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Pays a certain amount above the policy limit to replace a damaged home, generally 120 percent or 125 percent. Similar to a guaranteed replacement cost policy, which has no percentage limits. Most homeowner policy limits track inflation in building costs. Guaranteed and extended replacement cost policies are designed to protect the policyholder after a major disaster when the high demand for building contractors and materials can push up the normal cost of reconstruction.

An endorsement added to an insurance policy, or clause within a policy, that provides additional coverage for risks other than those in a basic policy.

Possibility of loss.

A provision in an insurance policy that eliminates coverage for certain risks, people, property classes, or locations.

A professional liability policy covering the policyholder for negligent acts and omissions that may harm his or her clients.

A written form attached to an insurance policy that alters the policy’s coverage, terms, or conditions. Sometimes called a rider.

Part B of the workers compensation policy that provides coverage for lawsuits filed by injured employees who, under certain circumstances, can sue under common law.

Covers direct losses and damage to businesses resulting from the dishonest acts of employees.

A kind of deductible or waiting period usually found in disability policies. It is counted in days from the beginning of the illness or injury.

Covers a building and its contents, but includes a large percentage deductible on each. A special policy or endorsement exists because earthquakes are not covered by standard homeowners or most business policies.

The portion of premium that applies to the expired part of the policy period. Insurance premiums are payable in advance but the insurance company does not fully earn them until the policy period expires.

A system of measuring insurers’ financial stability set up by insurance industry regulators. An example is the Insurance Regulatory Information System (IRIS), which uses financial ratios to identify insurers in need of regulatory attention.