carrier calculates the payout on a claim — replacement cost, actual cash value, agreed value, or functional replacement. The settlement basis matters as much as the policy limit.

M

Marine Liability: The liability portion of a boatowners policy — covers bodily injury and property damage you cause while operating a watercraft. Standard homeowners liability extends to small watercraft only.

N

Named Insured: The person or business listed by name on the declarations page. Other people may be covered (spouses, household residents, drivers), but the named insured controls the policy.
NFIP (National Flood Insurance Program): The federal program that writes flood insurance for properties in participating communities. Increasingly competing with private flood-insurance markets that often offer broader coverage at competitive pricing.
Non-Owners Auto Policy: Liability coverage for someone who drives but doesn't own a car. Useful for staying continuously insured while between vehicles or driving rental cars frequently.

O

Ordinance or Law Coverage: Coverage for the extra cost of rebuilding to current building code after a covered loss — often a major gap on older homes, where code-required electrical, plumbing, and structural upgrades can add 20-50% to the rebuild cost.

P

Personal Property: Belongings inside a home — furniture, electronics, clothing, etc. Covered under Coverage C on a homeowners policy. Subject to sub-limits on certain categories (jewelry, cash, firearms).
Policy Period: The time period the policy covers, typically 6 months on auto and 12 months on home. Coverage starts at 12:01 AM on the effective date and ends at 12:01 AM on the expiration date.
Premium: The price you pay for an insurance policy, typically annual or monthly. Premiums are determined by carrier rating algorithms — coverage limits, deductibles, location, age, prior claims, credit (in some states), and many other factors.
Professional Liability (Errors & Omissions): Coverage for claims that you made a mistake or omission in providing professional services — common for engineers, accountants, real-estate agents, IT consultants. Distinct from commercial GL.
Property Damage Liability: The part of an auto policy that pays for damage you cause to other people's property — most commonly other vehicles. Alabama's legal minimum is $25,000 per accident — almost always inadequate.

R

Renters Insurance: A policy for tenants that covers personal belongings, liability, and additional living expenses. Typically $12-25/month and often free when bundled with auto. Required by most landlords today.
Replacement Cost Coverage: A loss-settlement basis that pays the cost to replace property with new property of like kind and quality — no depreciation deducted. Standard on most homeowners dwelling coverage; often optional (and worth electing) on personal property and auto.
Rideshare Coverage: An auto endorsement (or separate policy) that covers driving for Uber, Lyft, or food-delivery platforms. Personal auto policies exclude most rideshare activity by default.

S

Scheduled Personal Property: A homeowners endorsement that lists specific high-value items (jewelry, fine art, firearms, cameras) by description and value, with broader coverage and no sub-limits. Often the right move for any single item over $2,500-$5,000.
SR-22 / SR-26: An Alabama state filing the carrier files on your behalf to prove you carry the legally required liability coverage — typically required after certain license suspensions or DUI convictions. Not a separate policy — an endorsement on your existing auto.
Subrogation: The carrier's right, after paying your claim, to pursue recovery from a third party that caused the loss. Doesn't affect your settlement; it just lets the carrier recover its payment from the at-fault party.

T

Term Life Insurance: Life insurance that covers a set period (commonly 10, 15, 20, or 30 years) at low premium. Pays a death benefit if the insured dies during the term; expires (or converts) at the end of the term.

U

Umbrella Insurance: Excess liability coverage that sits on top of your home, auto, and (for businesses) commercial GL — typically $1M-$5M in additional protection for $200-$600 a year. Foundational for any household with meaningful net worth.
Underinsured Motorist (UIM): Auto coverage that pays your damages when an at-fault driver carries liability limits too low to cover the full claim. Critical given that many Alabama drivers carry only the $25k/$50k legal minimum.
Uninsured Motorist (UM): Auto coverage that pays your damages when an at-fault driver has no insurance — a real risk in Alabama, where roughly 1 in 5 drivers is uninsured. Should always be at or above your liability limits.

V

Valued Policy: A policy where the carrier agrees to pay a stated dollar amount in a total loss, regardless of actual cash value. Common on agreed-value boat, classic-car, and inland-marine coverages.

W

Water Backup Coverage: An optional homeowners endorsement that covers damage from sewer or drain backup or sump-pump failure — a common cause of water damage that's excluded from the standard homeowners policy.
Whole Life Insurance: Permanent life insurance that lasts for the insured's whole life and builds cash value over time at a guaranteed rate. Higher premium than term life but never expires (as long as premiums are paid).
Wind/Hail Deductible: A separate, often higher deductible on a homeowners policy that applies specifically to wind or hail damage. Frequently expressed as a percentage of dwelling (1%-5%) rather than a flat dollar amount — meaning a 1% deductible on a $400k home is $4,000 out of pocket.
Workers Compensation: Mandatory coverage in Alabama for businesses with 5 or more employees. Pays employee medical bills and lost wages for on-the-job injuries, plus protects the employer from most employee injury lawsuits.
Writing Company / Carrier: The actual insurance company that issues a policy and pays claims. Independent agents place coverage with multiple writing companies to find the best fit; captive agents represent just one.

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