Accident & Health Insurance – Coverage for accidental injury, accidental death, or sickness; also called Accident and Sickness Insurance. Benefits include paid hospital expenses, medical expenses, surgical expenses and income payments.
Actual Cash Value – The fair market value of property; technically replacement cost less depreciation.
Additional Living Expense Insurance – Coverage under a Homeowners, Condominium and Renters policy reimbursing costs of residing in a temporary location until the insured’s home can be made whole again. It usually provides living expenses of 10-20% of the structural coverage on the home.
Adjustable Life Insurance – Life insurance that gives the policyholder power to change the face amount, premium, coverage period or other features of the policy.
Appraisal – Process that determined the value of property, or the extent of damage, usually performed by an impartial expert.
Anti-Theft Device – A device that deters auto theft and may entitle the insured to an insurance premium discount.
Arbitration – An alternative process of settling a dispute through an impartial party instead of litigation.
Auto Insurance – A form of insurance that covers losses for which the insured is liable as a result of owning or operating an automobile. Also guards against financial obligation or lawsuit in the event of an accident. Auto insurance coverage includes three broad categories of damage:
- Property: Pays for damage to or theft of insured vehicle
- Liability: Covers others against bodily injury or property damage
- Medical: Pays the cost of treatment, rehabilitation and sometimes lost wages and funeral expenses due to an accident
Automobile Liability Insurance – Coverage if an insured is legally liable for bodily injury or property damage caused by a vehicle that the individual owns or operates.
Auto Theft – Theft of an auto is a type of loss covered under comprehensive coverage.
Bodily Injury – A physical injury sustained by a person.
Bodily Injury Liability Coverage – Pays damages for bodily injury or death resulting from an accident for which the insured is at fault; also pays for a legal defense according to the limits and conditions of the policy.
Business Property & Liability Insurance – Protection of the property of the business that is damaged or destroyed by perils such as fire, smoke and vandalism; and/or if the actions (or nonactions) of the business’ representatives result in bodily injury or property damage to other individuals. Many insurance policies provide such coverages, but the two most often used are the Commercial Package Policy and the Business Owners Policy.
Cancellation – Termination of an insurance contract before the end of the policy period by the insured or insurer.
Carrier – Insurance company or insurer.
Casualty – Liability or loss resulting from an accident.
Casualty Insurance – A type of insurance that is primarily concerned with losses caused by injuries to persons and legal liability imposed upon the insured for such injury or for damage to property of others. It also includes such diverse forms as plate glass, insurance against crime (robbery, burglary and forgery) boiler and machinery insurance and aviation insurance. [Some carriers also write Surety Business insurance.]
Claim – A demand made by the insured, or the insured’s beneficiary, for payment of the benefits as provided by the policy.
Claimant – Individual or entity presenting a claim.
Coinsurance – An insurance-related term that describes a splitting or spreading of risk among multiple parties. Coinsurance is a penalty imposed on the insured by the insurance carrier for under reporting/ declaring/ insuring the value of tangible property or business income. The penalty is based on a percentage stated within the policy and the amount under reported. In property insurance, the policyholder is required to carry coinsurance equal to a specified percentage of the value of property to receive full payment on a loss. In health insurance, coinsurance is a percentage of each claim above the deductible paid by the policyholder.
Collision Insurance – Covers physical damage to an insured’s automobile (other than that covered under comprehensive insurance) resulting from contact with another inanimate object.
Commercial Lines – Refers to insurance for businesses, professionals and commercial establishments.
Commercial Package Policy – Commercial risk insurance that covers more than one peril, such as commercial property, commercial crime, commercial and general liability.
Comprehensive Insurance – Auto insurance coverage providing protection in the event of physical damage (other than collision) or theft of the insured vehicle. For example, fire damage or a cracked windshield would be covered under the comprehensive section.
Condo Insurance – A type of Homeowners insurance that meets the special needs of condominium or townhouse owners.
