North Carolina insurance glossary: key terms explained

Actual Cash Value (ACV)

The value of property at the time of loss, replacement cost minus depreciation. ACV settlements pay less than replacement cost settlements after a claim.

Additional Living Expenses (ALE)

Coverage that pays for temporary housing, meals, and other costs if your home becomes uninhabitable due to a covered loss.

Adjuster

An insurance professional who investigates claims, estimates damage, and determines what the insurer will pay. Public adjusters represent the policyholder; company adjusters represent the insurer.

Aggregate Limit

The maximum amount an insurer will pay for all covered claims during a policy period, regardless of the number of individual claims.

AM Best Rating

A financial strength rating from AM Best that reflects an insurance company's ability to pay claims. A (Excellent) and A+ (Superior) are the most common strong ratings.

Binder

A temporary proof of insurance issued while a formal policy is being written. Provides immediate coverage until the official policy is issued.

Cancellation

The termination of an insurance policy before its expiration date. NC law requires advance written notice of cancellation to policyholders.

Carrier

The insurance company that underwrites and issues the policy. Also called the insurer or underwriter.

Coinsurance

A provision requiring the policyholder to insure property for at least a specified percentage of its value (often 80%). Failure to meet the coinsurance requirement can result in reduced claim payments.

Collision

Auto coverage that pays for damage to your vehicle from a collision with another vehicle or object, regardless of fault.

Comprehensive

Auto coverage that pays for non-collision damage, theft, fire, hail, falling objects, hitting an animal. Often called 'other than collision.'

Declarations Page

The summary page of your policy listing coverage types, limits, deductibles, premium, policy period, and named insureds. Often called the 'dec page.'

Depreciation

The reduction in property value over time due to age, wear, and obsolescence. Insurers use depreciation to calculate actual cash value settlements.

Dwelling Coverage (Coverage A)

The portion of a homeowner's policy that covers the structure of your home. The limit should reflect the cost to rebuild, not market value.

Endorsement

An addition or modification to an insurance policy that changes its terms or coverage. Also called a rider. Examples: water backup, scheduled jewelry, home business.

Exclusion

A specific situation, condition, or property type that a policy explicitly does not cover. Flood and earthquake are the most commonly excluded perils in homeowner's policies.

Grace Period

A window of time after a premium due date during which the policy remains in force without lapsing. NC insurers typically provide a 10-30 day grace period.

HO-3

The most common homeowner's policy form. Covers the dwelling on an open-perils basis and personal property on a named-perils basis.

Inland Marine

Coverage for portable property and specialized equipment that moves between locations, cameras, tools, musical instruments, fine art. Extends beyond the home.

Liability

Coverage that pays for bodily injury or property damage you cause to others. Home policies include personal liability; auto policies include bodily injury and property damage liability.

Loss of Use

See Additional Living Expenses. Covers temporary housing and increased living costs when a covered loss makes your home uninhabitable.

Mortgagee

The lender who holds a mortgage on your property. Mortgagees are listed on home insurance policies and receive claim payments in proportion to their interest in the property.

Peril

A specific cause of loss, fire, wind, hail, theft, vandalism. Policies either name the perils they cover (named perils) or cover all perils except those excluded (open perils).

Policy Period

The span of time during which a policy is in force, typically 12 months for home and auto policies.

Replacement Cost

The cost to repair or replace damaged property with new materials of similar kind and quality, without deducting for depreciation. Preferred over ACV for most homeowners.

Rider

See Endorsement. A modification to an insurance policy that adds, removes, or changes coverage. The terms rider and endorsement are often used interchangeably.

Scheduled Personal Property

An endorsement that provides scheduled (itemized) coverage for high-value items, jewelry, art, firearms, cameras, at agreed value without sublimits.

Umbrella

Excess liability coverage that sits above your home and auto policies. A $1M umbrella policy adds $1M of liability coverage over your existing limits.

Underwriting

The process by which an insurer evaluates risk and decides whether to provide coverage and at what price. Underwriters assess factors like property condition, claims history, and credit.

Vacancy Clause

A policy provision that reduces or eliminates coverage if a property is unoccupied for an extended period (often 60 days). Important for landlords, snowbirds, and renovation projects.

What is the difference between a premium and a deductible?

Your premium is what you pay for your insurance policy (monthly or annually). Your deductible is what you pay out of pocket before coverage applies to a claim. Higher deductibles generally mean lower premiums.

What does 'named insured' mean on a NC policy?

The named insured is the person listed as the primary policyholder. They have the most rights under the policy, to make changes, file claims, and receive payments.

What is subrogation in insurance?

Subrogation is the insurer's right to pursue a third party that caused an insurance loss, after the insurer has paid the claim. If a neighbor's negligence causes damage to your home, your insurer pays your claim and then pursues the neighbor's insurer to recover those costs.

What does 'occurrence' vs. 'claims-made' mean in insurance?

An occurrence policy covers incidents that happen during the policy period, regardless of when the claim is filed. A claims-made policy covers claims reported during the policy period for incidents after the retroactive date. Claims-made is common in professional liability; occurrence is standard in home and auto.