California insurance glossary

This glossary defines common insurance terms in plain English for California consumers and business owners, from deductible and liability to the California FAIR Plan and difference-in-conditions coverage. Each term stands on its own, so you can look up just the one you need. Talk to a licensed agent about how any of these apply to your policy.

Policy basics

Premium. The amount you pay for an insurance policy, usually billed monthly, twice a year, or annually.

Deductible. The amount you pay out of pocket on a covered claim before the insurer pays the rest; a higher deductible usually means a lower premium.

Declarations page (dec page). The summary at the front of your policy that lists who and what is insured, your limits, deductibles, and premium.

Endorsement (or rider). A change added to a standard policy that adds, removes, or adjusts coverage.

Exclusion. Something a policy specifically does not cover, such as flood or earthquake on a standard California home policy.

Limit. The most a policy will pay for a covered loss; separate limits often apply to different coverages.

Binder. Temporary proof of coverage that confirms a policy is in force until the full policy documents are issued.

Grace period. A short window after a missed payment during which coverage may continue before the policy lapses.

Liability and auto

Liability insurance. Coverage that pays for injury or damage you are legally responsible for causing to others, plus related defense costs.

Bodily injury liability. The part of liability coverage that pays for others’ injuries you are responsible for in an accident.

California minimum limits (30/60/15). The least auto liability California allows as of 2025: $30,000 per person and $60,000 per accident for injuries, and $15,000 for property damage.

Collision coverage. Pays to repair or replace your own vehicle after a collision, regardless of fault, subject to your deductible.

Comprehensive coverage. Pays for damage to your own vehicle from non-collision events such as theft, fire, vandalism, or hitting an animal.

Uninsured and underinsured motorist (UM/UIM). Coverage that protects you when an at-fault driver has no insurance or not enough to cover your injuries.

“Full coverage”. Not an actual insurance term and not found in any policy. People usually mean liability plus collision and comprehensive together.

Personal umbrella. A policy that adds a layer of liability coverage, often $1 million or more, above your auto and home limits.

Home and property

Dwelling coverage (Coverage A). The part of a home policy that pays to repair or rebuild the physical structure of your home.

Replacement cost. Coverage that pays to repair or replace property with new materials of like kind and quality, without deducting for age or wear.

Actual cash value (ACV). Replacement cost minus depreciation; an ACV settlement pays less than replacement cost for older property.

Extended or guaranteed replacement cost. An endorsement that pays above your dwelling limit, up to a set percentage or in full, when rebuild costs exceed the limit.

Coinsurance. A policy provision that can reduce a claim payment if the property was insured for less than a required percentage of its value.

Named peril vs open peril. A named-peril policy covers only the causes of loss it lists; an open-peril policy covers all causes except those it excludes.

California catastrophe and market terms

California FAIR Plan. California’s insurer of last resort for basic property fire coverage when the standard market will not write a home; it is narrow and often paired with a DIC policy.

Difference in conditions (DIC). A policy that fills gaps a standard or FAIR Plan policy leaves out, commonly adding earthquake, flood, or the liability, theft, and water coverages a FAIR Plan policy excludes.

California Earthquake Authority (CEA). A publicly managed provider of residential earthquake policies sold through participating home insurers; private earthquake carriers also exist.

NFIP. The National Flood Insurance Program, the federal flood insurance program, typically with a 30-day waiting period before coverage starts.

Non-renewal. An insurer’s decision not to renew a policy at the end of its term, which has become more common for some California wildfire-exposed homes.

Surplus lines (non-admitted). Coverage placed with an insurer not licensed in California, used for hard-to-place or specialty risks the standard market will not write.

Business terms

General liability. Coverage for third-party bodily injury and property damage claims arising from your business operations.

Business owners policy (BOP). A package that bundles commercial property and general liability for many small and mid-sized businesses.

Professional liability (errors and omissions, E&O). Coverage for claims that your professional work or advice caused a client financial harm.

Workers’ compensation. Coverage for employees’ work-related injuries and illnesses, required in California once a business has any employee.

Certificate of insurance (COI). A one-page proof that a policy exists, often required by a landlord, client, or venue.

Additional insured. A person or business added to your policy so they share certain coverage, often required by contract.

Underwriting. The insurer’s process of evaluating a risk to decide whether to cover it and at what price.

This glossary is general information about insurance in California, not a policy, a quote, or personalized advice. Coverage, eligibility, and pricing depend on your situation and the policy terms. Talk to a licensed agent before you make a decision.

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