Coverage – The scope of protection provided under an insurance policy. In property insurance, coverage lists perils insured against, properties covered, locations covered, individuals insured, and the limits of indemnification. In life insurance, living and death benefits are listed.
Co-payment – A predetermined, flat fee an individual pays for healthcare services, in addition to what insurance covers. For example, some HMOs require a $10 co-payment for each office visit, regardless of the type or level of services provided. Co-payments are not usually specified by percentages.
Defensive Driver Discount – Certain drivers who have voluntarily taken a defensive driving course may quality for this discount on their auto insurance premiums.
Death Benefit – The limit of insurance or the amount of benefit that will be paid in the event of the death of a covered person.
Deductible – Amount of loss that the insured pays before the insurance kicks in.
Depreciation – The decrease in value of any property due to wear and tear or age. Generally, depreciation is not an insurable loss.
Driver Training Discount – A discount for people who have taken a driver training course; not available in all states or for all individuals.
Earthquake Insurance – A regular Homeowners policy will not include earthquake coverage, but it can be purchased as an endorsement or separate policy.
Elimination Period – The time that must pass after filing a claim before a policyholder can collect insurance benefits. Also known as “waiting period.”
Endorsement – A document, which is attached to the policy and modifies or changes the original policy in some way.
Exclusions – Items or conditions that are not covered by the general insurance contract.
Exposure – Measure of vulnerability to loss, usually expressed in dollars or units.
Extended Replacement Cost – This coverage pays a certain amount above the policy limit to replace a damaged home, generally 120 percent or 125 percent. It is similar to a Guaranteed Replacement Cost policy, which has no percentage limits. These policies are designed to protect the policyholder after a major disaster, when the high demand for building contractors and materials can push up the normal cost of reconstruction.
Floater – A floater is a type of insurance policy that covers specific items that aren’t normally covered under a standard insurance (or other type of insurance).
Flood Insurance – Damage from a flood is not covered by a standard Homeowners insurance policy, but coverage can be purchased as an endorsement or a separate policy.
General Liability Insurance – Insurance designed to protect business owners and operators from a wide variety of liability exposures. Exposures could include liability arising from accidents resulting from the insured’s premises or operations, products sold, work completed or contractual liability.
Grace Period – The length of time (usually 31 days) after a premium is due and unpaid, during which the policy and all riders remain in force. If a premium is paid during the grace period, the premium is considered to have been paid on time.
Group Health Insurance – Coverage underwritten on members of a natural group, such as employees of a particular business, union, association, or employer group. Each individual is entitled to benefits.
Guaranteed Renewable – A provision in many insurance products that guarantees the policy owner the right to renew coverage at every policy anniversary date. The company does not have the right to cancel coverage except for nonpayment of premiums by the policy owner; however, the company can raise rates if they choose.
Hazard – A circumstance that increases the likelihood or probable severity of a loss. For example, the storing of explosives in a home basement is a hazard that increases the probability of an explosion.
Hazardous Activity – Bungee jumping, scuba diving, horse riding and other dangerous activities are not generally covered by standard insurance policies. For insurers that do provide cover for such activities, it is unlikely they will cover liability and personal accident.
Homeowners Insurance – Protects homeowners from losses to their homes, personal property, and some types of damage or injury to others for which the homeowner is liable.
Indemnity – Restoration to the victim of a loss by payment, repair or replacement.
Inflation Protection – An optional property coverage endorsement that increases the limits of insurance during the policy term to keep pace with inflation.
Insurable Interest – Interest in property such that loss or destruction of the property could cause a financial loss.
Insurance – Financial protection against loss or harm: an arrangement by which a company gives customers financial protection against loss or harm such as theft or illness in return for payment premium.
Insured – A person or organization covered by an insurance policy.
Insurer – An organization that provides insurance.
Insurance Adjuster – A representative of the insurer who seeks to determine the extent of the insurer’s liability for loss when a claim is submitted. Independent insurance adjusters are hired by insurance companies on an “as needed” basis and might work for several companies at the same time. Public adjusters work for the insured in the settlement of claims and receive a percentage of the claim as their fee.
