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While not a complete list, our 'insurance dictionary' does contain most of the basic insurance terminology used in the insurance industry. Click on a letter or scroll down to find the insurance terms that require an explanation.
A B C D E F G H I J K L M N O P Q
R S T U V W X Y Z
ACCIDENT AND HEALTH INSURANCE
Coverage for accidental injury, accidental death, and related health expenses. Benefits will pay for preventative services, medical expenses, and catastrophic care, with limits.
ACTUARY
A professional person, skilled in the analysis, evaluation, and management of statistical information. An actuary valuates insurance firms' reserves, determines insurance rates and rating methods, and is able to determine other business and financial risks.
ADDITIONAL COVERAGES
This refers to extra coverage that can be purchased to provide
protection above and beyond that provided in the
original or standard policy (i.e., purchasing a higher
amount of coverage to protect against the theft of certain items like jewelry).
When such additional coverage is purchased, it
becomes an Endorsement or Rider to the original
policy
ADJUSTER
An individual employed by an insurer to evaluate losses and settle policyholder claims. Independent adjusters are independent contractors who adjust claims for different insurance companies.
AGENT
Insurance is sold by two types of agents: independent agents and exclusive or captive agents. Independent agents are self-employed, often representing several different insurance companies and are paid on commission. Exclusive or captive agents represent only one insurance company and can be either salaried or work on commission. Insurance companies that use exclusive or captive agents are called direct writers.
ALTERNATIVE DISPUTE RESOLUTION
This is an alternative to going to court to settle disagreements. Methods include arbitration, where disagreeing parties agree to be bound by the decision of an independent third party, and mediation, where a third party attempts to arrange a settlement between the two sides.
ANNUITANT
The person or persons who receive the income from an annuity contract.
ANNUITY
This is an insurance product that pays income benefits periodically for a specific period of time or over the course of the annuitant's lifetime. Deferred annuities allow assets to grow tax deferred over time before being converted into payments to the annuitant. (see annuitant) Immediate annuities allow payments to begin within a specified time after purchase.
APPORTIONMENT
The proportional dividing of a loss among two or more insurers that cover the same loss.
APPRAISAL
A survey to find out how much something is worth, to determine its insurable value, or the amount of a loss.
AUTO INSURANCE
This is a type of insurance that protects the policyholder
against losses involving automobiles. Different amounts of coverage
can be purchased depending on the requirements of the person purchasing the insurance. Auto insurance rates are determined by a variety of factors which often differ from insurance company to insurance company.
There are basically six different types of coverage available. Some of these are required by law, while others are optional. They are:
AUTO INSURANCE PREMIUM
Based on the frequency and cost of potential accidents, theft and other losses, this is the price an insurance company charges for coverage. Prices can vary significantly from company to company.
BENEFICIARY
The person or persons named by the insured to receive the benefits
or proceeds from an insurance policy.
BODILY INJURY LIABILITY COVERAGE
This is the portion of an auto insurance policy that covers the injuries that the policyholder causes to someone else.
BROKER
An insurance broker is an intermediary between a customer and an insurance company. Insurance brokers search the market for the appropriate coverage for their clients, typically working on commission.
CAPTIVE AGENT
A captive agent is an agent who sells insurance for only one company,
as opposed to an independent agent who represents
several companies.
CLAIM
A demand made by the insured, or the insured's
beneficiary, for payment of benefits provided by an
insurance policy.
COBRA
COBRA is the short term for Consolidated Omnibus Budget Reconciliation Act, which is a federal law under which group health plans sponsored by employers with 20 or more employees must offer continuation of coverage to employees who leave their jobs. It is the employee's responsibility to pay the entire premium. Coverage can be extended up to 18 months and surviving dependents can receive longer coverage.
COLLISION COVERAGE/INSURANCE
This is the part of an auto insurance policy that covers the damage to the policyholder's car from a collision.
COMMISSION
A commission is the fee paid to an insurance agent or insurance salesperson as a percentage of the policy premium. Depending on the coverage selected, the insurer, and the marketing methods, the percentage can vary substantially.
