Find clear explanations of common business and personal insurance terms.
Insurance can be confusing! This glossary is here to help. Think of it as a dictionary for insurance words. Whether you’re new to insurance or already know a little, this glossary will easily explain things. We’ll take complicated words and make them clear, so you can understand your insurance plan better. Let’s dive in!
A
- Accident Indemnity Rider: An optional rider that provides a death benefit if death results from an accident.
- Actuary: A professional who uses mathematical and statistical methods to assess risk and calculate insurance premiums.
- Agent: A licensed salesperson who represents an insurance company and sells their policies.
- Amortization: Spreading the cost of a loan (principal and interest) over a set period through monthly payments.
- Annuity: A financial product that provides a stream of income payments over a set period or for your lifetime.
- Asset: A resource with economic value, such as a car, house, or investment account.
B
- Beneficiary: The person or entity who receives the proceeds from an account or policy upon your death.
- Beneficiary Designation: The formal process of specifying who will receive the proceeds from your assets upon your death.
- Binder: A temporary agreement providing coverage until a formal policy is issued.
C
- Cancellation: The termination of an insurance policy by either the policyholder or the insurance company.
- Cancellation Clause: A provision in the policy outlining the conditions under which the insurance company can cancel your coverage.
- Captive Agent: An insurance agent who can only sell policies from one specific insurance company.
- Cash Value: The portion of a whole life insurance policy that accumulates over time and can be withdrawn or borrowed against.
- Claim: A formal request for payment from an insurance company after a covered event.
- Claim Denial: The insurance company’s refusal to pay for a claim, often due to exclusions or policy violations.
- Claims Adjuster: An insurance company representative who investigates claims and determines the settlement amount.
- Coinsurance: A clause requiring the policyholder to share a portion of the costs with the insurer after the deductible is met (e.g., 80/20 coinsurance).
- Coinsurance Clause: A clause requiring the policyholder to maintain a certain percentage of insurance coverage on a property to receive full reimbursement in case of a loss.
- Collision Coverage: Covers damage to your own vehicle caused by a collision with another object.
- Commercial Insurance: Insurance designed to protect businesses from financial losses, such as property damage, liability claims, or employee injuries.
- Comparative Negligence: A system used to determine how much fault each party involved in an accident bears, affecting how insurance claims are settled.
- Comprehensive Coverage: Covers damage to your vehicle caused by events other than collision, such as theft, fire, vandalism, or weather.
- Compound Interest: The interest earned on both the initial principal amount and the accumulated interest over time.
- Contestable Period: A period (typically 2 years) during which the insurance company can contest the validity of a life insurance claim.
- Contingency Coverage: Optional insurance coverage that provides additional protection for specific events not covered by the standard policy.
- Copay: A set amount you pay for specific covered services, such as doctor visits or prescriptions.
- Copayment Assistance Program: A program offered by some pharmaceutical companies to help patients afford copays for medications.
D
- Death Benefit: The financial payout to your beneficiaries after your death.
- Deductible: The amount you must pay out of pocket before your insurance begins to cover costs.
- Deductible Waiver: A provision that allows the insurance company to waive the deductible for certain claims, often in exchange for a higher premium.
- Depreciation: The reduction in the value of an asset over time due to wear and tear or obsolescence.
- Diversification: Distributing your investments across various asset classes to reduce risk.
- Double Indemnity: A rider (optional coverage) that doubles the death benefit if death occurs due to an accident.
- Dental Insurance: Dental insurance is a plan that helps cover the costs of dental care, including preventive treatments, procedures, and sometimes orthodontics.
E
- Estate: The total value of your assets and liabilities at the time of your death.
- Estate Planning: The process of creating a plan for managing and distributing your assets after your death.
- Exclusion: Events or situations that are specifically not covered by your insurance policy.
- Exclusionary Rider: An optional rider that excludes specific events or situations from coverage.
- Explanation of Benefits (EOB): A document from your insurance company explaining the details of a claim and how much was paid.
- Excepted Expenses: Specific medical expenses excluded from coverage under a health insurance plan.
F
- Financial Planning: The process of creating a roadmap to achieve your financial goals, including budgeting, saving, and investing.
- Flexible Spending Account (FSA): An employer-sponsored account that allows you to set aside pre-tax dollars to pay for qualified medical expenses.
G
- Grace Period: A short window of time (typically 30 days) after a missed premium payment where your coverage remains active before cancellation.
- Guaranteed Issue: A type of life insurance policy that is guaranteed to be issued regardless of your health condition, but typically comes with higher premiums.
- Guaranteed Insurability Rider: An option to purchase additional coverage at predetermined intervals without having to undergo a new medical exam.
- Group Policy: An insurance policy that covers a group of people, often offered by employers or membership organizations.
H
- Health Maintenance Organization (HMO): A type of health insurance plan that requires you to choose a primary care physician (PCP) for referrals to specialists.
- Health Savings Account (HSA): An account you can use to pay for qualified medical expenses with pre-tax dollars. Must be paired with an HDHP.
