Insurance Claim Glossary

Insurance claims bring with them confusing terms you may not encounter often enough to fully understand. Below are some of the more common terms and their definitions.

ACV / Actual Cash Value – ACV is an acronym used to represent "actual cash value." Insurance companies often issue policies that replace covered losses using the item's actual cash value. For example, if you originally spent $2500 on a computer and it is only worth $200 on the date of loss, an AVC policy would cover just $200 regardless of how much you paid for the item originally or how much it would cost to replace it.

Adjuster – An adjuster is a type of insurance professional who estimates the cost of an insurance claim. While many insurance adjusters work for insurance companies, some have chosen a different path and work as "public adjusters" who serve policyholders.

Denial letter – A denial letter from an insurance company is a formal letter informing you that your claim has been partially or completely denied.

Deductible – Deductibles are common components of insurance policies. The deductible is the amount of the claim that you will be responsible for paying out of pocket. In general, if your policy has a deductible and you file an insurance claim, the value of the claim must exceed the amount of the deductible. For example, if your deductible is $500, you will be responsible for paying the first $500 of the repairs and the insurance company will then become involved. On the other hand, if the damage is less than that amount, then the insurance company won't be involved at all.

Depreciation – Some property and belongings lose value over time, a process known as depreciation. Insurance policies often take depreciation into account.

Endorsement – Endorsements (and riders) are insurance policy add-ons. For example, a standard homeowner's insurance policy might have sufficient coverage for your belongings. By adding an endorsement, you can modify the policy to better meet your specific needs.

Exclusion – An insurance policy exclusion specifically excludes a specific item, damage type, or peril from the policy. For example, damage caused by earthquakes is commonly excluded from standard insurance policies.

Insured – The policyholder is often referred to as the "insured."

Insurer – The issuer of an insurance policy is often referred to as the "insurer."

Peril – A peril is a cause of damage such as an earthquake or a wildfire. Insurance policies often specify which perils they insure against and which ones they exclude from coverage.

Policy – Insurance policies are written contracts for a prescribed period between an insurance company and a policyholder. The policy spells out its terms and conditions along with all other pertinent details such as limits, premiums, deductibles, exclusions, and more.

Policy Limit – Insurance policies insure property up to the policy's specific limit. Numerous policy limits may apply to a single policy. For example, there may be limits on how much jewelry, artwork, and cash the policy will cover.

Premium – An insurance premium is the cost of the policy, typically expressed as either an annual or monthly amount.

Rider – See endorsement.

Statute of Limitations – When an insurance loss occurs, the policyholder has a limited amount of time to file a lawsuit related to the loss. This period of time is known as the statute of limitations.