Insurance 101: The Ultimate Glossary of Must-Know Terms

Covers veterinary expenses for injuries resulting from accidents.

The National Flood Insurance Act of 1968 and any amendments to it. This act established the National Flood Insurance Program (NFIP).

• What it is: Reimburses you for the depreciated value of your damaged or destroyed belongings. This takes into account the item's age, wear and tear, and overall condition.
• Example: If your 5-year-old TV is stolen, ACV coverage would pay you the current market value of a 5-year-old TV of the same model, not the price of a brand new one.
• Pros: Lower premiums compared to replacement cost value (RCV) coverage.‍
• Cons: May not be enough to fully replace your items.

The estimated replacement cost of a damaged item minus depreciation. This is typically the amount paid out by a flood insurance policy for damaged belongings.

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A professional who analyzes statistical data to calculate insurance risks and premiums.

You can often purchase additional coverage for specific risks, like flood insurance, earthquake insurance, or valuable articles insurance (for jewelry, art, or other high-value items).

• What it is: Covers the cost of temporary housing, food, and other essential living expenses if your home becomes uninhabitable due to a covered event (fire, storm, etc.).
• Coverage: ALE typically has a limit, either a specific dollar amount or a percentage of your dwelling coverage limit.
• Example: If a fire damages your home, ALE can help pay for a hotel stay, restaurant meals, pet boarding, and other expenses while your home is being repaired or rebuilt.

You can purchase additional coverages, such as flood insurance and earthquake insurance, to protect your home from these perils.

Assets recognized and accepted by state insurance laws in determining the solvency of insurers and reinsurers.

The tendency of those exposed to a higher risk to seek more insurance coverage than those at a lower risk.

Selling insurance through groups such as professional and business associations.

The professional who helps you find and purchase insurance policies.

The total amount an insurance company will pay for all claims during a policy period.

A contract in which one party provides something of value to another party in exchange for a conditional promise, which is a promise that the other party will perform a stated act upon the occurrence of an uncertain event.

An insurance company incorporated under the laws of a foreign country, as opposed to a "foreign" insurance company which does business in states outside its own.

Set amount that is applied to all covered losses other than hurricane losses. The second deductible applies only to hurricane losses.

Property insurance that is usually bought in conjunction with fire insurance; it includes wind, water damage, and vandalism coverage.

An alternative to going to court to settle disputes. Methods include arbitration and mediation.

Nontraditional mechanisms used to finance risk, such as captives and risk-retention groups.

The annual premium rate charged for flood insurance, expressed as a percentage of the building value.

The maximum amount a health insurance policy will pay for covered expenses over the course of a year or lifetime.

Laws that prohibit companies from working as a group to set prices, restrict supplies, or stop competition in the marketplace.

Pays benefits if you're unable to perform any occupation for which you are reasonably suited.

The procedure for formally challenging a flood zone determination or other FEMA decisions related to the NFIP.

A professional assessment to determine the value of a property or item.