Insurance Terms Explained
A plain-English insurance glossary for Texas homeowners, drivers, and business owners. Select a term to learn what it means, then explore the related coverage guide.
These are general explanations. Your policy wording, endorsements, limits, and exclusions determine coverage.
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Actual cash value
A way of valuing damaged property that generally accounts for depreciation. An older roof or vehicle can therefore have a claim value below the cost of buying a new replacement.
Additional insured
A person or organization given specified protection under someone else's liability policy. The endorsement determines which work, claims, and time periods are covered; a certificate alone does not create that status.
Additional living expenses
Eligible extra household costs when covered damage makes your home unfit to live in. For example, the additional cost of temporary lodging may qualify, subject to time and dollar limits.
Aggregate limit
The most a policy will pay for a defined group of covered claims during a stated period. This is different from the limit that applies to one occurrence.
Agreed value
A value accepted by the insurer and insured for a stated coverage purpose. Its effect depends on the form: it may set a settlement value or suspend a property coinsurance provision. Confirm which applies.
Auto liability
Coverage for your legal responsibility for covered injuries to others or damage to their property involving an insured vehicle. It does not replace collision coverage for your own vehicle.
Binder
Temporary evidence that insurance has been put in force by an authorized insurer or representative. A quote or request for insurance is not itself a binder.
Bodily injury
Physical injury, sickness, or disease, often including resulting death, as defined by the policy. Liability coverage addresses covered claims made against an insured for these injuries.
Builders risk
Property coverage for an eligible building project while construction or renovation is underway. Review the existing structure, materials, theft restrictions, and when coverage ends.
Business income
Coverage for qualifying income loss and continuing expenses following a covered interruption of operations. The cause of loss, restoration period, waiting period, and limits matter; ordinary slow sales do not qualify.
Business owners policy
A package for eligible businesses that combines property and general liability coverage, commonly with business income coverage. Commercial auto, workers' comp, and professional liability generally need separate review.
Business personal property
Business contents such as furniture, equipment, and inventory. Coverage depends on ownership, location, valuation, and policy terms. Property transported or used away from the premises may need different protection.
Cancellation
Ending a policy before its scheduled expiration. The cancellation date and any replacement policy's start date matter because a gap can leave you uninsured.
Carrier
The insurance company that issues the policy and assumes the covered risk. An independent agency helps arrange coverage with available carriers; it is not the insurer.
Certificate holder
The person or organization receiving a certificate of insurance. Being listed as the holder does not automatically make that party an insured.
Certificate of insurance
A document summarizing evidence of insurance for a stated policy period. It does not change the policy, guarantee a claim payment, or add an additional insured.
Claim
A request for payment or other policy benefits after a loss, or a demand made against an insured. The insurer evaluates the facts and applicable coverage.
Claims-made coverage
Liability coverage generally triggered by a claim first made during the specified coverage period, with reporting and other conditions. A retroactive date and any extended reporting period are important.
Class code
A rating category based on the work a business or its employees perform. Accurate job descriptions help the insurer apply appropriate classifications and calculate premium.
Coinsurance
In property insurance, a requirement to carry a stated percentage of the property's value. Carrying too little may reduce a covered claim payment. This differs from health insurance cost sharing.
Collision
Auto coverage for damage to your insured vehicle from a collision or overturn, subject to your deductible and settlement terms.
Combined single limit
One liability limit shared by covered bodily injury and property damage from an accident, instead of separate limits for each category.
Commercial auto
Insurance designed for business vehicle exposures. Covered vehicles, drivers, uses, liability limits, and physical damage options must match the operation.
Commercial property
Coverage for insured business buildings or contents against covered causes of loss. Check valuation, deductibles, location limits, and exclusions such as flood.
Completed operations
Liability exposure from work after it has been finished. A later injury or damage claim may involve this coverage, but it is not a warranty or a promise to replace defective work.
Comprehensive
Auto physical damage coverage for covered events other than collision, such as theft, hail, fire, or animal contact. The deductible and policy exclusions still apply.
Contractual liability
Liability assumed under an agreement. Insurance covers only qualifying contractual exposures under the policy; signing a contract does not automatically make its promises insured.
Cosmetic damage
Damage affecting appearance without necessarily affecting function, as defined by the policy. An exclusion or limitation can affect payment for dented roofing or other surfaces.
Cyber insurance
Coverage that may address selected data breaches, cyber incidents, response costs, and related liability. Ransomware, social engineering, and funds-transfer fraud need specific review.
Declarations page
The policy summary listing key information such as insured names, policy dates, coverages, limits, and deductibles. It must be read with the policy forms and endorsements.
Deductible
The part of a covered loss you retain under the policy. It may be a dollar amount or a percentage; different causes of loss may have different deductibles.
Depreciation
A reduction in property value for age, condition, wear, or other factors. Whether any withheld depreciation can later be recovered depends on the policy and repair requirements.
