Why Claims Vocabulary Matters
Filing an insurance claim is often the first time policyholders encounter language that feels like a foreign dialect. Terms like subrogation or reservation of rights appear in letters from your insurer at exactly the moment you're most stressed — after a loss. Knowing what those words mean ahead of time makes a real difference.
This glossary focuses specifically on the claims process — what happens after you report a loss. For broader policy language, see our plain-English policy glossary. And if you want a wider foundation, the insurance glossary every American consumer should bookmark is a solid companion reference.
Adjuster
A person who investigates an insurance claim on behalf of the insurer to determine the extent of the company's liability. Adjusters may be employees of the insurer (staff adjusters), independent contractors, or public adjusters hired by the policyholder.
Proof of Loss
A formal, often sworn document the policyholder submits to the insurer detailing the facts of a loss — what was damaged, when, how, and the estimated value. Most policies require it within a set timeframe; missing that deadline can jeopardize a claim.
Subrogation
The legal right of an insurer to step into the policyholder's shoes and pursue a third party whose negligence caused the loss. If your insurer pays your claim and later recovers money from the at-fault party, you may receive a portion of any excess recovery after the insurer is made whole.
Reservation of Rights
A letter from an insurer stating it will investigate and potentially pay a claim while reserving the right to deny coverage later if facts support it. It is not a denial; it's a formal notice that coverage is not yet confirmed.
Actual Cash Value (ACV)
The replacement cost of a damaged item minus depreciation. ACV settlements account for the item's age and wear, so the payout is typically less than what it would cost to buy a new equivalent today.
Replacement Cost Value (RCV)
The cost to replace a damaged item with a new one of similar kind and quality, without deducting for depreciation. Policies that pay RCV generally carry higher premiums than ACV policies.
Appraisal Clause
A dispute-resolution provision in many property policies allowing either party to demand an appraisal if they disagree on the value of a loss. Each side selects an independent appraiser, and a neutral umpire resolves any difference.
Examination Under Oath (EUO)
A formal, sworn interview the insurer may request as part of its investigation. The policyholder is required to answer questions about the loss, and the session is typically recorded by a court reporter. Refusing without legal basis can void coverage.
Duty to Cooperate
A standard policy condition requiring the policyholder to assist the insurer's investigation — providing documents, answering questions, submitting to an EUO if asked, and cooperating with subrogation efforts. Failure to cooperate can be grounds for claim denial.
Depreciation
The reduction in an item's value due to age, use, or wear and tear. Insurers apply depreciation when calculating ACV payments, meaning older property typically yields a lower settlement than newer property.
Coverage Dispute
A disagreement between the policyholder and the insurer about whether a loss is covered, how much is owed, or whether a policy condition was met. Disputes may be resolved through negotiation, appraisal, mediation, or litigation.
Mitigation of Loss
The policyholder's obligation to take reasonable steps to prevent further damage after a covered loss occurs — for example, covering a damaged roof with a tarp after a storm. Failure to mitigate can reduce or eliminate the insurer's obligation to pay for additional damage.
This article provides general information about insurance claims terminology and is not personalized insurance, legal, or financial advice. Coverage terms, exclusions, and processes vary by insurer and state. Always read your actual policy documents and consult a licensed insurance professional for guidance specific to your situation.
Key Terms in Context: What to Expect During a Claim
Understanding individual definitions is more useful when you can see how the terms interact throughout a typical claim.
| Proof of Loss Deadline | Often 60–90 days after loss (Varies by policy and state law; check your declarations page) |
| Claims Adjuster Types | Staff, independent, or public adjuster (Public adjusters work for the policyholder, not the insurer) |
| ACV vs. RCV | RCV pays more; ACV deducts depreciation (Review your policy's loss settlement provision) |
| Reservation of Rights | Not a denial — investigation continues (Consult a licensed agent or attorney if you receive one) |
| Subrogation Cooperation | Typically required by policy terms (Failing to cooperate may affect your claim) |
| Appraisal Clause | Available in most property policies (An alternative to litigation for valuation disputes) |
When you file: You'll submit a first notice of loss and may be required to provide a formal proof of loss — a sworn statement detailing what was damaged and its value. Your insurer will then assign a claims adjuster who investigates and estimates the loss.
During investigation: Watch for a reservation of rights letter. This doesn't mean your claim is denied — it means the insurer is reserving its right to deny coverage later while still investigating now. Receiving one is worth noting; your rights during the claims process still apply fully.
At settlement: If a third party caused your loss, your insurer may pursue subrogation — recovering its payout from that party. Cooperating with this process is typically a policy requirement. Policyholders sometimes stumble here; see common mistakes when filing a first claim for missteps to avoid.
For auto-specific claims scenarios, auto insurance basics explains how collision, comprehensive, and liability coverage each respond differently to a loss event.
You Can Hire Your Own Adjuster
A public adjuster represents the policyholder — not the insurer — and works to document and negotiate the highest supportable settlement on your behalf. Public adjusters typically charge a percentage of the claim payout. If you feel the insurer's estimate is significantly low, consulting a licensed public adjuster or an attorney who handles insurance claims is a reasonable step to consider.
