Insurance Resources Glossary
This is a list of terms designed to assist you while shopping or learning about insurance. It is not meant to be all-inclusive but should help with your understanding of the most common terms.
A
Accidental Death and Dismemberment (AD&D) Rider
A supplement to many life insurance policies that provides an additional cash benefit to the insured or beneficiaries if an accident causes death or loss of limbs or eyesight.
Actual Cash Value
The value of property based on the cost of repairing or replacing it with property of the same kind and quality minus depreciation.
Adjuster
A person who investigates and settles losses for an insurance carrier.
Agent
The person authorized to represent the insurer in negotiating or servicing insurance policies.
Annual Out-of-Pocket Maximum
A dollar amount that caps how much an insured must pay for covered expenses during a calendar year.
Annuity
A contract that provides periodic payments over time.
Applicant
The party applying for an insurance policy.
Application
A form completed by a prospective insured that includes personal information and coverage requests.
Assigned Risk
A risk insured through a pool and assigned to an insurer when standard insurers decline coverage.
Auto Collision Coverage
Optional auto insurance paying for damage caused by collision or rollover.
Auto Comprehensive Physical Damage Coverage
Coverage paying for vehicle damage from events other than collision such as theft, vandalism, fire, or hail.
Automatic Premium Loan
A policy provision that uses accumulated cash value to pay overdue premiums.
B
Beneficiary
A person or entity designated to receive policy benefits upon the insured’s death.
Binder
A temporary contract that places insurance coverage in force until a policy is issued.
Binding Receipt
A receipt acknowledging temporary insurance coverage until the application is approved or rejected.
Broker
A professional who arranges insurance coverage between clients and insurers.
Buy-Sell Agreement
An agreement that a deceased business owner’s share will be sold to remaining owners.
C
Calendar Year Deductible
The amount an insured must pay before insurance benefits begin.
Cancellation
Termination of a policy before its expiration date.
Case Management
A medical management technique used to evaluate treatment options.
Cash Value
The amount payable to a policyowner if a life policy is terminated early.
Certificate of Insurance
A document outlining coverage under a group insurance plan.
Claim
A request made to an insurer for payment of a covered loss.
COBRA
A law allowing employees to continue group health coverage after certain qualifying events.
Coinsurance Provision
A requirement that the insured pay a percentage of costs after meeting the deductible.
Collision Insurance
Coverage protecting against damage caused by vehicle collision.
Commission
A percentage of the premium paid to an agent for selling insurance.
Comprehensive Auto Insurance
Coverage protecting against non-collision vehicle damage.
Compulsory Auto Liability Insurance
Laws requiring motorists to carry minimum liability insurance.
Conditions
Policy provisions outlining obligations of the insured and insurer.
Contingent Beneficiary
The beneficiary who receives benefits if the primary beneficiary dies first.
Contract
A legally binding agreement between two or more parties.
Conversion Privilege
The right to convert a term life policy to permanent coverage.
Convertible Term Life Insurance
A term policy that can be converted to permanent life insurance.
Copay
A fixed payment required for certain healthcare services.
Creditable Coverage
Previous insurance coverage that reduces pre-existing condition exclusions.
D
Declination
An insurer’s refusal to provide coverage after evaluating an application.
Deductibles
The portion of a claim the insured must pay before insurance coverage applies.
Dependent
A person relying on the insured for financial support, typically a spouse or child.
Depreciation
Reduction in property value due to age or wear.
Double Indemnity
A policy provision paying double benefits for accidental death.
E
Emergency Room Visit
A hospital visit required for severe or life-threatening conditions.
Endorsement
A modification to the terms of an insurance policy.
Exclusions and Limitations
Conditions or situations not covered by an insurance policy.
Extended Term Life Insurance
A nonforfeiture option using policy value to buy term coverage.
F
Face Amount
The death benefit of a life insurance policy.
Floater
Additional coverage for valuable items like jewelry.