COMPREHENSIVE COVERAGE
This is the part of an auto insurance policy that covers damage to the policyholder's car not involving a collision with another car, like damage from fire, theft, explosions, floods, earthquakes and riots etc.
COMPULSORY AUTO INSURANCE
This is the minimum amount of auto liability insurance required to meet a state law. Financial responsibility laws in every state require all automobile drivers to show proof, after an accident, of their ability to pay damages up to the state minimum. In compulsory liability states this proof is required before you can legally drive a car. (The proof is usually in the form of an auto insurance policy)
COVERAGE
Coverage basically means the same thing as insurance, and generally refers to the scope of protection under an insurance contract.
CREDIT RATING
An evaluation of an entities financial strength.
CREDIT SCORE
This is the number produced by an analysis of an individual's credit history. Credit history is routinely reviewed by insurers before issuing a policy. Car and home insurers may use the information in a credit history to produce an insurance score, which may affect the pricing of an insurance policy.
DEDUCTIBLE
The amount of an insured loss paid by the policyholder. This can be either a specified dollar amount, a percentage of the claim amount, or a specified amount of time that must pass before the benefits are paid. The larger the deductible, the lower the premium charged for the same coverage.
DEPRECIATION
A decrease in the value of property over a period of
time resulting from use, obsolescence, or wear and
tear.
DIRECT WRITER
Insurance companies that sell directly to the public using exclusive agents or their own employees, are referred to as direct writers.
DISABILITY INSURANCE
Disability Insurance is a type of heath insurance that pays a monthly
income to the policyholder when he or she is unable
to work because of an illness or accident.
EMPLOYEE BENEFITS
Benefits offered employees at their place of work
covering medical expenses, disability, retirement
and death. These benefits are usually insurance
coverages and are paid in whole or in part by the
employer.
ENDORSEMENT
An endorsement is an attachment to an insurance policy that amends
and alters the coverage provided in the policy. An endorsement may also be
called a Rider.
EXCLUSIONS
Exclusions are specific conditions, situations or circumstances that
are listed in the insurance policy as not being covered.
EXCLUSIVE AGENT
An agent who represents only one insurance company and is restricted by agreement from submitting business to any other company unless it is first rejected by the agent's company.
FINANCIAL RESPONSIBILITY LAW
This is a state law requiring that all automobile drivers show proof that they can pay damages up to a minimum amount if they are involved in an auto accident. This varies from state to state but can be met by carrying a minimum amount of auto liability insurance.
FIRE INSURANCE
Fire insurance is coverage that protects property against losses caused by fire or lightning and is usually included in homeowners insurance.
FLOATER
This is typically bought to cover jewelry, furs and
other items that are moved from
location to location, because the full value of these items may not be covered in
standard homeowners policies. It covers losses wherever they
occur.
FLOOD INSURANCE Flood damage is covered under the comprehensive portion of an auto insurance policy, but "flood insurance" is available from the federal government under the National Flood Insurance Program. It is sold by licensed insurance agents. Flood damage is typically excluded under homeowners policies and many commercial property policies.
GAP INSURANCE
Where available, this covers the difference between a car's actual cash value when it is stolen or wrecked and the amount the consumer owes the leasing or finance company. It is mainly used for leased cars.
GROUP INSURANCE
This is single policy, typically covering a group of individuals and their dependents. The group are usually employees of the same company or members of the same association.
HEALTH INSURANCE
This is a general term for insurance against loss by sickness
or bodily injury. It typically includes coverage
for expenses such as doctor visits and hospital
stays, and can cover normal and preventive
care such as check-ups, prenatal and baby
care.
HOMEOWNERS INSURANCE
This provides coverage against property
and liability perils facing homeowners. The typical homeowners insurance policy covers the structures on the property, as well as furniture, appliances and clothing, against a wide variety of perils such as windstorms, fire and theft. The extent of the perils covered depends on the type of policy. An all-risk policy offers the broadest coverage. All perils except those specifically excluded in the policy are covered.