- High-Deductible Health Plan (HDHP): A plan with a lower monthly premium but a higher deductible. Often paired with a Health Savings Account (HSA).
I
- In-Network Provider: A healthcare provider who has contracted with your insurance company to offer discounted rates.
- Inflation: The gradual increase in prices of goods and services over time, reducing the purchasing power of money.
- Investment: Purchasing an asset with the expectation of future income or appreciation in value.
- IRA (Individual Retirement Account): A tax-advantaged retirement savings account with contribution limits and specific withdrawal rules.
J
We’re still building our glossary! Check back soon for terms starting with ‘J’.
K
- Key Person Insurance: Life or disability insurance for a crucial employee, protecting a business financially if they die or become disabled.
L
- Lapse: When an insurance policy is canceled due to non-payment of premiums.
- Legacy Planning: The process of planning for the transfer of your wealth and assets to your beneficiaries after your death.
- Liability: A financial obligation that you owe to another person or entity.
- Liability Limit: The maximum amount your insurance company will pay for covered claims.
- Liquidity: The ease with which an asset can be converted into cash.
- Loss: The chance of an event happening that could cause financial loss.
- Loss Ratio: The ratio of claims paid out by an insurance company to the premiums collected.
- Loss of Income Coverage: Optional coverage that provides financial protection if you are unable to work due to a covered event.
- Loss of Replacement Cost vs. Actual Cash Value: Replacement cost reimburses you for the cost of replacing damaged property with a new one of similar quality. Actual cash value considers depreciation when determining the payout amount.
M
- Maturity Date: The date on which a bond or other investment matures and you receive the principal amount back.
- Maximum Out-of-Pocket (MOOP): The most you will have to pay out of pocket for covered services in a plan year.
- Medical History: A record of your past illnesses, surgeries, and medications. Insurance companies use this to assess risk and determine your premium.
- Medically Necessary: Services or treatments that a healthcare professional deems essential for diagnosing or treating a medical condition.
- Morbidity: The rate of illness or disease within a population.
- Mortality: The rate of death within a population.
N
- Named Peril Policy: An insurance policy that only covers losses caused by specifically listed events.
- No-Fault Insurance: A type of auto insurance system where each driver’s own insurance company pays for their damages regardless of who is at fault in the accident (applicable in certain states).
O
- Open Enrollment Period: The specific timeframe each year when you can enroll in or make changes to a health insurance plan under the Affordable Care Act.
- Out-of-Network Provider: A healthcare provider who has not contracted with your insurance company and may charge higher rates.
- Out-of-Pocket Maximum: The most you will have to pay out of pocket for covered services under a health insurance plan in a plan year, after the deductible is met.
P
- Portfolio: A collection of investments owned by an individual or institution.
- Pre-existing Condition: A medical condition you had before obtaining insurance coverage. Some plans may have limitations on coverage for pre-existing conditions.
- Premium: The periodic payment you make to keep an insurance policy or investment account active.
- Preventive Care: Medical services aimed at preventing illness, such as checkups and screenings.
- Preferred Provider Organization (PPO): A type of health insurance plan that allows you to see any provider but offers greater benefits for using in-network providers.
Q
We’re still building our glossary! Check back soon for terms starting with ‘Q’.
R
- Reinsurance: Insurance purchased by an insurance company from another company to share the risk of a large claim.
- Replacement Cost Coverage: Reimburses you for the cost of replacing damaged property with a new one of similar quality.
- Rider: An optional add-on to a standard insurance policy that provides additional coverage for a specific event or situation.
- Risk: The chance of an event happening that could cause financial loss.
- Risk-Based Pricing: Setting insurance premiums based on the individual’s risk profile, such as age, health history, driving record, or property location.
- Risk Management: The process of identifying, evaluating, and taking steps to minimize potential losses.
S
- Securities: Financial instruments like stocks, bonds, and mutual funds that represent ownership or debt.
- Specialist: A doctor who specializes in a specific area of medicine.
T
- Term: The specific period of time for which an insurance policy is in effect (e.g., 10-year term life insurance).
U
- Underinsured Motorist Coverage: Provides financial protection if you are injured in an accident caused by a driver with inadequate liability insurance.
- Underwriting Guidelines: The criteria used by an insurance company to evaluate applicants and determine their eligibility for coverage and premium rates.
- Universal Life Insurance: A type of flexible premium adjustable life insurance with a cash value component.
V
- Valuable Papers Insurance: Protects important documents (physical or digital) from loss due to theft, fire, etc., covering their value or reconstruction costs.
- Variable Survivorship Life Insurance: Life insurance for two people with investment options to grow the policy’s value.
- Veterans’ Group Life Insurance (VGLI): Affordable life insurance for veterans with guaranteed coverage and no medical exams (under certain conditions).
W
- Waiver of Premium: A provision allowing the insurance company to waive premium payments if you become disabled.
X
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Y
We’re still building our glossary! Check back soon for terms starting with ‘Y’.
Z
We’re still building our glossary! Check back soon for terms starting with ‘Z’.
