Insurance Coverage Glossary
Actual Cash Value – The cost necessary to replace property that has been destroyed with a similar item, taking into consideration depreciation on the item. In this type of policy, a 20-year-old dining room table will not be replaced at the current value for a new table.
Actuary – A mathematician who calculates dividends, rates, reserves, and statistics that relate to insurance.
Adjustable Rate – A changing interest rate that follows the current market-rate index.
Adjuster – Someone who inspects damaged property or injuries to determine the amount the insurer is liable for when there is a loss.
Agent – Someone who sells insurance policies and provides service for those who purchase them.
Annuity – An agreement made by an insurance provider to make payments from a policy for a set period of time.
Assets – The property of an insurance company that could be sold or cashed in to pay the debts of the insurer. These include physical property as well as invested assets.
Attained Age – the insured individual's age at a particular time. Typically applies to life insurance policies that allow certain options when an insured individual reaches a certain attained age.
Benefit Period – The period of time in which benefits are paid to the insured individual and qualified dependents in a health insurance policy.
Broker – Someone who sells insurance products but focuses on finding clients who need insurance and then finding the right insurance company for them, rather than working for one particular insurance company.
Broker-Agent – Insurance salespeople who work for particular insurance providers but also search for insurance products that better fit a client's needs when the represented provider is not a good fit.
Capital – The value or equity shareholders of a stock insurance company have. This protects the benefits of the company's policyholders.
Casualty – Loss or liability that occurs in an accident
Casualty Insurance – Insurance that covers injuries and legal liability the insured has for injuries and damage to someone else's property. Casualties include accidents and also crimes, machinery malfunction, and aviation problems.
Claim – A demand for payment based on the benefits in a policy.
Coinsurance – Required insurance equal to a percentage of the value of the policy if the insured is going to receive full payment for a loss.
Collision Insurance – Automotive insurance that covers damage that occurs in a collision, outside of what is covered by comprehensive coverage.
Commission – The agent or broker's fee for making the sale of the insurance policy. It is a percentage of the premium paid by the insured.
Comprehensive Insurance – Car insurance that covers damage to the vehicle caused by something other than what is covered in collision coverage. Comprehensive insurance also covers theft of a vehicle.
Coverage – Protection provided by an insurance policy as outlined in the policy's explanation of benefits.
Convertible Life Insurance – Term life insurance that can be changed to a whole life or other permanent insurance structure even without a medical examination.
Copayment – The amount an insured must pay for health care alongside what the insurance company pays. Typical copayments are $10-$20 per visit, but costs vary between policies.
Death Benefit – The amount of benefit that will be paid at the insured's death in a life insurance plan.
Deductible – The amount that an insured must pay out of pocket before insurance begins to pay for a loss.
Dividend – A return paid to the insured by the insurance provider based on the interest earned on the premiums the insured paid. This typically applies to life insurance products.
Elimination Period – A length of time that must pass before coverage will kick in or benefits can be collected by the insured or the beneficiaries on a policy. This is sometimes called a waiting period.
Employer's Liability Coverage – Liability coverage an employer purchases to cover accidents that may occur to employees and are covered under common law liability. This is separate from workman's compensation insurance.
Exclusions – Conditions or items that are not covered in an insurance policy.
Expense Ratio – The ratio of underwriting expenses to net premiums written.
Exposure – A measure of an insured's vulnerability to loss, measured in units or dollars.
Floater – A policy that can be purchased to cover something that is not covered by standard renters insurance. Floaters are often purchased for jewelry or sports equipment.
General Liability Insurance – Insurance business owners purchase to cover liability exposures they face, such as injuries that occur when a customer falls on the premises.
Grace Period – a length of time after the due date for a premium payment before the policy will be canceled. As long as the premium is paid during the grace period, the coverage will stay in force, even if the premium is quite late.
Guaranteed Renewable – A provision in a policy that gives the right to renew the policy every time it is time to renew, and the policy cannot be canceled by the insurer unless the premiums were not paid.
Hazard – Something that increases the chances or severity of a loss.
Hazardous Activity – A dangerous activity that is exempted from coverage by an insurance policy.
Health Maintenance Organization – Sometimes called an HMO, this health insurance structure is a prepaid group health insurance plan that gives insured individuals access to health care from providers that operate within the HMO.
