Vocabulary of Insurance

Coverage: A promise to pay a certain type of claim if it occurs (exammples include automobile liability coverage, theft coverage, and so on).

Deductible: The amount of a loss that you payout of your own pocket before insurance kicks in.

Liability: Your financial obligation to another person for injuries or property damage you cause.

Liability coverage: A promise in an insurance policy to defend you in court and pay what you owe another person for injuries or property damage you cause.

Peril: A cause of a loss (examples include windstorm peril and flood peril).

Policy: The legal contract between you and an insurance company in which the company agrees to pay covered claims when you have them in exchange for a monthly (or some other periodic) payment from you. Any given policy contains many coverages.

Premium: The price you pay for the insurance policy covering a defined time period - six months or one year.