Insurance Dictionary.
Explain it to me like I’m 5…
… is what I’d commonly advise my colleagues whenever they feel like they “lost” a client in the conversation.
Insurance shouldn't be harder to understand than trying to assemble IKEA furniture with missing instructions. That's why we've put together this foolproof "Insurance Jargon Buster", so that any one and everyone can confidently understand what their hard-earned money is paying for.
General Terms
Endorsement
Think of this as a change order for your insurance policy. It tweaks or adds to your coverage. Like, say you built a sweet new pool in the backyard - you might want to add an "endorsement" to your homeowner's insurance to cover it.
Underwriting
Underwriting is insurance-speak for "We're checking you out". It's how insurance companies decide if they'll cover you and how much it's gonna cost. Like when you get car insurance, they'll look at your age, how you've been driving, and what kind of car you have to figure out your rate.
Exclusion
These are the "Nope, we're not covering that" rules in your policy. For example, a business insurance policy might say "Sorry, but earthquakes or floods are on you, buddy".
Indemnity
Indemnity is just a fancy way of saying "We'll get you back to where you were financially before the disaster hit". So if a fire causes $30,000 worth of damage to your house, your insurance should pay up that amount.
Actual Cash Value (ACV)
This is how much your insured item is worth right now, not when you bought it. So if a tree decides to take a nap on your 5-year-old car, the insurer will figure out the car's "current" value to calculate your payout.
Replacement Cost
This is what it'll cost to get a brand new or repair the insured item, regardless of how old it was. If a storm wreaks havoc on your roof, a policy covering replacement cost would pay for a brand new roof, not just what the old, weathered roof was worth.
Peril
Peril is just a scary term for the risks or causes of loss covered by your insurance policy. Things like theft, fire, and collision in case of auto insurance.
Rider
A rider is like a VIP pass for your insurance policy. It's an add-on that gives you extra coverage or changes the terms. Maybe you want to add a rider to your life insurance to cover something extra, like if an accident sends you to the big gig in the sky.
Deductible
This is your "you pay first" amount. It's the chunk of change you need to cover before your insurance steps in. If your homeowner's insurance has a $1,000 deductible, and a storm causes $5,000 damage, you're picking up the first $1,000 of the tab, and the insurance covers the rest.
Liability Coverage
A part of an insurance policy that protects the policyholder against legal claims. This is the part of your policy that's like your personal superhero, swooping in to protect you if someone claims you injured them or damaged their property. Like if a customer takes a tumble at your business, your liability insurance is there to handle the costs.
Auto
Bodily Injury Liability
Bodily Injury Liability is like a parachute – you hope you never need it, but if you do, you're grateful to have it. It covers medical expenses, loss of income, and even legal fees for others if you cause an accident. It's the chivalrous part of your car insurance, taking care of others before yourself, as it doesn't cover your own injuries or property damage.
Collision Coverage
The unsung hero of the automotive world. This covers your repair costs after a collision, whether that collision is with another vehicle, a mailbox, or even a pesky guardrail that snuck up on you. It's optional unless a lender is involved, in which case, they'll likely demand it. Just know that it has a secret identity called a "deductible" that you'll need to meet first.
Comprehensive Coverage
The cover-all insurance for everything that isn't a collision. Theft, fire, natural disasters, and even an oddly specific clause for "animal-caused damage" – comprehensive coverage has got your back. Like Collision Coverage, it's optional unless your car is leased or financed. It's essentially a big safety net for your car for all those "just-in-case" scenarios.
Gap Insurance
The harsh truth of car depreciation can hit hard, especially when your vehicle is totaled and its value doesn't match what you owe. Gap Insurance acts as a buffer, filling in the difference and ensuring your wallet doesn't bear the brunt of the "gap."
Medical Payments Coverage (MedPay)
MedPay is like a mini healthcare team, activated the moment you or your passengers need immediate medical attention following a car accident. It's there to pay the medical bills, making sure you don't have to sweat the finances when you should be focusing on recovery.
Property Damage Liability
Should your car decide to go rogue and damage someone else's property (maybe that charming white fence down the lane), Property Damage Liability steps in. It foots the repair bills, keeping your neighborly relations intact and your bank balance healthy.
