Glossary of Insurance Terms
There are many types of insurance policies to consider when it comes to protecting yourself and your family. Understanding the insurance industry jargons and which policy works best for you can be confusing. As you venture into the insurance world, here are some common Insurance Terms you should know.
A
Adjuster: - An employee or contractor working for an insurance company who inspects claims and establishes the company liability in a claim.
Agent: - A person who represents one or more insurance companies and sells its insurance products. Agents are usually licensed in the State or region in which they do business.
Annuity: - A payment benefit sold by insurance companies that makes a periodic (usually monthly) payment for the life of a person or for a predetermined period of time.
Anti-stacking provision: - Insurance contract provision that prohibits adding multiple sets of limits to a single loss event.
Authorized insurer: - An authorized insurer is an insurer that holds a valid certificate of authority to do insurance business in this state. This term is synonymous with a “licensed insurer.”
Auto Insurance: - Protects a person against financial loss in the event of an auto accident, damage
to a vehicle, or theft.
B
Beneficiary: - The person or entity named in an insurance policy as the recipient of insurance money as the result of a covered event.
Betterment: - Betterment is an improvement that increases the value of property. For example, in an auto insurance claim, your insurance may determine that some replacement items are better than the ones damaged, then they may
apply "betterment." You may or may not be responsible for the extra charges.
Broker: - An individual or company who sells the insurance products of several different insurance companies. Like Agents, Brokers are usually licensed in the State or region in which they do business.
C
Cancellation: - Termination of an insurance policy before its expiration date.
Claim: - A formal request you provide to your insurer requesting to be paid for a loss or covered event under the terms and conditions of a policy.
Claim investigation: - Process used by insurers to get the claim information necessary in order to decide whether to pay a claim.
Collision coverage: - Auto insurance coverage that pays for damage to the policyholder’s vehicle caused by a collision with another vehicle or object.
Comprehensive coverage: - Auto insurance coverage that pays for damage to the policyholder’s vehicle for losses caused by fire, theft, vandalism, and other incidents not involving collision with another vehicle or object.
Coverage: - Amount of protection you have purchased. The maximum amount of money the insurance company will pay you if you make a claim for a loss or event covered by your policy.
D
Deductible: - Amount of your claim that you are responsible to pay before an insurance company will cover the remaining costs attributed to your loss. Choosing a higher deductible will decrease the cost of your insurance premiums but you end up paying for a larger part of your loss.
Depreciation: - A decrease in value of an asset with the passage of time due to wear and tear, and the like.
Diminished value: - Diminished value is the difference in fair market value of your vehicle immediately before the accident and the vehicle immediately after the accident that caused the damage.
Disability Insurance: - Pays some or all of a worker’s salary if they become disabled and are unable to
work at their job; either short-term or long-term.
Domestic insurer: - Insurance corporation organized under the laws of this state.
E
Endorsement: - An amendment to the policy used to add or delete coverage (Sometimes referred to as a Floater or Rider).
F
Financial responsibility law: - A law requiring a person involved in an automobile accident to furnish security up to certain minimum dollar limits.
First-party liability: - A first-party liability claim is when you make a claim against your own insurance policy.
Foreign insurer: - Insurance corporation organized under the laws of another state.
H
Health insurance: - Covers the cost of medical expenses due to illness, injuries, and health conditions.
Homeowners insurance: - Policy covering a home’s structure and the personal belongings inside in the event of loss or theft; helps pay for repairs and replacement. Homeowners insurance also provides liability coverage for injuries and acts of negligence.
I
Insured - Person(s) protected by the insurance policy.
Insurer - Insurance company that issues the insurance policy.
L
Liability: - Individual responsibility for causing injury or property damage.
Liability insurance: - Insurance covering legal liability by protecting an individual or business if they experience claims resulting from injuries and damage to people and/or property.
Life insurance: - Pays an agreed upon sum of money to a beneficiary when the insured person dies (or pays this amount after a set period of time).
Long-term care insurance - is a way to pay for long-term care. This insurance policy will pay or reimburse you for extended nursing care due to accidents, illness, or old age.
M
Mitigation: - Mitigate means to minimize. You have an obligation to keep your expenses to a minimum. For
example, you may have to move your vehicle from paid storage to a neutral location, such as your home, until the insurance dispute is settled.
N
O
P
Policy - The written Legal contract between you and the insurer that specifies:
What risks are covered by the insurer.
Under what circumstances the insurer will make a payment to you.
How much money or what type of benefit you will receive if you make a claim.
What risks are covered by the insurer.
Under what circumstances the insurer will make a payment to you.
How much money or what type of benefit you will receive if you make a claim.
Policyholder - Person who owns the insurance policy; usually, but not always, the insured.
Premium - The amount of money an insurance company charges for insurance coverage. The premium is usually paid monthly, quarterly or annually.
Policy Limit - The maximum amount a policy will pay, either overall or under a particular coverage.
Q
R
Reducing clause: - Provision in an insurance contract that reduces recovery by amounts received from other sources (such as the other party or worker’s compensation).
Renter's Insurance: - Covers the cost of replacing personal belongings that are stolen, damaged, or
ruined in a home that is being rented.
Rider: - Special provisions added to a policy that are not contained in the original policy
contract. Riders are frequently used in homeowners insurance for items such as jewelry, antiques, or firearms.
Risk - Probability that an insured event, such as loss, injury or death, will happen
while your policy is in effect.
S
Salvage vehicle: - A salvage vehicle as any motor vehicle which has been damaged to the extent that the total cost of repairs to rebuild the vehicle to its condition immediately before it was damaged exceeds 80% of the fair market value of the vehicle prior to the damage.
Stated Value: -
This is a pre-determined, fixed amount listed in your policy.
Subrogation: - The right of an insurance company to recover money paid on a claim from a third party. A common example occurs in uninsured motorist coverage, where the policyholder is paid by their own insurer and the insurer takes action to collect from the uninsured, at-fault party.
T
Term insurance: - Life insurance for a given period of time, with no investment component that would provide residual or cash value. If the insured survives the policy term, the insurer pays nothing.
Third-party liability: - A third-party liability claim is when you make a claim against someone else’s policy.
U
Umbrella policy: - A policy providing additional liability coverage after the limits of another policy are reached (such as a home or auto policy). These policies frequently provide coverage in many situations not covered by the other liability insurance policies.
Umbrella insurance: - is a type of liability insurance that offers coverage beyond the limits of your existing insurance policies — such as auto or homeowners insurance — to provide additional financial protection.
Unauthorized insurer: - An unauthorized insurer is one that does not hold a valid certificate of authority to do insurance business in this state.
Under-insured motorist (UIM) coverage: - An auto insurance policy under which the insurance company will pay damages to the insured for which another motorist is liable in an amount up to the point that total recovery equals the insured’s UIM limits. If, for example, an at-fault driver had $50,000 of liability coverage and caused $70,000 worth of damage, a $100,000 UIM policy would pay the additional $20,000 to cover what the other party’s insurance did not.
Uninsured motorists coverage: - A policy that will pay bodily injury damages to the insured for which another motorist is liable if that motorist is uninsured or cannot be identified.
W
Whole life insurance: - Life insurance that remains in force during the insured’s entire lifetime, provided premiums are paid as specified in the policy. Whole life insurance also builds a savings called the cash value.
Always review your policy or contact your agent to identify the limitations and exclusions of your coverage.