Dwelling
The home structure insured under a residential property policy. Its rebuilding limit is different from the home's sale price or the amount owed on the mortgage.
Employers liability
Coverage commonly included with workers' compensation for certain employer liability claims involving employee injury or disease. It has its own limits and exclusions.
Endorsement
A policy document that adds, removes, or changes coverage or other terms. Endorsements can narrow coverage as well as expand it.
Equipment breakdown
Coverage for qualifying sudden equipment failures, such as certain mechanical or electrical breakdowns. It is different from routine maintenance or normal wear and tear.
Errors and omissions
Liability coverage for covered allegations of mistakes or failures in professional services. The profession, services, exclusions, claim timing, and reporting rules determine the protection.
Excess liability
Liability insurance that provides limits above specified underlying insurance. Do not assume it covers an exclusion or exposure missing from the underlying policy.
Exclusion
Policy wording that removes coverage for a particular cause of loss, activity, person, property, or type of claim. An exception to an exclusion must also be read carefully.
Experience modification
A factor used in qualifying workers' compensation rating that compares a business's loss experience with expected results. Eligibility and calculation rules apply; it is not the only pricing factor.
Extra expense
Qualifying additional spending to reduce or avoid a covered business interruption, such as eligible temporary-location costs. Coverage triggers, limits, and time periods depend on the policy.
Fidelity bond
Protection addressing specified employee dishonesty or theft exposures. The people covered, property protected, discovery conditions, and limits must be checked.
Flood insurance
Separate protection for eligible flood damage to a building or contents. Standard homeowners insurance generally excludes flood; building and contents limits and deductibles may be separate.
Full coverage
An informal auto-insurance phrase with no single guaranteed package of benefits. Ask which coverages, limits, and deductibles are included rather than relying on the label.
Gap insurance
Coverage or an agreement addressing some or all of the eligible difference between a vehicle's claim value and the loan or lease balance after a total loss. Caps and exclusions vary.
General liability
Business liability coverage for covered third-party bodily injury, property damage, and specified personal or advertising injury claims. It does not cover every business risk.
Hired and non-owned auto
Liability protection for a business using certain vehicles it does not own. Hired auto concerns qualifying rented, leased, or borrowed vehicles; non-owned auto commonly concerns employees' personal vehicles used for work. It generally does not pay to repair those vehicles.
Hired auto
Business liability coverage involving qualifying vehicles the business rents, leases, or borrows, such as a temporary replacement service truck. Damage to that truck needs a separate physical damage review.
Independent agency
An insurance agency able to work with multiple insurance companies. Available choices depend on its carrier relationships, the products involved, and your eligibility.
Inland marine
Property insurance often used for movable tools, equipment, or property in transit. For contractors, review jobsite theft, storage, rented equipment, and off-premises limits.
Liability insurance
Insurance addressing covered legal responsibility for harm to others. The type of policy determines which activities and claims are covered and how defense costs are handled.
Limit
The maximum payable under a specified coverage provision. Limits may apply per person, accident, occurrence, item, or policy period; one figure does not describe every limit.
Liquor liability
Coverage for qualifying claims connected with selling, serving, or furnishing alcohol. Restaurants should review this exposure separately from ordinary general liability.
Loss of use
Coverage for qualifying loss of the ability to use insured property. A home policy may address temporary living costs; auto rental benefits require checking the specific coverage purchased.
Loss payee
A party, often a lender, entitled to specified rights to property claim payments. Those rights depend on the applicable clause or endorsement.
Loss runs
Insurer records of reported losses and claim activity for specified periods. Underwriters may request them when quoting a business; a loss run is different from a declarations page.
Medical payments
Coverage for specified medical expenses, often without requiring a finding of fault. Who qualifies, where coverage applies, and the limit differ between auto, home, and business policies.
Named insured
The person or legal entity identified as an insured in the policy declarations. Use the correct business entity and review who else qualifies as an insured under the wording.
Non-owned auto
Business liability coverage for qualifying use of vehicles the business does not own, rent, or lease, commonly an employee's personal car used to collect supplies. It does not replace the employee's personal auto insurance.
Nonrenewal
An insurer's decision not to continue a policy after its current term. It differs from cancellation during the term. Applicable notice requirements and replacement timing should be reviewed.
Occupational accident
A policy or benefit arrangement addressing specified accident-related losses for eligible people. Benefits, limits, and legal protections differ from statutory workers' compensation; they are not interchangeable.
Occurrence
An event, including qualifying repeated exposure, as defined in a liability policy. An occurrence limit applies to covered claims arising from that occurrence, subject to the wording.
Ordinance or law
Coverage for specified additional costs associated with building-code enforcement after covered damage. Demolition, undamaged portions, and increased rebuilding costs may have separate provisions.
Other structures
Residential property coverage for qualifying structures separate from the dwelling, such as a detached garage or fence. Business use and certain property types may be restricted.
