Insurance has its own vocabulary, and the words on a declarations page or a non-renewal notice decide what you are actually covered for. These are the terms that come up most often in Orange County home, condo, landlord, earthquake, auto, life and business insurance, each defined in a sentence or two, with a link to the guide that explains it in context.
A
Actual cash value (ACV)
A way of valuing a claim that subtracts depreciation from the cost to replace the item, so an older roof or sofa pays out much less than a new one would cost. Compare replacement cost.
Additional insured
A person or company added to someone else’s policy by endorsement, so that policy also protects them for claims arising from the named insured’s work. Clients, landlords and general contractors often require it. A certificate of insurance alone does not make anyone an additional insured.
Additional living expenses (loss of use)
Coverage on a home, condo or renters policy that helps pay for temporary housing and the extra costs of living elsewhere while your home is repaired after a covered loss.
Admitted carrier
An insurer licensed by the California Department of Insurance to sell a given line of insurance in the state. Its rates and policy forms are filed with the Department, and its policyholders are protected by the California Insurance Guarantee Association if it fails. Compare surplus lines carrier.
Agreed value
A way of insuring an item, such as a boat, a classic vehicle or a collection, for an amount you and the insurer agree on when the policy is written, so a total loss pays that amount without subtracting depreciation. Compare actual cash value.
B
Business owners policy (BOP)
A package policy for small and mid-sized businesses that combines general liability and commercial property, often with business income coverage. Eligibility depends on the carrier, the industry, revenue and the size of the premises.
C
California Earthquake Authority (CEA)
A publicly managed, privately funded organization whose earthquake policies are sold through participating home insurers. Private earthquake carriers also write their own policies, with their own deductibles and limits.
California FAIR Plan
The state’s insurer of last resort for property. Every insurer licensed to sell property coverage in California must belong to and fund it. For a home it writes a dwelling fire policy that covers fire, lightning and internal explosion, with optional extended coverage, so it is usually paired with a DIC policy.
Certificate of insurance (COI)
A one-page summary, usually on a standard ACORD form, that shows a business has insurance: the carriers, policy numbers, dates and limits. It proves coverage exists but does not change the policy.
D
Declarations page
The summary page of an insurance policy: who and what is insured, the policy period, each coverage and its limit, the deductibles and the premium. It is the first thing to send when you ask for a quote.
Deductible
The part of a covered loss you pay before the policy pays. A higher deductible usually lowers the premium. Earthquake deductibles are a percentage of the coverage limit rather than a flat dollar amount.
Difference in conditions (DIC) policy
A separate policy from a private carrier that sits next to a California FAIR Plan policy and fills its gaps, typically adding personal liability, theft, water damage and loss of use. Together the two policies work much like a standard homeowners policy.
Dwelling coverage (Coverage A)
The part of a home policy that pays to repair or rebuild the house itself. The limit should match the cost to rebuild at today’s construction prices, not the purchase price or the market value.
E
Excess liability policy
A policy that adds liability limits above another policy and follows its terms (“follows form”), so it covers only what the underlying policy covers. Compare personal umbrella policy.
Extended replacement cost
An option that adds a cushion above the dwelling limit (for example a percentage of it) in case rebuilding costs more than expected, such as after a large wildfire when labor and materials are scarce.
F
Free look period
A period after an individual life insurance policy is delivered during which the buyer can return it for a refund. In California the period is longer for buyers age 60 and over; the exact window is printed on the policy.
G
General liability insurance
Commercial coverage that pays for defense and damages when a customer or other third party claims your business injured them or damaged their property. It also covers certain advertising and personal injury claims, such as libel.
H
HO-3 policy
The most common homeowners policy form. The house is usually covered for all risks except those the policy excludes, and belongings are covered for named perils such as fire, theft and certain water damage.
HO-6 policy (condo insurance)
A policy for condo and some townhome owners. It covers the parts of the unit the HOA’s master policy leaves to the owner, personal belongings, loss assessments, loss of use and personal liability.
L
Landlord policy (dwelling fire / DP-3)
A policy for a home you rent to tenants. It covers the building, loss of rent and the owner’s liability, but not the tenants’ belongings. A homeowners policy is written for an owner-occupied home and usually doesn’t fit a rental.
Liability limits (auto)
The most an auto policy pays for injuries and damage you cause to others, written as three numbers. Since January 1, 2025, California’s minimum is 30/60/15: $30,000 for injury to one person, $60,000 for all injuries in one accident and $15,000 for property damage.
Loss assessment coverage
Condo coverage that pays your share when the homeowners association charges owners for a covered loss, most often the master policy’s deductible or damage above its limits.
Loss of rent (fair rental value)
Landlord coverage that replaces the rent you would have collected while a rental is repaired after a covered loss.
M
Master policy (HOA)
The policy a homeowners or condo association buys for the buildings and common areas it is responsible for. How much it covers inside each unit determines how much dwelling coverage a condo owner needs on an HO-6.
N
Non-renewal
An insurer’s decision not to renew a policy when its term ends. In California an insurer that won’t renew a homeowners policy generally has to give written notice, with the reason, at least 75 days before the policy expires.
Non-renewal moratorium
After a declared wildfire disaster, the Insurance Commissioner can order a one-year moratorium that stops insurers from non-renewing homes in ZIP codes in or next to the fire perimeter because of wildfire risk. The Department of Insurance publishes the affected ZIP codes.
P
Permanent life insurance
Life insurance designed to last your whole life, such as whole life or universal life. It usually builds cash value, which makes it cost more than term insurance for the same death benefit.
Personal umbrella policy
An extra layer of liability coverage that sits above the limits of your home and auto policies and pays once those limits are used up.
R
Renters insurance (HO-4)
A policy for people who rent. It covers your belongings, your personal liability and loss of use; the landlord’s policy covers only the building and the landlord.
Replacement cost
A way of valuing a claim that pays what it costs to repair or replace with new materials of like kind and quality, without subtracting depreciation. Compare actual cash value.
S
Scheduled personal property
Valuable items, such as jewelry, watches, art or collectibles, listed individually on a policy (or a separate valuables policy) with their own coverage amounts, usually based on an appraisal. Scheduling avoids the small theft sub-limits of a homeowners or renters policy.
Self-insured retention (SIR)
The amount you pay yourself on a claim that an umbrella policy covers but the policies underneath don’t. It works much like a deductible.
SR-1 accident report
The form California drivers must file with the DMV within 10 days of an accident in which anyone was injured or killed or property damage was more than $1,000, in addition to reporting to their insurer.
Surplus lines carrier
An insurer that is not licensed (admitted) in California but is allowed to write coverage the admitted market won’t, through a licensed surplus lines broker. Its rates and forms are not approved by the state, and its policies are not protected by the California Insurance Guarantee Association.
T
Term life insurance
Life insurance that covers you for a set period, such as until the mortgage is paid or the children are grown, and pays only if you die during that term. It is generally the simplest way to cover a temporary need at the lowest cost.
U
Uninsured / underinsured motorist coverage (UM/UIM)
Auto coverage that pays for your injuries, and your passengers’, when the at-fault driver has no insurance or not enough. California insurers must offer it, and you can only decline it in writing.
W
Workers’ compensation
Insurance that pays for employees’ work-related injuries and illnesses. California requires every employer with one or more employees, including part-time workers, to carry it or be certified to self-insure.
Still not sure what your policy says?
Send Jennifer your declarations page or the notice you received and she will walk you through it in plain English. Call or text (949) 351-3986, or send a message. For how these definitions are written and checked, see the editorial policy.