G
Grace Period
The time allowed after a premium due date to make payment without losing coverage.
Group Health Insurance
Insurance coverage offered to members of a group such as employees.
Guaranteed Renewable Policy
A policy that must be renewed as long as premiums are paid.
Guaranty Association
An organization protecting policyholders if an insurer becomes insolvent.
H
HIPAA
A federal law protecting health insurance coverage when employees change jobs.
HMO
A healthcare system providing coverage through a network of doctors.
I
Indemnification
Compensation for a loss through payment or replacement.
Indemnity
The principle that insurance restores financial position but does not create profit.
Insolvent
When a company lacks sufficient assets to meet obligations.
Insurable Risk
A risk that meets the requirements for insurance coverage.
Incontestable Clause
A provision limiting the insurer’s ability to dispute a policy.
Insurable Interest
A financial interest that would cause loss if the insured property or person is harmed.
Insurance Company
An organization authorized to provide insurance coverage.
Insured
The person or entity protected by an insurance policy.
Insurer
The company providing insurance coverage.
Irrevocable Beneficiary
A beneficiary designation that cannot be changed without consent.
J
K
Key Employee
Insurance protecting a business from loss due to the death or disability of an essential employee.
L
Lapse
Termination of a policy due to nonpayment of premiums.
Liability
A legal obligation to compensate another party.
Liability Coverage
Insurance covering damage or injury to a third party.
Life Insurance
Insurance paying a benefit upon the insured’s death.
Lifetime Maximum
The maximum amount an insurer will pay during a lifetime.
Living Benefits
Policy benefits accessible before death due to illness.
Loss
The event for which insurance provides payment.
M
Medical Payments Coverage
Coverage paying medical expenses after an auto accident.
Misrepresentation
Providing false information about policy terms or coverage.
N
Negligence
Failure to use reasonable care.
Network
A group of providers contracted with an insurer.
No-fault Insurance
A system where compensation is paid regardless of fault.
O
Offer and Acceptance
The process of forming an insurance contract.
Out-of-Network
Healthcare services outside an insurer’s provider network.
Out-of-Pocket Expense
Costs the insured must pay that are not covered by insurance.
P
Paid-up Policy
A life policy requiring no additional premium payments.
Peril
The cause of loss or damage.
Personal Injury Protection
No-fault auto coverage paying medical and wage losses.
Physical Damage
Damage to property such as a vehicle.
Permanent Insurance
Life insurance that remains active as long as premiums are paid.
Personal Property Insurance
Coverage protecting personal belongings.
Point-of-Service Plan
A health plan combining HMO and indemnity plan features.
Policy
The written insurance contract.
Policy Declarations
The section listing coverage details.
Policy Limits
The maximum amount payable under a policy.
Policy Loan
A loan against the cash value of a life policy.
Policyholder
The individual who owns the policy.
Q
R
Rate
The pricing factor used to determine premiums.
Rated Policy
A policy issued at a higher premium due to increased risk.
Reimbursement
Payment from an insurer for a covered loss.
Reinstatement
Restoring a lapsed policy after conditions are met.
Replacement Cost Coverage
Coverage paying the cost to replace damaged property.
Renewable Term Life Insurance
Term life coverage renewable without medical evidence.
Revocable Beneficiary
A beneficiary designation that can be changed.
Rider
An addition that modifies an insurance policy.
Risk
The possibility of loss.
S
Salvage
Property value recovered after a loss.
Settlement
An agreement resolving a claim payment.
Subrogation
The insurer’s right to recover payments from a responsible party.
T
Term Insurance
Life insurance providing coverage for a set period.
U
Umbrella Liability Insurance
Extra liability coverage extending beyond standard policies.
Underwriter
The individual who evaluates insurance risk.
Underwriting
The process of assessing risk for insurance coverage.
V
W
Waiver
An agreement excluding certain conditions from coverage.