A provision known as Loss of Use, also covers additional living expenses if the house is being restored after a disaster.
The liability portion of the policy covers the homeowner for accidental injuries caused to third parties and/or their property.
Coverage for flood and earthquake damage is excluded and must be purchased separately.
INDEMNIFY
Means to provide financial compensation for losses.
INDEPENDENT AGENT
An agent who is self-employed, is paid on commission, and represents several insurance companies is an independent agent.
INSURANCE
Insurance is a formal device for reducing the possibility of loss by
transferring the risks of individual entities to insurance companies.
INSURANCE FRAUD
Insurance fraud is intentional lying or concealment by policyholders to
obtain payment of an insurance claim that would not otherwise be paid.
INSURANCE SCORE
An insurance score is a measure of how well consumers manage their financial affairs, not of their financial assets. Insurance scores include whether a consumer has made timely payments on loans, the number of open credit card accounts and whether a bankruptcy filing has been made.
Studies have shown that people who manage their money well tend also to manage their most important assets, like homes and cars well also.
INSURED
The person or entity that is covered by an agreement whereby an insurer agrees to indemnify for losses, provide benefits or render services in return for a premium.
JOINT UNDERWRITING ASSOCIATION
A joint underwriting association is when insurers join together to provide coverage for a particular type of risk or size of exposure. These insurers would then share in the profits or losses associated with the program.
KEY PERSON INSURANCE
Insurance taken out on the life or health of a key individual whose services are essential to the continuing success of a business and whose death or disability could cause the firm a substantial financial loss is referred to as key person insurance.
LIABILITY INSURANCE
Insurance for what the policyholder is legally obligated to pay because of bodily injury or property damage caused to another person.
LIFE INSURANCE
Life insurance is a policy that guarantees the payment of a stated
amount of monetary benefits upon the death of the
insured to a designated beneficiary, typically a family
member or business. Various plans exist, such as term life insurance, variable life insurance, and whole life insurance.
LIMITS
The maximum amount of insurance that can be paid for a covered loss.
LONG-TERM CARE INSURANCE
Long-term care (LTC) insurance pays for services to help people who are unable to perform certain activities of daily living without assistance. Long Term Care insurance is available as individual insurance or through an employer-sponsored or association plan.
LOSS OF USE
Loss of Use is a provision in homeowners and renters insurance policies that reimburses policyholders for any extra living expenses due to having to live somewhere else while their home is being repaired following certain kinds of disasters.
MEDICAID
Medicaid is a joint federal-state public assistance program for
people whose income and resources are not enough
to pay for health care. Benefits and eligibility vary from state to
state.
MEDICAL PAYMENTS INSURANCE
This is a form of coverage that is optional in various liability policies
such as auto insurance. It provides for the
payment of medical and similar expenses regardless
of who is at fault.
MEDICARE
Medicare is a federal program for persons age 65 or older that
pays part of the cost associated with hospitalization,
surgery, doctor visits and nursing care.
MORTGAGE INSURANCE
This insurance covers the life of a person taking out a mortgage. Death benefits provide for payment of the outstanding balance of the mortgage. The amount of coverage decreases as the debt decreases.
NATIONAL FLOOD INSURANCE PROGRAM
This is a federal government-sponsored program under which flood insurance is sold to homeowners and businesses through certain channels.
NO-FAULT
No fault auto insurance coverage pays for each driver's own injuries, regardless of who is at fault. No-fault coverage varies from state to state. It also refers to an auto liability insurance system that restricts lawsuits to serious cases.
OTHER-THAN-COLLISION COVERAGE
Auto insurance policies use this term for
physical damage caused by fire, theft,
vandalism, falling objects and various other perils.
PACKAGE POLICY
A package policy is a single insurance policy that combines several coverages. For example, homeowners
insurance is a package policy, combining
property, liability and theft coverages.
PERIL
Peril refers to a specific risk or cause of loss covered by an insurance policy, such as a fire, windstorm, flood, or theft. A named-peril policy covers the policyholder only for the risks named in the policy, while an all-risk policy, covers all causes of loss except for those specifically excluded.