Insurance Attorney – An attorney who practices the law as it relates to insurance matters. Such attorneys might be solo practitioners or work as part of a law firm.
Insurance ID Card – The card issued by an insurer containing basic information about the insurance policy.
Insurance Institute of America (IIA) – An organization that develops programs and conducts national examinations in general insurance, risk management, management, adjusting, underwriting, auditing and loss control management.
Liability – Broadly, any legally enforceable obligation.
Liability Insurance – Insurance that offers protection against third-party claims, which means that payment is made to someone who suffers loss caused by an insured person.
Licensed Insurer – A company that is incorporated (or chartered) in one state but is a licensed (admitted) insurer for another state to write specific lines of business.
Life Insurance – Policy taken out by the insured to pay the beneficiary a certain amount upon the insured’s death.
Limit – The maximum amount of protection purchased by the insured for a specific coverage.
Limits of Liability – The amount specified in the policy up to which the insurance company will provide protection.
Loss – Any measurable dollar cost of damage and/or injury suffered by a person.
Loss Control –The use of appropriate insurance, avoidance of risk, loss control, risk retention, self insuring, and other techniques that minimize the risks of a business, individual, or organization.
Loss Ratio – The ratio of incurred losses and loss-adjustment expenses to net premiums earned. This ratio measures the company’s underlying profitability, or loss experience, on its total book of business.
Loss Reserve – The estimated liability, as it would appear in an insurer’s financial statement, for unpaid insurance claims or losses that have occurred as of a given evaluation date. For individual claims, the loss reserve is the estimate of what will ultimately be paid out on that claim.
Losses Incurred (Pure Losses) – Net paid losses during the current year plus the change in loss reserves since the prior year-end.
Mortgage Insurance – In Life and Health insurance, a policy covering a mortgagor with benefits intended to pay off the balance due on a mortgage upon the insured’s death, or to meet the payments due on a mortgage in case of the insured’s death or disability.
Motorcycle Insurance – A policy that provides protection from losses resulting from owning and operating a motorcycle.
Motor Vehicle Report (MVR) – A report on a prospective insured that reveals any accidents and/or violations that appear on their driving record.
Multi-Car Discount – Available to policyholders at the same property address who insure more than one vehicle.
Named Insured – The person or entity listed on a policy declarations page.
No-Fault Insurance – Subject to the terms of an insured’s policy contract, this coverage pays for the insured’s medical treatment, lost wages or other accident-related expenses, regardless of who caused the accident.
Named Perils – Perils specifically covered on a property insurance policy.
Nonstandard Auto (High-Risk Auto or Substandard Auto) – Insurance for motorists who have poor driving records or have been canceled or refused insurance. The premium is much higher than standard auto coverage due to the additional risks.
Occurrence – An event that results in an insured loss. In types of insurance, such as Liability, an occurrence is distinguished from accident in that the loss does not have to be sudden and fortuitous but can result from continuous or repeated exposure that results in bodily injury or property damage.
Out-of-Pocket Limit – A predetermined amount of money that an individual must pay before insurance will pay 100% for an individual’s health care expenses.
Peril – The cause of a possible loss.
Personal Injury Protection – Pays basic expenses for an insured and his or her family in states with no-fault Auto insurance. No-fault laws generally require drivers to carry both Liability insurance and Personal Injury Protection coverage to pay for the insured’s basics such as medical expenses in the event of an accident.
Personal Lines – Insurance for individuals and families, such as Auto and Homeowners insurance.
Personal Property – Property that is not related to real estate, such as furniture or jewelry.
Personal Umbrella Policy – Coverage for losses above the limit of an underlying policy such as Homeowners or Auto insurance. While it applies to losses over the dollar amount in the underlying policy, terms of coverage are sometimes broader than in the basic policy.
