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Whether you have just purchased a new insurance policy or are renewing a previous one, knowing some key terms from the policy can help make understanding it a little less overwhelming. While your insurance agent is a great resource for answering your questions, here are five key insurance terms you should know.
- Deductible – the amount of a loss paid by you, the policyholder.
- Deductibles can fluctuate between insurance policies. If you are looking to pay less upfront or through monthly payments, ultimately your deductible will be higher when a claim occurs.
- Deductibles can fluctuate between insurance policies. If you are looking to pay less upfront or through monthly payments, ultimately your deductible will be higher when a claim occurs.
- Liability Insurance – insurance for what you are obligated to pay because of bodily injury or property damage caused to another party.
- For example, if you get into a car accident and cause bodily injury or property damage to another party, you would have to cover those expenses. With liability insurance, your policy covers certain damages so the cost no longer comes out of your pocket.
- For example, if you get into a car accident and cause bodily injury or property damage to another party, you would have to cover those expenses. With liability insurance, your policy covers certain damages so the cost no longer comes out of your pocket.
- Endorsement – an optional form attached to an insurance policy that alters the policy’s coverage, terms, or conditions.
- Endorsements are important because they allow insurance policies to be customized to fit your needs as a policyholder. Endorsements may be added to the policy if your coverage needs a change during the policy’s term.
- Endorsements are important because they allow insurance policies to be customized to fit your needs as a policyholder. Endorsements may be added to the policy if your coverage needs a change during the policy’s term.
- Replacement Cost Value (RCV) – this is the cost to replace an item with a new one of similar kind and quality. It does not account for depreciation.
- For example, if a TV that you purchased two years ago for $500 was stolen from your home today and replacement cost is included in your insurance policy, you would receive the full replacement cost of $500.
- For example, if a TV that you purchased two years ago for $500 was stolen from your home today and replacement cost is included in your insurance policy, you would receive the full replacement cost of $500.
- Actual Cash Value (ACV) – this is the item’s value at the time of loss, factoring in depreciation.
- If a TV that you purchased two years ago for $500 was stolen from your home today, but has depreciated $200 in value over the past two years, and ACV is included in your insurance policy, then you would receive $300.
Sources Used:
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Insurance Information Institute. III Glossary: Liability. Insurance Information Institute, https://www.iii.org/resource-center/iii-glossary/?glossary_search=Liability. Accessed 9 Mar. 2026.
This information is provided solely as an insurance risk management tool. It is provided with the understanding that the member insurance companies of the Utica National Insurance Group are not providing legal advice, or any other professional services or advice. Utica shall have no liability to any person or entity with respect to any loss or damages alleged to have been caused, directly or indirectly, by the use of this information. You are encouraged to consult an attorney or other professional for advice on these issues.
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