Insurance section · Glossary

Insurance glossary

50 words you will see in a policy or a quote, explained in plain English. California rules are noted where they apply.

Policy basics

Premium: The price of an insurance policy, paid for the policy term, either all at once or in installments.
Deductible: The part of a covered loss you pay before the insurance company pays the rest.
Percentage deductible: A deductible set as a percent of a coverage limit instead of a fixed amount. Earthquake policies often work this way, for example 15% of the dwelling limit.
Declarations page ("dec page"): The summary page of your policy: who and what is insured, the policy period, the limits, the deductibles and the premium.
Policy limit: The most the insurance company will pay for a covered loss under one coverage.
Endorsement (rider): A change added to a policy that adds, removes or adjusts coverage.
Exclusion: Something the policy specifically does not cover, such as flood in a homeowners policy.
Peril: A cause of loss, such as fire, theft or windstorm.
Named-peril policy: A policy that covers only the causes of loss it lists.
Open-peril (special form) policy: A policy that covers every cause of loss except the ones it excludes.
Binder: A temporary written confirmation from the insurance company that coverage is in force until the policy is issued.
Underwriting: How an insurance company decides whether to insure you and at what price.

Home, renters and landlord

Dwelling (Coverage A): Insurance on the house itself.
Other structures (Coverage B): Detached structures on the property, such as a garage, fence or shed.
Personal property (Coverage C): Your belongings: furniture, clothes, electronics and the like.
Loss of use or additional living expenses (Coverage D): The extra cost of living somewhere else while your home is repaired after a covered loss.
Fair rental value: For landlords: the rent you lose while a rental can't be lived in after a covered loss.
Personal liability (Coverage E): Pays when you are legally responsible for injuring someone or damaging their property, including the cost of your legal defense.
Medical payments to others (Coverage F): Small medical payments for a guest hurt on your property, no matter who was at fault.
Loss assessment: Covers your share of a charge your homeowners association bills owners after a covered loss to common property.
Actual cash value (ACV): The cost to repair or replace something minus depreciation (wear and age). California defines it in Insurance Code section 2051.
Replacement cost: The cost to repair or replace with similar materials, without subtracting depreciation, up to the limit (Insurance Code section 2051.5).
Extended replacement cost: Pays a set percentage above the dwelling limit if rebuilding costs more. In California this type must be labeled "Limited Replacement Cost Coverage."
Guaranteed replacement cost: Pays to rebuild fully no matter the limit. It is rare, and in California the name may be used only when the policy really does this.
Building code upgrade (ordinance or law) coverage: Pays the extra cost of rebuilding to current building codes. California replacement cost policies must include at least 10% of the dwelling limit for this (Insurance Code section 10103).
Difference in Conditions (DIC): A policy that fills gaps in another one. In California it is often paired with a FAIR Plan policy to add coverage such as water damage, theft and liability.
FAIR Plan: California's insurer of last resort for property owners who can't find coverage from a regular insurance company.
Moratorium: A temporary ban on cancellations and non-renewals in wildfire areas after a declared state of emergency (Insurance Code section 675.1).
Wildfire risk score: An insurance company's rating of a property's wildfire risk. California requires companies to share the score with you and to let you appeal it.

Auto

Liability limits (for example 30/60/15): Shorthand for $30,000 per injured person, $60,000 per accident for injuries and $15,000 for property damage. These have been California's minimum limits since 2025 (Vehicle Code section 16056).
Combined single limit (CSL): One total liability limit for injuries and property damage together. Common on commercial auto policies.
Uninsured and underinsured motorist (UM/UIM): Pays for your injuries when an at-fault driver has no insurance or too little. California insurance companies must offer it, and turning it down takes a signed waiver (Insurance Code section 11580.2).
Collision: Covers damage to your car from hitting another vehicle or an object.
Comprehensive: Covers damage to your car from causes other than a collision, such as theft, fire or vandalism.
Good Driver Discount: A discount of at least 20% that California requires for drivers who meet the Proposition 103 rules (Insurance Code sections 1861.02 and 1861.025).
SR 22: A certificate your insurance company files with the DMV to prove you carry insurance, required after some license suspensions.
Credit-based insurance score: A score built from credit history that some states let insurers use. In California, credit history is not an approved rating factor for auto insurance.

Companies, agents and brokers

Admitted insurer: An insurance company licensed by the California Department of Insurance. If it fails, its covered claims are backed by California's guarantee associations.
Non-admitted insurer: An insurance company not licensed in California but allowed to sell here through surplus lines brokers. It is not backed by California's guarantee funds.
Surplus lines: The market for coverage that admitted companies won't write. It is placed through a licensed surplus lines broker, and you sign a notice first (Insurance Code section 1764.1).
Agent: A licensee appointed to act for one or more insurance companies, usually paid a commission by the company.
Broker: A licensee who acts for the customer. In California a broker may charge a disclosed broker fee in some cases (Insurance Code section 1623 and the broker fee regulations).
Commission: What the insurance company pays the agent or broker for selling and servicing a policy. It is part of the premium.
Umbrella policy: Extra liability coverage that sits above your home and auto (or business) policies.
Adverse underwriting decision: A decline, cancellation, non-renewal or higher price based on information about you. In California you are entitled to the reasons (Insurance Code section 791.10).
CLUE report: A database report (Comprehensive Loss Underwriting Exchange) of past home or auto claims that insurance companies check when you apply.

Claims

Claim: Your request for payment under the policy after a loss.
Proof of loss: A sworn statement of what you lost and what it is worth. In California an insurance company can't require it sooner than 100 days after a loss (Insurance Code section 2051.5).
Subrogation: After paying your claim, your insurance company's right to recover the money from whoever caused the loss. It can also get your deductible back.

Life insurance

Free look: A period after you buy an individual life policy or annuity when you can return it for a refund: at least 10 days, and at least 30 days if you are 60 or older (Insurance Code sections 10127.9 and 10127.10).

Sources

Checked October 25, 2026. Laws, programs and rates change, so confirm anything important with the source or with Billy.