It is extremely important to get a good grip on the long list of terms insurers use in your coverage. Without such an understanding, you may not be getting the right coverage or, worse yet, you may think you’re getting coverage you are actually lacking.
That’s where this handy insurance glossary comes in. These insurance definitions will help you figure out your next policy and speak more knowledgeably with your insurance specialist.
Part of a contract that explains when a loan is due and payable.
Actual Cash Value
How much it will cost, minus depreciation, to replace damaged or destroyed property.
The person who determines dividends, rates, reserves and any other relevant insurance statistics.
An interest rate that varies depending on the published market-rate index.
The insurer’s representative, charged with calculating liability after a claim has been submitted.
Annual Administrative Fee
Small annual payment that subsidizes the cost of offering a group employee benefit plan.
Converting the money you have saved in a retirement plan or annuity contract into regular payments, which are fixed and cannot be changed once they have been set.
Commitment by the insurer to make annuitization payments for a specified period.
All of an insurance company’s possessions, which may be divided into three categories:
- Invested assets, i.e. stocks and bonds
- Total admitted assets, i.e. every single thing the company owns
- All other assets, i.e. possessions that do not produce income, such as office furniture
Automobile Liability Insurance
Coverage for injury or property damage sustained in an automobile accident.
A company’s liabilities, assets and surplus as of a certain date.
The dates during which benefits are paid out to the policy holder and his or her dependents.
Someone who sells insurance and tries to match people up with policies that benefit them.
Shareholders’ equity in a stock-based insurance company.
Capitalization or Leverage
How much a company’s surplus is exposed to operating and financial practices. Instability is highly undesirable.
An insurance company representative who gives the employer right of first refusal on all sales; agents generally get benefits and office expenses from the insurance company.
Loss or liability stemming from an accident.
Insurance covering losses caused by injury, as well as legal liability for injury or damaged property caused by an accident.
A request made for payment of benefits, submitted by either the insured or the insured’s beneficiary.
Insurance that requires the insurer to pay part of a payment on a claim.
Covering the damage to an automobile resulting from a collision with an inanimate object, such as a tree.
Auto insurance that covers physical damage aside from a collision, as well as theft of the car.
Benefits paid out on multiple disability claims at the same time.
Term life insurance that is changed to permanent insurance without a medical examination. There can be no denial of coverage or increase in premium for health problems.
A flat fee paid by the insured with every health insurance transaction. All doctor’s office visits might carry a $20 copayment, for example.
The amount paid out to a beneficiary upon the death of the insured.
Dollar amount paid by an individual before insurance begins to foot the bill.
When a policy paid for in advance ages without a claim, it’s said to have been earned or partially earned. For instance, a five-year policy that’s two years old has been partially earned.
Also called the waiting period, this is the time between filing a claim and collecting insurance benefits.
Employers Liability Insurance
Coverage bought by employers and used in the case of accidents involving employees.
A claim on a particular property, which may include a lien for work, a mortgage or a right of dower.
Things that a general insurance contract does not cover.
Underwriting expenses vs. net premiums, which helps to measure a company’s operating efficiency.
Usually measured in dollars, this term expresses how vulnerable a company is to loss.
Institution or individual who provides money for purchasing.
An add-on policy that goes beyond renters insurance to cover moveable property, including:
- Sporting equipment – skis, high-tech bikes, canoes, etc.
Future Purchase Option
Provisions in life and health insurance policies offering the option of buying more coverage without proving insurability. Also called a guaranteed insurability option.
General Liability Insurance
Insurance to guard business owners and operators from liability from accidents, products they sell, and contracts.
Time after a premium is due when it remains unpaid, but the policy continues to be in full force, including riders. This period is usually 31 days, and if the bill is paid in full during this time, it’s still considered on time.
Guaranteed Issue Right
The right to buy insurance without undergoing a physical examination, because the condition of the insured is not considered in granting coverage.
The policyholder’s right to renew coverage on the anniversary date of the policy. Rates on the policy may be raised, but the insurer cannot cancel.
Something that jacks up the probability of a loss, such as storing a cardboard box full of paper near a wood-burning sources increasing the likelihood of a fire.
Health Maintenance Organization (HMO)
Prepaid group health insurance plan with designated doctors, hospitals and clinics focused on preventative medicine.
Health Reimbursement Arrangement
An alternative to Health Savings Accounts (see below), made available to high-deductible health plan owners who don’t qualify for HSAs.
Health Savings Account
Accounts available to high-deductible plans subscribers, where pre-tax money can be stored to be spent later on medical expenses.
Out-of-pocket expense a policyholder must pay for losses due to hurricane before insurance begins to cover it.
Insurer facing such serious financial troubles it may not be able to meet its monetary or regulatory requirements.
Restoring the victim’s loss through payment, replacement or repair of what was destroyed or taken.
Optional extra property coverage that will up the limit of insurance protection to remain apace of inflation.
Interest in a property that would cause financial loss if that property was lost or destroyed.
The insurer’s representative who calculates the extent of damage and the amount of the insurer’s liability upon submission of a claim. These people are often contract employees who work for several insurance companies.
Money earned on investment portfolios, which may include:
- Capital gains
It does not, however, include the value of the company’s stocks or bonds.
Buying bonds that mature at different times.
A legal obligation.
What is paid on the insured’s behalf for losses incurred by negligence or assumed through contact with someone else.
A company chartered in another state but allowed to offer insurance in this state.
Lifetime Reserve Days
The amount of time – 60 days – Medicare will cover you after you’ve been hospitalized at least 90 days in a benefit period. This benefit can be used just once in a lifetime.
A person or business’s ability to turn assets into cash.