Per-project aggregate
An endorsement provision applying a specified aggregate limit separately to qualifying projects. Its scope and exclusions must match the contract and actual operations.
Peril
A cause of damage, such as fire or wind. A policy covers only the causes of loss provided by its terms and endorsements.
Personal injury protection
Auto coverage for eligible medical expenses and certain other benefits, including qualifying lost income, regardless of fault. Texas auto policies include PIP unless it is rejected in writing.
Personal property
Belongings such as furniture, clothing, and electronics. Coverage may have special limits and different settlement terms; high-value items can require separate scheduling.
Policy
The insurance contract, including its declarations, coverage forms, conditions, and endorsements. Summaries and certificates cannot substitute for reading the contract.
Premium
The price charged for insurance. Payment installments, fees, taxes, and later audit adjustments may affect the total amount paid.
Premium audit
A review comparing estimated rating information with actual exposures such as payroll or sales. The final premium may change based on the records and policy provisions.
Primary and non-contributory
A provision describing when a policy responds before other available insurance and does not seek contribution from it. Availability and application depend on the endorsement and claim facts.
Property damage
Physical injury to tangible property, or qualifying loss of its use, as defined by a liability policy. This differs from property insurance for your own building or belongings.
Quote
An estimate or proposal for insurance based on supplied information. Price and eligibility may change after review; a quote alone does not put coverage in force.
Replacement cost
A valuation approach based on replacing damaged property with comparable new property without deducting depreciation, subject to policy terms. Payment may depend on completing repairs and staying within limits.
Retroactive date
For applicable claims-made coverage, the date before which acts or events are generally outside coverage. Changing it can create a gap even if the new policy starts immediately.
Roof schedule
Policy terms that set how payment for a roof is calculated, often using age or material. Review the schedule alongside the deductible and settlement provisions.
Scheduled property
Items specifically listed for insurance, often with individual values and terms. Scheduling jewelry, equipment, or other property can address limits in broader coverage.
Self-insured retention
An amount the insured must handle before specified coverage responds. Its defense and payment responsibilities can differ from a deductible.
Split limits
Separate auto liability limits for injury to one person, injury to multiple people in one accident, and property damage. For example, 30/60/25 represents limits of $30,000, $60,000, and $25,000.
Spoilage
Loss of perishable stock from specified causes, potentially including covered refrigeration breakdown or power interruption. The exact triggers and exclusions require review.
SR-22
A certificate filed by an insurer to show required auto liability financial responsibility. It is a filing, not a separate type of coverage or a substitute for an auto policy.
Subrogation
An insurer's right, after paying a covered loss, to pursue recovery from another responsible party. Policy duties and any waiver can affect that right.
Surety bond
A three-party agreement involving the principal who must perform, the obligee requiring the bond, and the surety backing the obligation. The principal may have to reimburse the surety for a paid claim.
Tenant improvements
Changes made to leased space, such as built-in counters or partitions. The lease, ownership interests, and policy determine how these improvements should be insured.
Umbrella insurance
Liability insurance providing additional limits over specified underlying policies, with any broader coverage governed by its own terms. Required underlying limits and exclusions must be reviewed.
Underwriting
An insurer's evaluation of the information about a risk to determine eligibility, terms, and pricing. Accurate descriptions of your home, drivers, or operations help avoid mismatched coverage.
Uninsured and underinsured motorists
Auto coverage addressing qualifying losses caused by drivers with no liability insurance or insufficient insurance. Coverage conditions, limits, and deductibles apply.
Vacancy
A property's vacancy or lack of occupancy can change eligibility or restrict coverage. Definitions and time thresholds differ, so report a move-out or prolonged vacancy before relying on an existing policy.
Waiver of subrogation
A provision restricting recovery against a specified party after a covered payment. The waiver must be permitted by the policy or an appropriate endorsement; a contract request alone does not add it.
Water backup
Water damage from specified sewer, drain, or sump backup events. It is different from flood and may require an endorsement with its own limit and deductible.
Wear and tear
Gradual deterioration from use or age. Insurance is generally not a maintenance contract; worn-out components and resulting damage must be evaluated separately under the policy.
Wind and hail deductible
The amount retained for covered wind or hail damage. If it is 2% of a $300,000 dwelling limit, the deductible is $6,000—not 2% of the repair bill.
Workers' compensation
Coverage providing statutory benefits for eligible work-related injuries or illnesses. Texas employers should review legal exceptions, customer contracts, employee duties, and payroll before deciding on coverage.
Ask about your own coverage
A definition is a starting point. Send us the policy wording or contract requirement you want explained. Contact Greg Williams Insurance in Longview or call 903-372-1901.
Further reading: Texas Department of Insurance auto guide, Texas home insurance guide, Texas workers’ compensation employer resources, and hired and non-owned auto overview.