Rental Reimbursement
When your vehicle is off for a repair vacation, Rental Reimbursement ensures you're not left stranded. It's the bridge that covers the cost of a rental car, making sure your life on the road continues without a hiccup.
SR-22 Certification
The SR-22 Certification is the official nod from the court confirming that you carry the necessary car insurance. It's like the badge of honor that lets you get back on the road after certain traffic violations.
Towing and Labor Cost Coverage
This coverage acts as your car's best friend on a bad day. If your vehicle suffers a breakdown or refuses to start, this coverage ensures that help is just a call away. It covers services like towing, tire changes, and lockouts, so you're never left high and dry.
Uninsured/Underinsured Motorist Coverage
If another driver, lacking sufficient insurance, causes an accident, Uninsured/Underinsured Motorist Coverage steps in like a backup plan. It covers your repair and medical costs, ensuring that you're not left picking up the financial pieces due to someone else's negligence.
Homeowners
Dwelling Coverage
This is your home's shield against covered disasters, repairing or rebuilding your home's structure when disaster strikes. In Southwest Florida, it's not a matter of if, but when. Keep in mind that skimping on this coverage could lead to financial turbulence.
Other Structures Coverage
This coverage extends protection to detached structures on your property. As we know, Mother Nature doesn't pick favorites, and this makes sure your unattached structures aren't forgotten in a storm. Be cautious though, there's usually a cap tied to your dwelling coverage.
Personal Property Coverage
Offering a safety net for your personal belongings, it covers damage or loss due to theft or covered disasters. If, however, you're stashing Picassos or a grand piano, you might need a Personal Articles Policy for ample protection.
Loss of Use Coverage
This coverage steps in when a covered disaster makes your home uninhabitable, paying for those pricey hotel stays. A must-have during Florida's hurricane season, it makes sure that you're not stranded on a financial desert island. Be mindful that this coverage has limits.
Personal Liability Coverage
This is your insurance's response to Murphy's Law, covering medical and legal expenses if someone's injured on your property. However, it doesn't cover damages from intentional acts - so, no recreating 'Fight Club' scenes on your lawn.
Sinkhole Exclusion
This term refers to a clause in your insurance policy that essentially says, "Sorry, but we don't cover sinkholes." This is particularly relevant in areas like Florida, known for its karst topography, which might as well be a Michelin star restaurant for sinkholes. While excluding sinkhole coverage can reduce your premium, it's a game of Russian Roulette given the sinkhole-prone region. You'd want to check this part of your policy with a fine-tooth comb, lest your home takes an unplanned journey to the center of the Earth.
Ordinance or Law Coverage
If you're rebuilding after a disaster, this coverage ensures you meet the modern building codes. With Florida's strict building laws, this is no optional add-on. Just remember, it doesn't cover voluntary upgrades or enhancements.
Lender-Placed Insurance
If your homeowners insurance lapses, your mortgage lender will likely opt for this, protecting their investment in your property. However, it usually costs more and covers less, turning the cost-effectiveness meter upside down.
Wind Mitigation Inspection
This typically optional assessment reveals how well your home can weather strong winds. In Florida, where wind plays rough, a good report can seriously cut your insurance premium. While the upfront cost may hurt, the potential savings are like aloe on a sunburn.
4-Point Inspection
Typically required for homes in Florida over 20-40 years old by most carriers, this inspection can uncover potential issues that need attention. It might lead to unplanned repairs, but a thumbs-up can also lead to lowered premiums.
Water Backup Coverage
When your sewers or drains reverse roles due to heavy rain or your sump pump throws in the towel, this coverage kicks in for cleanup and repairs. However, don't confuse it with flood coverage - that's a separate conversation.
Flood Insurance
For when Florida's weather decides to remodel your home as an indoor pool, this separate policy covers flood damage to your home and belongings. Just remember, your standard homeowners policy typically says "no can do" to flood damage.
Medical Payments Coverage
This coverage is quick to cover minor medical expenses if someone gets injured on your property, regardless of fault. A great dispute-avoider, but it may run out of steam for severe injuries.
Replacement Cost Estimator Tool
Your insurer uses this to figure out the cost of rebuilding your home with similar materials and workmanship. The accuracy of the tool heavily relies on your input. Here, honesty is indeed the best policy.
