Insurance Words Explained
We cut through the confusing words with our guide to explaining the usual insurance jargon!
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A
Accident Only - an insurance contract that provides coverage for death, dismemberment, disability, or hospital and medical care as the result of an accident.
Actual Cash Value - repayment value for indemnification due to loss or damage of property; in most cases, it is replacement cost minus depreciation
Adjuster - a person who investigates claims and recommends settlement options based on estimates of damage and insurance policies held.
Agent - an individual who sells, services, or negotiates insurance policies either on behalf of a company or independently.
Annuity - a contract providing income for a specified period of time, or duration of life for a person or persons.
B
Beneficiary - an individual who may become eligible to receive payment due to will, life insurance policy, retirement plan, annuity, trust, or other contracts.
Binder - a temporary agreement declaring that the policy is in effect
Blanket Coverage - coverage for property and liability that extends to more than one location, class of property or employee.
Bodily Injury - physical injury including sickness or disease to a person.
Book Value - original cost.
Broker - an individual who receives commissions from the sale and service of insurance policies. These individuals work on behalf of the customer and are not restricted to selling policies for a specific company but commissions are paid by the company with which the sale was made.
Bundling - carrying more than one insurance policy with a single company. This usually saves you money on your premiums.
Burglary and Theft - coverage for property taken or destroyed by breaking and entering the insured's premises, burglary or theft, forgery or counterfeiting, fraud, kidnap and ransom, and off-premises exposure.
Business Auto - coverage for motor vehicles, other than those in the garage business, engaged in commerce.
C
Cancellation - the termination of an insurance contract before the end of the policy period, by the insured or insurer.
Carrier - the insurance company or insurer.
Casualty Insurance - a form of liability insurance providing coverage for negligent acts and omissions such as workers compensation, errors and omissions, fidelity, crime, glass, boiler, and various malpractice coverages.
Claim - a request made by the insured for insurer remittance of payment due to loss incurred and covered under the policy agreement.
Claimant - individual or entity presenting a claim.
Collision Insurance - pays for damage to an insured vehicle when it hits or is hit by another car or object.
Commission - a percentage of premium paid to agents by insurance companies for the sale of policies.
Condos - homeowners insurance sold to condominium owners occupying the described property.
D
Date of Issue - date when an insurance company issues a policy.
Declarations - policy statements regarding the applicant and property covered such as demographic and occupational information, property specifications, and expected mileage per year.
Deductible - The amount of a claim you pay out of your own pocket. If you choose a high deductible in most cases it can reduce your insurance premium.
Dwelling Policy - this is different than a homeowners policy in that it covers a secondary home or vacation dwelling.
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E
Effective Date - date at which an insurance policy goes into force.
Endorsement - an addition or change to the insurance policy contract.
Excess and Umbrella Liability - liability coverage of an insured above a specific amount set forth in a basic policy issued by the primary insurer; or a self-insurer for losses over a stated amount; or an insured or self-insurer for known or unknown gaps in basic coverages or self-insured retentions.
Exclusions - specific things that an insurance policy will not cover will be listed on the policy document.
F
Face Amount - the value of a policy to be provided upon maturity date or death.
Federal Flood Insurance - coverage for qualifying residents and businesses in flood-prone regions through the National Flood Insurance Act.
First Party Claims - a claim for damage, loss, or injury made by the insured person.
Flood - coverage protecting the insured against loss or damage from a flood.
FR-44 - may be required if you commit a major driving infraction like a DUI or DWI. It is a certification that is attached to your insurance policy and filed with the relevant state.
Full Coverage - a term used in car loans and dealerships to refer to Comprehensive and Collision coverages on your auto policy. This may be required when financing the purchase or leasing a vehicle.
G
Gap Insurance - an auto insurance option that comes into play when your vehicle is stolen or destroyed. Gap Insurance covers the difference, if any, between your car's actual value and what you still owe on it.
Grace Period - If you are insured, this is the amount of time you have to add a new car to your policy.
Group Health - health insurance issued to employers, associations, trusts, or other groups covering employees or members and/or their dependents, to whom a certificate of coverage may be provided.
H
Hazard - a circumstance that tends to increase the probability or severity of a loss.
Health Insurance - a generic term applying to all types of insurance indemnifying or reimbursing for losses caused by bodily injury or illness including related medical expenses.
Health Plan - written promise of coverage given to an individual, family, or group of covered individuals, where a beneficiary is entitled to receive a defined set of health care benefits in exchange for a defined consideration, such as a premium.
Homeowners Insurance - a package policy combining real and personal property coverage with personal liability coverage. Often referred to as "HO" policies. There are a number of different HO policies listed below:
HO-1: Provides no protection for liability or personal property.
HO-2: A basic Broad Form policy that provides more coverage than HO-1.
HO-3: A Special Form policy. The most common home policy type.
HO-4: Renters insurance policies are also known as HO-4.
HO-5: A Comprehensive policy. This is the best coverage homeowners policy.