Receiving the payout from your own life insurance policy before you die, in the case of terminal or catastrophic illness, or when you are being put in a nursing home. This is also called “accelerated death benefits.”
Loss Adjustment Expenses
Bills rung up while looking into and settling losses.
Everything done to decrease the recurrence or severity of losses, which may include:
- Exposure avoidance
- Noninsurance transfer of risk
- Segregation of exposure units
- Loss prevention
- Loss reduction
Liability for unpaid insurance claims or losses as of a certain date, such as:
- Losses that have not been reported
- Losses due that haven’t been paid
- Amounts that are not due yet
Medical Loss Ratio
Health benefits divided by total health premium.
Number of participants on a health plan in a given month.
Mortality and Expense Risk Fees
The charge for annuity contract guarantees, such as death benefits.
Mortgage Insurance Policy
Benefits in a life or health insurance policy that will pay off the mortgage balance if the insured dies.
Mutual Insurance Companies
Companies owned by policyholders that have no capital stock.
Potential dangers on an insurance property specifically covered in the policy.
Amount a company earns from operations and realized capital gains, after taxes.
Net Investment Income
Investment income minus investment expenses and real estate depreciation.
The premium, less the agent’s commission.
Nonstandard Auto (High Risk Auto or Substandard Auto)
Insurance available to those with bad driving records or previously cancelled or refused insurance. The premiums are much higher than standard because of the risk of insuring these people.
A mortgage that does not allow the borrower to owe more than the house is worth at the time the loan is paid back.
Unchangeable contract terms.
An event that leads to a loss. An occurrence is not the same as an accident.
The predetermined dollar amount the insured must pay before insurance kicks in 100 percent for health care bills.
A contract stipulation letting policyholders who cannot work in their own occupation a chance to collect benefits.
Cause of a potential loss.
Personal Injury Protection
Provision paying expenses for the insured and beneficiaries in states offering no-fault auto insurance.
Family or individual insurance.
The health insurance policy lets the employee pick in- or out-of-network care when medical treatment is needed.
The contract that puts insurance into effect.
Policy or Sales Illustration
A material agents and insurers employ to illustrate a policy’s performance under different conditions.
In health insurance, coverage limitations specifying that previously diagnosed conditions are not covered under a new policy.
A “safe driver” bonus of sorts, offering coverage to low-risk drivers who obey the law and have never been in an accident.
Preferred Provider Organization
A network of medical providers offering fee-for-service billing who are paid based on a discounted schedule.
The price for insurance over a certain period of time.
Private-Passenger Auto Insurance Policyholder Risk Profile
An auto insurance company sorts policyholders into three categories, depending on the quality of the driver:
Qualified High-Deductible Health Plan
Low-premium health plan that kicks in for coverage of expenses after the insurer has met a high out-of-pocket expense. These are also called “catastrophic plans.”
Qualified Versus Non-Qualified Policies
Qualified employee benefit plans are in line with Internal Revenue Service Code Section 401a requirements, and the employer’s contributions are tax deductible.
An occurrence that causes insurance protection to kick in.
Assets that can quickly be converted into cash.
Reciprocal Insurance Exchange
Subscribers who insure one another and each assume a share of risk; an unincorporated group of:
Allowing level-premium term policyholders to become eligible for another level-premium policy.
Insurance bought by an insurance company.
The price of replacing damaged personal or dwelling property without deducting for depreciation. It is limited by the max dollar amount on the policy’s declarations page.
Value of actual or potential liabilities an insurer has on hand to cover policyholder debts.
A benefit paid out from disability insurance when loss of income continues.
A group of insured individuals with the same risk levels.
Risk Retention Groups
Policyholders in similar businesses or activities who own their liability insurance companies.
A marketplace where buyers are willing to pay only what they deem fair market value.
Being financially able to transact in the insurance business and pay for liabilities. Assets may include:
Auto insurance held by the average, everyday driver with minimal accidents or claims.
State of Domicile
The state where a company has been chartered or incorporated.
A stipulation that abruptly ends losses for an insurer.
When an insurer takes on another’s loss, they gain the right to pursue that person’s remedies against an outside party.
Fee paid by the insured for a life insurance or annuity being cashed out.
Amount of time most of your money must stay in an annuity contract.
Term Life Insurance
Life insurance that offers protection over a certain amount of time, such as five or 10 years or until the policy holder reaches a designated age.
An intentional or unintentional wrong committed against someone, leading to legal liability and perhaps civil court.
A loss so complete that there is no monetary value left, such as a house and accompanying property being totally destroyed.
Coverage that includes losses over the limit of the underlying policy.
Also known as an insurer. The person who evaluates risks, then determines coverage for them.
Classifying risks according to how insurable they are.
Uninsured Motorist Coverage
An auto insurance provision that protects the policyholder when involved in a crash with a driver without liability insurance.
Universal Life Insurance
A life insurance policy with a flexible premium and adjustable life.
Usual, Customary and Reasonable Fees
The average amount charged for similar doctor-recommended services or supplies.
A measurement of how much a covered group uses the plan.
The policy reserve value for life insurance.
Going from the accumulation to the payout phase of a variable annuity.
Variable Life Insurance
Life insurance policy whose value goes up or down, depending on factors including:
- The value of the dollar
- Other equity products
Variable Universal Life Insurance
One contract that combines variable and universal life insurance features.
Someone with a terminal illness who sells their life insurance policy.
Waiver of Premium
When an insurance company waives premiums the policyholder is supposed to pay because the insured is out of work from accident or injury – but he or she keeps the policy active.
Whole Life Insurance
Policy that remains active for a person’s entire life, paying out upon their death.