PERSONAL INJURY PROTECTION COVERAGE
Personal injury protection coverage or PIP is the portion of an auto insurance policy that covers the treatment of injuries to the driver and passengers of the policyholder's car.
POLICY
A policy is a written contract for insurance between an insurance company and a policyholder stating the exact details of coverage.
PREMIUM
The price of insurance protection for a specified risk and for
a specified period of time, is called the premium. This is typically charged annually or semiannually.
PROOF OF LOSS
Proof of Loss Documents demonstrate to the insurance company that a loss has occurred.
PROPERTY-CASUALTY INSURANCE
The terms "casualty" and "liability" insurance are often used interchangeably.
Both cover the policyholder's legal liability for damages
caused to other persons and/or their property.
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RATE
The cost of a unit of insurance as determined by
insurance companies and/or state regulators. The rate
serves as the basis for the premium and are based on historical loss experience for similar risks.
RATE REGULATION
The process by which states monitor insurance companies' rate changes. This is done either through prior approval or open competition models.
REAL PROPERTY
Land and most of the things attached to the land such as
buildings and vegetation is referred to as real property.
RENTERS INSURANCE
This is a form of insurance that covers a policyholder's belongings against perils such as fire, theft, windstorm, hail, explosion, vandalism and riots etc. It also provides personal liability protection to the policyholder or dependents in the event of damage or injury to third parties, as well as additional living expenses, known as loss-of-use coverage, if a policyholder must move while their home is being repaired due to certain kinds of disasters.
REPLACEMENT COST
Insurance that pays the dollar amount needed to replace damaged personal property or dwelling property without deducting for depreciation but limited by the maximum dollar amount shown on the declarations page of the policy.
RISK
This could mean either:
(1) the
chance of loss, such as from a peril; or to an insurer
(2) the person
or entity that is insured by a policy.
SELF-INSURANCE
Basically, this is the concept of assuming the financial risk oneself, instead of paying an insurance company to take it on. Every policyholder is a self-insurer to some degree or another, in terms of paying a deductible and co-payments.
SEWER BACK-UP COVERAGE
This is an optional type of homeowners insurance that covers sewer back-up.
SOCIAL SECURITY
The U.S. Social
Security Act of 1935 plus its amendments and additions provides for disability, retirement and annuity benefits to dependents and survivors.
STRUCTURED SETTLEMENT
A structured settlement is a legal agreement to pay a specific person or persons, a specific sum of money in periodic payments, instead of in a single lump sum payment.
TERM INSURANCE
This is a particular kind of life insurance that covers the insured person for the time period that is specified in the policy, paying a benefit to a designated beneficiary only if the insured person dies within that specific time period. The "term" can be one, five, 10 or even 20 years. Term life insurance premiums increase with age.
TOTAL LOSS
If an automobile or other property is damaged so extensively that repair costs would exceed the value of the vehicle or property, it is referred to as a "total loss".
TRAVEL INSURANCE
Travel insurance covers typical problems that may occur while traveling, like illness, lost luggage etc.
UMBRELLA POLICY
An "umbrella policy" refers to coverage for losses above and beyond the limits of an underlying policy or policies such as auto insurance and homeowners insurance. Basically an extra level of protection.
UNDERINSURED
An underinsured policyholder is not adequately covered and may only receive part of the cost of replacing or repairing damaged items covered in the policy.
UNINSURED MOTORIST COVERAGE
Uninsured Motorist Coverage is the part of an auto insurance policy that protects a policyholder from uninsured drivers and hit-and-run drivers.
VANDALISM
Vandalism is usually malicious, often random, and describes the destruction or ruining of someone's property.
WAIVER
A waiver generally refers to the surrender of a privilege or a right, such as a provision which will allow for coverage to remain in force without payment of premiums if certain conditions are met. (Such as disablement)
WORKERS COMPENSATION
Workers Compensation is a policy conforming to state law, which pays benefits
to an employee (or an employee's family) if the
employee suffers a job-related injury (including
death), or disease related to work.
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