HO-6: Condo insurance policies.
HO-7: Mobile homes or similar manufactured homes.
I
Independent Adjuster - freelance contractor paid a fee for adjusting losses on behalf of companies.
Individual Health - health insurance where the policy is issued to an individual covering the individual and/or their dependents in the individual market. This includes conversions from group policies.
Insurance - a system for transferring risk from an individual to a company and reducing the uncertainty of risk via pooling.
Insured - party or parties covered by an insurance policy.
Insurer - an insurer or reinsurer authorized to write property and/or casualty insurance under the laws of any state.
Internet Liability Insurance/Cyber Insurance - coverage for cyber commerce including copyright infringement, libel, and violation of privacy.
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J
Joint-Life Annuity - an annuity contract that ceases upon the death of the first of two or more annuitants.
K
Nothing here for K!
L
Lapse - termination of a policy due to failure to pay the required renewal premium.
Letter of Experience - a document that states the length of time you were with a particular insurance carrier. Most carriers offer a discount for being insured before taking out a new policy.
Level Premium Insurance - life insurance policy for which the cost is equally distributed over the term of the premium period, remaining constant throughout.
Liability - insurance that provides protection from claims arising from injuries or damage to other people or property.
Lienholder - a person or organization with a financial interest in property up to the amount of money borrowed or still owed on the property.
Life – Endowment - insurance that pays the same benefit amount should the insured die during the term of the contract, or if the insured survives to the end of the specified coverage term or age.
Lifetime Disability Benefit - a provision in some disability income policies to recoup lost wages for the term of disability or remainder of the insured's life in case of permanent disability.
Limited Payment Life Insurance - a form of whole-life insurance with a pre-defined number of premiums to be paid.
Limited Policies - health insurance coverage for a certain ailment, such as cancer.
Limits - maximum value to be derived from a policy.
Loss - physical damage to property or bodily injury, Including loss of use or loss of income.
Loss of Use - compensation to a third-party for financial consequences resulting from the inability to use property as the result of accident-related damage
Losses Incurred - Includes claims that have been paid and/or have amounts held in reserve for future payment.
M
Major Medical - a hospital/surgical/medical expense contract that provides comprehensive benefits as defined in the state in which the contract will be delivered.
Mandated benefits - insurance required by state or federal law.
Market Value - fair value or the price that could be derived from the current sale of an asset.
Mechanical Breakdown Insurance - premiums attributable to policies covering repair or replacement service.
Medicare - a state assistance program, passed under Title XVIII of the Social Security Amendments of 1965, to provide hospital and medical expense insurance to those over 65 years of age.
Medigap - supplementary private health insurance products to Medicare insurance benefits.
Mobile Homes - Homeowners - homeowners insurance sold to owners occupying the described mobile home.
Mortgage Guaranty - insurance that indemnifies a lender for loss upon foreclosure if a borrower fails to meet required mortgage payments.
Mortgage Insurance - a form of life insurance coverage payable to a third party lender/mortgagee upon the death of the insured/mortgagor for loss of loan payments.
Motor Vehicle Report (MVR) - the official document that contains information about your driving record, crashes, and your license history from the DMV.
Multi-Car Discount - available to policyholders who insure more than one vehicle at the same location.
Multi-Peril Insurance - personal and business property coverage combining several types of property insurance in one policy.
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N
Named Insured - the individual defined as the insured in the policy contract.
National Insurance Crime Bureau (NICB) - a not-for-profit organization that partners with insurers and law enforcement agencies to facilitate the identification, detection, and prosecution of insurance criminals.
No-fault Insurance - could pay for your medical treatment, lost wages, or other accident-related expenses regardless of who caused the accident. This coverage is not available in all states.
Non-owners Insurance - a type of policy that offers the minimum required auto insurance cover for people who do not own a vehicle but still need to be insured.
Negligence - failure to exercise reasonable consideration resulting in loss or damage to oneself or others.
NFIP (National Flood Insurance Program) - flood insurance and floodplain management for personal and business property administered under the National Flood Act of 1968. Encourages participation by private insurers through a flood insurance pool.
Nuclear Energy Liability - coverage for bodily injury and property damage liability resulting from the nuclear energy material (whether or not radioactive) on the insured premises or in transit.
O
Occurrence - an accident, including injurious exposure to conditions, which results, during the policy period in bodily injury or property damage neither expected nor intended from the standpoint of the insured.
(OEM) Original Equipment Manufacturer Parts - auto parts obtained from the original manufacturer of the car or the supplier of the original part.
Overseas Insurance - auto and property insurance for those living abroad.
Owner Occupied - homeowners insurance sold to owners occupying the described property.
P
Package Policy - two or more distinct policies combined into a single contract.
Peril - the cause of property damage or personal injury, origin of desire for insurance. "Cause of Loss"
Permanent Life Insurance - policy that remains active for the life of the insured.
Personal Auto Policy - coverage designed to insure private passenger automobiles and certain types of trucks owned by an individual or husband and wife.
