Understanding insurance language doesn’t have to be difficult. At Galloway Insurance, we’re committed to helping you feel confident about your coverage—starting with the basics. This glossary provides plain-language definitions for common insurance terms you may come across in your policy or during a conversation with your agent. Whether you’re reviewing a home, auto, or business policy, use this resource to get clear answers and make informed choices about your protection.
Use the links below to jump to terms by letter.
BEGINS WITH:
A | B | C | D | E | F | L | O | P | R | S | U
A
Actual cash value
This refers to what an item is worth today, not what it costs new. It is calculated by taking the replacement cost and subtracting depreciation due to age, wear, or obsolescence. Many claims are settled using actual cash value unless a replacement cost option is selected.
Actuary
An actuary is a professional who analyzes risk using math and statistics. Insurance companies rely on actuaries to help determine premium rates, predict losses, and ensure long term financial stability.
Additional insured
An additional insured is a person or organization added to a policy who receives certain protections under that policy. This is common in business contracts.
Agent
An insurance agent represents insurance companies and helps clients select, purchase, and manage insurance policies. At Galloway Insurance, agents also serve as advisors, helping clients understand coverage and avoid gaps.
Aggregate limit
This is the maximum amount an insurance policy will pay during a policy period, regardless of how many claims occur.
All risk insurance
Also called open peril coverage, this type of policy covers losses from most causes unless they are specifically excluded in the policy language.
Application
An application is the form used to apply for insurance. It collects information about property, vehicles, businesses, or individuals so the insurer can determine eligibility and pricing.
B
Benefits
Benefits are the payments or services provided by an insurance policy when a covered loss occurs.
Binder
A binder is temporary proof of insurance that provides coverage until the official policy is issued. It outlines key details such as coverage type, limits, and effective dates.
Blanket coverage
Blanket coverage provides a single limit of insurance that applies across multiple properties, locations, or items instead of listing each one separately.
Bodily injury liability
This coverage helps pay for injuries suffered by others for which you are legally responsible. It may also include legal defense costs.
Burglary
Burglary generally involves forced entry with intent to steal. Insurance policies define burglary specifically, so coverage depends on how the policy describes the loss.
C
Carrier
The carrier is the insurance company that issues the policy and pays claims.
Casualty insurance
Casualty insurance broadly refers to coverage for liability and loss caused by accidents, including auto liability, workers’ compensation, and general liability.
Certificate of insurance
A certificate of insurance is a document that shows proof of coverage and policy limits, often required by landlords, lenders, or contractors.
Claim
A claim is a request made to an insurance company asking for payment or services after a loss.
Coinsurance
Coinsurance requires the insured to carry insurance equal to a certain percentage of the property’s value. Failing to do so can reduce claim payments.
Commercial lines
Commercial lines refer to insurance policies designed for businesses rather than individuals.
D
Declarations
The declarations page summarizes the key details of an insurance policy, including named insureds, coverage limits, deductibles, and policy period.
Deductible
A deductible is the amount you pay out of pocket before insurance coverage applies to a claim.
Depreciation
Depreciation is the reduction in value of property due to age, wear, or condition.
E
Endorsement
An endorsement is a written change to an insurance policy that adds, removes, or modifies coverage.
Exclusion
An exclusion identifies what is not covered by a policy. Understanding exclusions is critical to avoiding coverage gaps.
Exposure
Exposure refers to the potential for loss. In insurance, this could mean payroll, square footage, revenue, or number of vehicles.
F
Flood insurance
Flood insurance covers damage caused by rising or overflowing water, which is not covered under standard home or business policies.
L
Liability limits claims
Liability limits are the maximum amounts an insurance policy will pay for covered
Loss
A loss is damage, injury, or financial harm that may be covered by insurance.
O
Occurrence
An occurrence is an accident or repeated exposure to the same hazardous condition that results in a loss and may trigger coverage under a policy.
P
Peril
A peril is the cause of a loss, such as fire, theft, wind, or water damage.
Policyholder
The policyholder is the individual or business listed on the policy who owns the insurance contract.
R
Replacement cost
Replacement cost coverage pays what it costs to repair or replace property with new items of similar kind and quality, without deducting for depreciation.
Risk
Risk refers to the chance of loss.
S
Subrogation
Subrogation allows the insurance company to recover claim payments from a responsible third party after a loss is paid.
U
Underwriter
An underwriter evaluates insurance applications and decides whether to offer coverage and at what terms.
FAQs – Frequently Asked Questions
What are the most important insurance terms to know?
Some of the most common terms every policyholder should understand include deductible, premium, liability, exclusion, and replacement cost. These appear in nearly every type of insurance policy, including home, auto, and business insurance.
What does ‘replacement cost’ mean in homeowners insurance?
Replacement cost refers to the amount it would take to replace your home or belongings with similar items at today’s prices, without deducting for depreciation. This is different from actual cash value, which subtracts depreciation from the payout.
What is a deductible in insurance?
A deductible is the amount you pay out of pocket before your insurance starts covering a loss. For example, if you have a $1,000 deductible and file a covered claim for $5,000, your insurance company would typically pay $4,000.
What’s the difference between liability and full coverage auto insurance?
Liability insurance covers the injuries or damage you cause to others. Full coverage usually includes liability, collision, and comprehensive insurance, which also protects your own vehicle from damage, theft, or weather events.
Do insurance terms mean the same thing in every policy?
Not always. Many terms are common across the industry, but their definitions can vary depending on the policy type or insurance carrier. That’s why Galloway Insurance offers a glossary to help Texas clients understand what their policy actually says.
Why does insurance language seem so technical?
Insurance policies are legal contracts, which is why they’re written with specific terminology. This ensures precision and clarity between insurers and policyholders. Galloway Insurance helps break down these terms in plain language for better understanding.
Where can I get help understanding my policy?
You can contact Galloway Insurance or stop by one of our offices in Marble Falls, Burnet, or Horseshoe Bay. Our local agents are happy to walk you through your policy.
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