Commercial/Business
BOP (Business Owners Policy)
Consider this your combo-deal of insurance coverage. It's a bundling of property, liability, and business interruption insurance. So, when a hurricane decides to do a number on your storefront, a BOP has got you covered.
Commercial Auto Insurance
Commercial auto insurance comes to the rescue when on-the-job mishaps occur. Not sure if you need it? If you're more than just a commuter, like if you haul goods or people for work, you're veering into commercial insurance territory. If it's just you and the open road, personal auto insurance should suffice.
Commercial Property Insurance
Commercial property insurance saves your buildings, equipment, and inventory from disastrous endings. If a wildfire invites itself to a party at your premises, commercial property insurance swoops in for the rescue.
Cyber Liability Insurance
In this age of keyboard warriors, this coverage is your digital knight in shining armor. If a data breach occurs and customer information gets into the wrong hands, cyber liability insurance helps save the day.
EPLI (Employment Practices Liability Insurance)
This is the HR whisperer for your insurance policy. It deals with the tricky stuff like discrimination, wrongful termination, and harassment claims. If a disgruntled ex-employee decides to take you to court, EPLI will be your legal sidekick.
GL (General Liability Insurance)
It's like your business's invisible safety net. If a customer takes a tumble in your cafe and decides to sue, general liability insurance is there to juggle the financial implications.
Inland Marine Insurance
No, it's not for insuring seahorses. This covers goods, tools, and equipment that are on the move. So, if a light-fingered thief takes a liking to your construction tools, inland marine insurance will help cover your losses.
Liquor Liability Insurance
When the drinks flow, so can the legal claims. This covers the aftermath when a patron at your bar enjoys one too many and causes trouble. Liquor liability insurance helps you mop up the legal mess.
Professional Liability Insurance
Sometimes referred to as "Oops! We goofed!" insurance. It covers the fallout from mistakes or oversights your business makes in providing professional services. If your real estate agency overlooks a property's flood zone status, resulting in a client's financial loss, professional liability insurance would protect you from the resulting legal claims.
Workers' Compensation Insurance
This policy is like your employees' safety harness. If they get hurt on the job, it helps them bounce back by covering medical costs and part of their lost wages. It's there to make sure a slip with a nail gun doesn't lead to financial ruin.
Business In-depth
Business Income Coverage
Think of this as your business's sick pay. It covers the money you miss out on if a disaster forces you to close or repair your business. So, if a hurricane has you temporarily closing your Ft. Myers Beach restaurant, business income coverage steps in to fill the income gap you'd usually make.
Data Breach Coverage
In the unfortunate event your tech firm faces a data breach, this coverage is your financial lifeline. It pays for stuff like notifying affected people, credit monitoring services, and your defense costs.
Employee Dishonesty Coverage
Just in case you have an employee with sticky fingers, this coverage protects your business from losses due to theft, embezzlement, or forgery. So if you find an employee in your retail shop helping themselves to cash from the register, this coverage has your back.
Flood Exclusion
In the land of floods - aka Florida - most standard business insurance doesn't cover flood damage. To fight against this risk, you'd need to put your money down for separate flood insurance.
Glass Coverage
This endorsement is like a safety net for your business's glass fixtures. If a wind storm sends a tree branch crashing through your storefront window, glass coverage would chip in for the repairs.
Non-Owned Auto Coverage
This is a handy endorsement if your employees use their personal cars for work. If one of your Sarasota employees has a fender-bender while on a work errand, non-owned auto coverage shields your business from liability claims.
Spoilage Coverage
This add-on is a lifesaver if your business deals with perishable stock. If a hurricane turns off the power at your seafood restaurant, causing your fresh seafood to spoil, spoilage coverage would cover the loss.
TRIA (Terrorism Risk Insurance Act) Coverage
If the unthinkable happens and your Miami hotel gets damaged in an act of terrorism, this federally-backed coverage comes to the rescue once you've met certain conditions.
Utility Services – Direct Damage Coverage
This endorsement is like an insurance policy for your utilities. If a FPL power outage ruins the food in your grocery store, this coverage is there to take care of the losses.
Voluntary Property Damages Coverage
This endorsement steps in when you've accidentally damaged someone else's property during your work and decide to foot the bill. If your company accidentally breaks a customer's property, this coverage handles the repair or replacement cost.