Insurance Claim Glossary: Plain English Definitions

Insurance has its own language. Adjusters, attorneys, and contractors use these terms daily. Below are the terms an insured is most likely to encounter during a property insurance claim, defined in plain English.

A

ACV (Actual Cash Value)

The cost to replace something today minus depreciation for age and wear. If a 10-year-old roof costs $20,000 to replace and has lost 40% of its life, the ACV is $12,000. Read more

Additional Living Expenses (ALE)

Money your insurer pays when you cannot live in your home after a covered loss. Covers the difference between your normal expenses and what you spend while displaced — hotel, meals, storage, extra gas. Read more

Adjuster

The person who inspects your damage and calculates what the insurer will pay. There are three kinds: company adjusters (work for the insurer), independent adjusters (contractors hired by the insurer), and Public Adjusters (work for you). Read more

Appraisal

A process in the policy for resolving disputes about the amount of loss. Each side picks an appraiser, the two appraisers pick an umpire, and they determine the dollar amount. The panel's authority is limited to amount of loss only — not coverage, recoverability, or waiver. In California, the resulting award is enforceable like an arbitration award and is binding unless successfully challenged on the narrow statutory grounds in CCP § 1286.2. Read more

B

Bad Faith

When an insurer unreasonably delays, underpays, or denies a claim. In California, bad faith is recognized as a tort, and an insured may be able to recover damages beyond policy limits — potentially including emotional distress and, where the conduct meets the statutory standard, punitive damages. Whether a particular claim supports a bad-faith action is a question for a California-licensed attorney. Read more

Brandt Fees

A category of compensatory damages recognized in California bad-faith cases — limited to the attorney fees an insured reasonably incurred to recover the policy benefits the insurer wrongfully withheld, not fees for prosecuting the bad-faith tort generally. Named after Brandt v. Superior Court (1985) 37 Cal.3d 813.

C

CDI (California Department of Insurance)

The state agency that regulates insurance companies. An insured may file a complaint when they believe an insurer has violated claims-handling regulations. Read more

Claim

A formal request to the insurer to pay for a covered loss. Reported claims commonly appear on the insured's CLUE report (see next entry).

CLUE Report

Comprehensive Loss Underwriting Exchange — a LexisNexis database that records reported insurance claims. Future insurers can pull it during underwriting. Entries typically remain in the database for approximately five to seven years, depending on the type of claim and the carrier's reporting practices.

Coinsurance

A penalty for under-insurance — most commonly seen on commercial policies and on some residential dwelling forms. If property is insured for less than the required percentage of its value, the insurer reduces every payment proportionally.

Contents (Coverage C)

Your personal property — furniture, clothing, electronics, everything you own that is not part of the building itself. Read more

Coverage A / B / C / D

The four main sections of a homeowner policy. A = dwelling (the building). B = other structures (detached garage, fence). C = personal property (your stuff). D = loss of use (living expenses while displaced).

D

Declarations Page (Dec Page)

The summary page of your policy showing your name, address, coverage limits, deductible, premium, and policy period. The first page you should read. Read more

Deductible

The amount you pay out of pocket before the insurer pays anything. A $2,500 deductible means the first $2,500 of every claim comes from you.

Depreciation

The reduction in value due to age and wear. Applied to your payment on replacement cost policies — the insurer withholds it until you complete repairs. Read more

Dwelling (Coverage A)

The physical structure of your home — walls, roof, floors, built-in appliances, attached garage. The largest coverage on your policy.

E–F

Endorsement

An add-on to your policy that changes the coverage — adds something, removes something, or modifies limits. Also called a rider.

EUO (Examination Under Oath)

A formal interview conducted under oath by the insurer's attorney, with a court reporter. More serious than a recorded statement. May signal that the insurer is investigating possible fraud or coverage defenses, though some carriers also use EUOs routinely on certain claim types (theft and fire are common examples).

Exclusion

A peril, condition, or situation your policy specifically will not cover. Common exclusions: flood, earthquake, wear and tear, mold, intentional damage. Read more

FNOL (First Notice of Loss)

Your initial report to the insurance company that a loss occurred. The moment you call to report damage, regulatory deadlines begin.

FRV (Fair Rental Value)

The rental income a landlord loses when a rental property is uninhabitable after a covered loss. The landlord equivalent of ALE.

H–L

Holdback

The depreciation amount the insurer withholds from your first payment. Released after you complete repairs and submit documentation.

Independent Adjuster

A contractor hired by the insurance company to inspect claims. They work for the insurer, not for you — despite the word “independent.” Read more

Loss of Use (Coverage D)

The policy section that pays Additional Living Expenses (ALE) for an owner-occupant, and Fair Rental Value (FRV) for a landlord, when a covered loss makes the property uninhabitable. Loss of Use is the policy section; ALE and FRV are benefits inside it.

M–O

Mitigation

Steps you take to prevent further damage after a loss. Board-up, tarp, water extraction, emergency repairs. Your policy requires it and pays for it.

Named Perils

A policy that covers only the specific causes of loss listed (named) in the policy. If the cause is not on the list, it is not covered. Contrast with open perils.

Open Perils (All Risk)

A policy that covers all causes of loss unless specifically excluded. Better coverage than named perils. Your dwelling is usually open-perils; your contents may be named-perils only.

O&P (Overhead and Profit)

The general contractor's markup — typically 10% overhead + 10% profit — that covers project management. Owed when the job requires a general contractor to coordinate multiple trades. Read more

P–R

Peril

The cause of loss — fire, wind, theft, burst pipe, vandalism. What actually caused the damage to your property.

Proof of Loss

A sworn statement affirming the details and dollar amount of a loss. Once submitted, the sworn amount becomes the insurer's record of the claimed loss; later increases are typically pursued through supplements with supporting documentation. Many insureds consult a public adjuster or attorney before submission. Read more

Public Adjuster

A licensed professional who works for you in an insurance claim. Handles documentation, estimating, and negotiation. Paid on contingency from the claim proceeds. Read more

RCV (Replacement Cost Value)

The cost to repair or replace something today at current prices, without deducting for age or wear. What your policy ultimately owes you if you complete repairs. Read more

Reservation of Rights

A letter from the insurer saying they are investigating your claim but have not yet decided if it is covered. They “reserve the right” to deny later. Not a denial — but a warning sign.

S–X

Scope

The list of what needs to be repaired. The scope determines which items appear on the estimate. Scope disputes (what should be repaired) are different from price disputes (how much it costs).

SIU (Special Investigations Unit)

The insurer's internal fraud investigation team. A referral indicates the insurer is investigating possible misrepresentation or fraud — though SIU referrals are sometimes triggered by automated red flags (such as claim amount or prior loss history) rather than an actual suspicion of wrongdoing. An SIU file is worth taking seriously regardless of how it was opened. Read more

Subrogation

After the insurer pays your claim, they may pursue the responsible third party to recover what they paid. If someone else caused the damage, the insurer steps into your shoes to collect from them.

Supplement

A request for additional payment when damage beyond the original estimate is discovered during repairs. Normal and expected on most claims. Read more

Xactimate

The software most insurance companies use to write repair estimates. It prices every line item using a database of local labor and material costs. Read more

This glossary covers the most common terms. As you read deeper articles on this site, unfamiliar terms will be defined in context. If you encounter a term that is not here and not explained in the article where it appears, use the contact page to ask — and it will be added.

This article is for informational purposes only and does not constitute legal advice. Insurance policies and applicable law vary by state and by policy form. Consult with a licensed professional regarding your specific situation.

Written by Leland Coontz III, Licensed Public Adjuster, CA License #2B53445.