California insurance glossary

Actual cash value (ACV)

A claims valuation that pays replacement cost minus depreciation, so older items are worth less. Contrast with replacement cost coverage.

Admitted carrier

An insurer licensed by the California Department of Insurance and backed by the California Insurance Guarantee Association if it fails. Contrast with surplus lines (non-admitted) insurers.

Binder

Temporary proof of insurance that confirms coverage is in force before the full policy is issued.

Bodily injury liability

Coverage that pays for injuries you cause to other people in an at-fault accident, up to your policy limits. Required in California.

Broker

A licensed intermediary who represents you, the client, and shops your risk across multiple insurance carriers, rather than selling for a single company.

Collision coverage

Auto coverage that pays to repair or replace your vehicle after a collision, regardless of fault, subject to your deductible.

Comprehensive coverage

Auto coverage for non-collision losses to your vehicle, such as theft, vandalism, fire, and weather damage.

Defensible space

The managed area around a home, generally out to 100 feet, where vegetation is reduced to slow a wildfire and protect the structure.

Difference-in-conditions (DIC)

A wrap policy that sits alongside a California FAIR Plan policy to add coverages the FAIR Plan excludes, such as liability, theft, and water damage.

Dwelling coverage

The part of a home policy that pays to repair or rebuild the structure itself, ideally set to full rebuild cost.

Dwelling fire policy (DP)

A policy for non-owner-occupied, seasonal, or vacant homes, available in DP-1, DP-2, and DP-3 forms of increasing breadth.

Endorsement

An add-on that changes a policy, either adding, removing, or modifying coverage.

FAIR Plan

California's insurer of last resort - a syndicated pool providing basic fire coverage when the standard market will not write a home. Not a state agency and not full homeowners insurance.

Fire Hazard Severity Zone (FHSZ)

A California mapping designation (moderate, high, or very high) that rates wildfire hazard and influences insurance and building requirements.

HO-3

The most common homeowners policy form, covering the dwelling on an open-perils basis and personal property on a named-perils basis.

HO-4

A renters insurance policy, covering a tenant's belongings, liability, and living expenses, but not the building.

HO-6

A condo unit-owner policy, covering the interior, belongings, liability, and loss assessments beyond the HOA master policy.

Liability coverage

Coverage that pays for harm you cause to other people or their property, whether on the road or at your home.

Loss of use

Coverage for additional living expenses, like a hotel and meals, if a covered loss makes your home uninhabitable.

Named-perils

Coverage that applies only to perils specifically listed in the policy. Contrast with open-perils.

Non-admitted carrier

See surplus lines. An insurer not licensed by the state, used for risks the standard market declines, and not backed by the guarantee association.

Non-owner policy

An auto liability policy for a driver who does not own a vehicle, often used to satisfy an SR-22 requirement.

Non-renewal

An insurer's decision not to continue a policy at the end of its term, distinct from mid-term cancellation, and accompanied by advance notice.

Non-standard auto

Auto insurance for drivers considered high-risk due to tickets, accidents, a DUI, a lapse, a foreign license, or an SR-22 requirement.

Open-perils

Coverage for all causes of loss except those specifically excluded. Contrast with named-perils.

Premium

The amount you pay for an insurance policy, typically monthly, semi-annually, or annually.

Replacement cost

A claims valuation that pays to replace damaged property with new equivalent items, without deducting for depreciation.

SR-22

A certificate an insurer files with the DMV proving a driver carries the required liability coverage, often needed after a DUI, a lapse, or serious violations.

Surplus lines

Coverage placed with non-admitted insurers for risks the standard market declines, such as many wildfire-exposed homes. Not protected by the California Insurance Guarantee Association.

Underinsured motorist

Coverage that pays your damages when an at-fault driver's liability limits are too low to cover your losses.

Uninsured motorist

Coverage that pays your damages when the at-fault driver has no insurance, a common situation in California.

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