Health Savings Account – A savings account linked to a high-deductible health insurance policy and allows insured individuals to contribute pre-tax money to be used for future qualified medical expenses.
Indemnity – Restoration to a victim for a loss in the form of replacement, repair, or payment.
Insurance Adjuster – A representative of an insurance company who studies a loss to determine the amount of liability the company has.
Insurance Attorney – An attorney whose focus is law that relates to insurance.
Least Expensive Alternative Treatment – Maximum an insurance policy will pay due to its research about the least expensive cost for the procedure.
Liability – A legally enforceable obligation, which in the insurance world typically applies to losses that are the insured individual's fault.
Liability Insurance – Coverage that insures an individual for liability losses, even those due to negligence.
Living Benefits – A feature that allows an insured to receive proceeds of a life insurance policy before death under predetermined circumstances, such as catastrophic illness.
Loss Reserve – Estimated cost of liability for unpaid claims or losses that occur during a given period.
Losses Incurred – The net paid losses during an insurance year in addition to the change in loss reserves from the prior year.
Net Premium – Premium amount after the agent's commission is deducted.
Nonstandard Auto – Automotive insurance for drivers who have poor driving records or cannot get traditional insurance. This coverage carries high premiums.
Noncancellable – A contract that cannot be changed, including costs of the policy.
Occurrence – Something that results in a loss covered by insurance.
Out-of-Pocket Limit – A set amount that an insured must pay before insurance will pay 100 percent of a healthcare expense.
Peril – Reason for a loss or possible loss.
Personal Injury Protection – Sometimes called PIP, Personal Injury Protection is a type of insurance that protects the insured and dependents from the cost of medical bills that occur in a car accident that occurs in a state with no-fault auto insurance laws.
Personal Lines – An insurance policy taken out on an individual or family. This includes personal auto insurance and homeowner's policies.
Policy – A written insurance contract including all clauses, riders, endorsements, and other written items that apply to the policy.
Pre-Existing Condition – Coverage limitation that excludes health conditions that the individual has already received treatment for or diagnosis for before the health insurance went into effect.
Preferred Auto – Auto coverage offered to drivers who have never been in a car accident and have good driving records. This policy typically has a low premium.
Preferred Provider Organization – Network of doctors and other medical facilities who offer a discount to individuals who are insured under a particular insurance provider but are paid on a fee-for-service basis.
Premium – The amount paid for insurance protection.
Qualified High-Deductible Health Plan – A policy that has a high deductible and is eligible to be coupled with a Health Savings Account. The deductible must be at least $1,000 for an individual or $2,000 for a family.
Qualifying Event – An occurrence that causes the insurance to kick in.
Renewal – The automatic re-establishment of a policy that is currently in force when a premium is paid.
Replacement Cost – The money needed to replace property that is covered under an insurance policy.
Reserve – The amount of liabilities an insurer keeps to cover any debts to policyholder.
Section 1035 Exchange – Section of the IRS Code that allows life insurance policyholders to replace the policy without paying taxes on the purchase.
Section 7702 – Section of the IRS Code that defines the type of life policy that is a life insurance contract and is subject to the tax advantages of that type of policy.
Standard Auto – The type of auto insurance available for average drivers with a few marks on their records.
Stop Loss – A policy provision that stops the insurance company's losses at a given point. Typically this is a dollar limit.
Surplus – The amount that assets exceed liabilities for an insurer.
Term Life Insurance – A life insurance policy that is in effect for a set period of time, after which the insured has no coverage and no money. If the insured dies within the coverage time, the insurance policy will pay the death benefit.
Total Loss – A loss that is so complete that there is no value left in the property.
Umbrella Policy – A policy that covers losses that are not covered in an underlying policy. Umbrella policies can be purchased for homeowners and auto insurance policies.
Underwriting – Selecting risks an individual poses for insurance, classifying them, and then choosing the premium rate.
Universal Life Insurance – A life insurance product that builds a cash value, has a flexible premium, and offers a guaranteed rate of return.
Valuation – The mathematical calculation of policy reserves in a life insurance policy that earns a dollar value.
Whole Life Insurance – Life insurance that is in place for the entire life of the insured. The death benefit is paid whenever the insured dies.
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