Personal Earthquake - earthquake property coverage for personal, family or household purposes.
Personal Flood - separate flood insurance policy sold for personal, family, or household purposes.
Personal GAP Insurance - credit insurance that insures the excess of the outstanding indebtedness over the primary property insurance benefits in the event of a total loss to a collateral asset.
Personal Injury Liability - liability coverage for those who have been discriminated against, falsely arrested, illegally detained, libeled, maliciously prosecuted, slandered, suffered from identity theft, mental anguish or alienation of affections, or have had their right of privacy violated.
Personal Injury Protection Coverage/PIP - required auto coverage in some states, PIP insurance covers the cost of medical bills for you and your passengers in the event of an accident and normally covers work loss of varying amounts.
Pet Insurance Plans - vet care insurance policy providing coverage for a pet like a dog or cat of the insured owner in the event of an accident or illness.
Policy - a written contract confirming the legality of an insurance agreement.
Premium - Money charged for your insurance coverage.
Pre-accident Condition - the state of a vehicle before an accident, including damage not related to the accident, mileage, and other factors.
Prior insurance - If you have a prior insurance policy for at least six months you may be eligible for an extra discount.
Protection and Indemnity (P&I) Insurance - a broad form of marine legal liability insurance coverage.
Q
Quote - the statement of the premium that will be charged by the insurer.
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R
Rebate - a refund of part or all of the premium payment.
Renewal - the period of time when your current policy is expiring and your new policy is due to begin. Most policies are due for renewal after six or twelve months.
Renters Insurance - covers renters for the contents of their home and general liability. This is also known as a HO-4 policy. Coverage does not include the structure.
Replacement Cost - the cost of replacing the item or property without depreciation. If your car costs $20,000, make sure the replacement cost is sufficient to cover the loss.
Residence - the place you live.
Risk - uncertainty concerning the possibility of loss.
S
Salvage - value recoverable after a loss.
Self-Insurance - a type of insurance often used for high-frequency low severity risks where risk is not transferred to an insurance company but retained and accounted for internally.
Situs of Contract - the jurisdiction in which the contract is issued or delivered as stated in the contract.
Social Insurance - compulsory insurance plan administered by a federal or state government agency with the primary emphasis on social adequacy.
State of Domicile - the state where a company's home office is located.
State minimum - describes the minimum insurance coverage required to legally drive in a state. Some states only require liability insurance as the minimum level of cover, while others require ‘Uninsured Motorist’ or ‘PIP’ coverage.
T
Term - period of time for which policy is in effect.
Term Insurance - life insurance payable only if death of insured occurs within a specified time, such as 5 or 10 years, or before a specified age.
Third Party - person other than the insured who has incurred losses.
Theft - the unlawful taking of another's property with the intent to permanently deprive the owner of its use or possession.
Third-Party Claim - claims for injury or damage to property of a third party alleged to have been caused by the insured.
Travel Coverage - covers financial loss due to trip cancellation or interruption, lost or damaged baggage.
U
Umbrella Insurance - provides high limits of additional liability coverage above the limits of your homeowners and auto policy. In addition. Also, the coverage which could be excluded by other liability policies.
Underwriting - a process the insurer goes through to evaluate whether or not it will provide coverage for you.
Uninsured Motorist Coverage - In some circumstances, may pay for your injuries or property damage caused by an uninsured driver. In some cases, it also includes coverage for underinsured drivers and at-fault drivers with insufficient insurance to pay your claim.
Underinsured Motorist Coverage - policy option for bodily injury or property losses caused by a motorist with coverage insufficient to cover total dollar amount of losses.
Universal Life Insurance - adjustable life insurance under which premiums and coverage are adjustable, company expenses are not specifically disclosed to the insured but a financial report is provided to policyholder's annually.
V
Valued Policy - an insurance contract for which the value is agreed upon in advance and is not related to the amount of the insured loss.
Variable Life Insurance - life insurance whose face value and/or duration varies depending upon the value of underlying securities.
Variable Universal Life - combines the flexible premium features of universal life with the component of variable life in which excess credited to the cash value of the account depends on investment results of separate accounts. The policyholder selects the accounts into which the premium payments are to be made.
Vehicle Identification Number (VIN) - your car’s serial number. This 17-digit number is used for identification purposes and is visible on the dashboard when viewed from the outside of the vehicle.
W
Warranty Insurance - coverage that protects against manufacturer's defects past the normal warranty period.
Whole Life Insurance - life insurance that may be kept in force for the duration of a person's life and pays a benefit upon the person's death. Premiums are made for same time period.
Written Premium - the contractually determined amount charged by the reporting entity to the policyholder for the effective period of the contract based on the expectation of risk, policy benefits, and expenses associated with the coverage provided by the terms of the insurance contract.
X
Nope! Nothing starting with X to explain.
Y
Likewise with Y.
Z
Z is for Zebra. But we don’t talk about the Zebra’s here at the zoo!