The Language of Insurance Claims: A Plain-English Glossary

Adjuster

A licensed professional — employed by the insurer or hired independently — who investigates a claim, assesses the extent of a covered loss, and recommends a settlement amount. A public adjuster works on behalf of the policyholder, while a staff or independent adjuster represents the insurer.

Proof of Loss

A formal, signed statement submitted by the policyholder documenting the details of a loss — what was damaged or lost, when, how, and its estimated value. Most policies require proof of loss within a specified time window after the incident; missing that deadline can jeopardize your claim.

Subrogation

The legal right that allows your insurer, after paying your claim, to pursue recovery from a third party who was responsible for the loss. For example, if another driver causes an accident and your insurer covers your repairs, the insurer may then seek reimbursement from the at-fault driver's insurance.

Covered Peril

A specific cause of loss — such as fire, wind, theft, or water damage — that is explicitly covered under a policy. Claims are only eligible for payment if the loss resulted from a covered peril; losses caused by excluded perils are denied.

Actual Cash Value (ACV)

A settlement method that pays the depreciated value of a damaged or lost item at the time of the loss, not what it would cost to replace it new. ACV accounts for age, condition, and wear, which means payouts are often lower than replacement cost.

Replacement Cost Value (RCV)

A settlement method that pays the full cost to repair or replace a damaged item with a comparable new one, without deducting for depreciation. RCV policies typically carry higher premiums than ACV policies but can provide significantly greater recovery after a major loss.

Reservation of Rights

A formal notice from an insurer stating that it will investigate and may pay a claim, while reserving the right to deny coverage later if the investigation reveals a policy exclusion applies. Receiving this notice does not mean your claim is denied — it signals the insurer needs more information.

Appraisal Clause

A policy provision that provides a mechanism to resolve disputes over the dollar amount of a loss when the insurer and policyholder disagree. Each party selects an independent appraiser; if those two cannot agree, they jointly select an umpire whose decision is typically binding.

Depreciation

The reduction in an item's value due to age, use, and wear and tear. Insurers apply depreciation when calculating ACV settlements. On RCV policies, withheld depreciation may be released once repairs or replacement are completed and documented.

Mortgagee Clause

A provision in a property insurance policy that protects a lender's financial interest in the insured property. Claim payments may be made jointly to the policyholder and the lender, and the lender's coverage may remain intact even if the policyholder's coverage is voided.

Excess Clause

A policy provision specifying that coverage only applies to losses above a certain threshold, functioning similarly to a deductible. It determines how costs are shared when multiple insurance policies apply to the same loss.

Loss of Use

Coverage that pays for additional living expenses or lost rental income when a covered loss makes a home or property temporarily uninhabitable or unavailable. Policies cap this benefit by time period, dollar amount, or both.