Physical Damage Insurance – Coverage in the event the insured’s automobile is damaged, lost or destroyed through fire, theft, vandalism, malicious mischief, collision or windstorm.
Policy – The written contract between an insured and the insurance company.
Policy Change – Any change made to an insurance policy during the period that the policy is in force.
Policyholder – The person or entity listed on the policy declarations page.
Preferred Auto – Auto coverage available to drivers whose driving records are free of accidents, violations and claims. These types of drivers are desirable to insurance companies for their low-risk driving habits.
Premium – The price of insurance protection for a specified risk for a specified period of time.
Primary Insurance – Insurance that must be maintained as a condition of the most Personal Umbrella Policies. Primary insurance acts as the first layer of coverage on common types of losses. This usually includes auto, motorcycle and homeowner insurance, but may also include boat insurance, commercial liability or some other policy.
Proof of Loss – A statement made regarding the extent of the claim, which may be requested in accordance with the conditions of the policy.
Property Insurance – Indemnifies an insured whose property is stolen, damaged, or destroyed by a covered peril. The term Property insurance encompasses numerous lines of available insurance.
Rate – Often used as another word for premium, “rate” actually refers to the base rating used to determine the final premium.
Renters Insurance – Insurance that provides protection from the loss of personal property that arise out of the rental of a home (apartment, house, motor home, etc). Renters policies are similar to Homeowners insurance, except that they do not cover the structure. They do, however, cover changes made by the tenant to the interior of the structure, such as carpeting, kitchen appliances, and built-in bookshelves.
Renewal – The automatic re-establishment of in-force status affected by the payment of another premium.
Replacement Cost – 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.
Schedule – A list of items covered under a Homeowners policy. Schedules can list specific benefits, assets, charges, credits and other features that are unique to the policy, such as Earthquake insurance. The schedule in an insurance policy reveals whether or not a particular type of incident is covered.
Solvency – The financial stability of an insurance company that gives it the margin necessary to pay policyholder claims.
Standard Auto – Auto insurance for average drivers with relatively few accidents during their lifetimes.
Stop Loss – Any provision in a policy designed to cut off an insurer’s losses at a given point.
Subrogation – The method by which an insurance company seeks payment recovery against the damage to an insured’s car caused by another driver’s negligence.
Tenants Insurance – See Renters Insurance.
Term Life Insurance – Life insurance that provides protection for a specified period of time. Common policy periods are one year, five years, 10 years or until the insured reaches age 65 or 70. The policy does not build up any of the nonforfeiture values associated with Whole Life policies.
Towing Insurance – Provides coverage if an insured auto needs to be towed or requires roadside assistance.
Umbrella Policy – See Personal Umbrella Policy.
Uninsured Motorist Coverage – Endorsement to a Automobile policy that covers an insured’s collision with a driver who does not have Liability insurance. The coverage is limited to the terms, limits and conditions of the policy contract.
Universal Life Insurance – A type of flexible permanent life insurance offering the low-cost protection of term life insurance as well as a savings element (like whole life insurance) which is invested to provide a cash value buildup.
Variable Life Insurance – A form of Life insurance whose face value fluctuates depending on the value of the dollar, securities or other equity products supporting the policy at the time premium payment is due.
Variable Universal Life Insurance – A combination of the features of Variable Life insurance and Universal Life insurance under the same contract. Benefits are variable based on the value of underlying equity investments, and premiums and benefits are adjustable at the option of the policyholder.
Vehicle Identification Number (VIN) – A unique 17-digit number assigned to every vehicle manufactured in the U.S. after 1980 that is used for identification purposes.
Waiting Period – See Elimination Period.
Waiver of Premium – A provision in some insurance contracts that enables an insurance company to waive the collection of premiums while keeping the policy in force if the policyholder becomes unable to work because of an accident or injury. The waiver of premium remains in effect as long as the insured is disabled.
Whole Life Insurance – Life insurance that can be kept in force for an insured’s lifetime and that pays a benefit upon the person’s death.