Insurance Terms

  • Accident: Any unintended event that results in loss to property or life.
  • Active Participant: An individual whose absence from an event would trigger a benefit or claim if the event needs to be canceled or postponed.
  • Actual Cash Value: The value of the property at the time of loss.
  • Actuary: Person who assesses risk ratios for the insurance company and helps determine rates.
  • Adjuster: An individual who evaluates claims for the insurance company and determines loss value of claims.
  • Adjustable Rate – An interest rate that can change based on a published market-rate index.
  • Admitted Assets – Assets permitted by state law to be included in an insurance company’s yearly financial statement. These assets are an important factor when insurance regulators evaluate insurance company solvency. They include stocks, bonds, mortgages and real estate.
  • Agent: A person who is licensed to sell insurance policies.
  • Aggregate Limit: The maximum amount a policy will pay for a certain type of loss over a span of time, regardless of amount of accidents or claims within that span of time.
  • Agreed Value: Common in boat policies where the insurance company and the insured agree on a stated value of a boat. This is then listed as the amount you would receive in the event of a loss, rather than the current market value.
  • Anti-Theft Device: Any deterrent, electronic of mechanical, that prevents theft of property (i.e. car alarms, “lo-jack” or other tracking devices, of “club”-type devices).
  • Appraisal: A systematic approach to evaluating the amount of damage and the cost to repair (or claim a total loss). Appraisals also determine the value of property in order to assess taxes and initiate policies (such as during the home-buying process).
  • Assessed Values: Used to value properties to determine taxable value.
  • Auto Death and Dismemberment Coverage: An additional coverage that pays a specific, pre-determined amount for death or loss of limbs due to a car accident.
  • Beach and Windstorm Policy: State-sponsored insurance risk pool that provides coverage for hurricanes or other coastal storms.
  • Benefit Period – In health insurance, the number of days for which benefits are paid to the named insured and his or her dependents. Usually a specific number of calendar days.
  • Beneficiary: The person who is awarded financial restitution in the event of a loss.
  • Binder: A temporary agreement between the insurance company and the insured that states the policy is in effect. Usually provides proof of coverage while the policy documents are being generated.
  • Boat insurance (marine coverage): Coverage for vessels used and propelled on the water by engines, wind, or oars.
  • Bodily Injury Liability Coverage: Coverage that pays for the injured party if you are at-fault in an accident. May also cover legal fees, lost time at work and other related expenses to an injured person.
  • Burglary and Theft Coverage: Additional coverage that pays for loss due to theft. Can also cover belongings left in the vehicle if they are listed on the policy.
  • Broker: A person who compares and finds insurance policies for a customer. They do not represent a particular insurance company but rather the customer.
  • Bundling: Coverage that includes multiple policies, such as home and auto which, when combined, can save the consumer money on their annual premiums.
  • Calendar Year: Used for dating policy term dates, which means a policy would be in effect for 365 days.
  • Cancellation: The end of the policy’s coverage, either due to policy end-date or non-payment.
  • Cash Value: The actual value of property at the time of loss. Also considered the market value. It does not consider replacement value or amount owed on a loan.
  • CARFAX: A report that can be obtained to show the accident and repair history of a vehicle by researching its VIN number.
  • Carpool Discount: Discounts on policy premiums for those that have proof they participate in a carpool for commuting purposes.
  • Carrier: Another name for the insurance company.
  • Casualty Insurance: Coverage for a person who is killed or injured in an accident.
  • Certificate of Insurance: A written document that proves coverage is in force during a specific time period.
  • Citation: A violation of either moving or non-moving laws in which an official serves a ticket to the person found at fault.
  • Claim: A notice to the insurance company of a loss, which may or may not trigger compensation.
  • Claim number: A distinct reference number assigned to each claim.
  • Coinsurance: A portion of a claim that is paid by the insured. Sometimes referred to as a deductible.
  • Commercial Vehicle: A vehicle that is used for business purposes and not for commuting or private use.
  • Commute: The drive between home and work (or school) and back. This is usually measured in miles per day or amount of time on the road.
  • Competitive replacement parts: When replacing damaged parts from an accident these parts may be used instead of the standard manufactured parts from the factory.
  • Comprehensive Coverage: Coverage for loss not caused by a collision, such as damage from a fire or theft.
  • Compulsory Auto Insurance: Basic minimum liability coverage which is legally required in most states. Severe penalties can be given if you are caught driving without insurance.
  • Conditions: These are limitations on policies that can deny coverage for certain criteria listed in the policy.
  • Contents Coverage: Additional coverage for items contained, housed, or stored within a covered property.
  • Clause: A specific part of a policy which may include exclusions or exceptions.
  • Condominium Insurance: Coverage for your personal property and the interior structure of your condo. May also contain liability coverage for someone injured in your home.
  • Continual Coverage: Coverage that has not had any lapses or gaps in coverage for a specific time period.
  • Collision Coverage: Coverage for physical damages caused by an accident with another car or object.
  • Coverage: Protection that reimburses the insured party for a loss according to a written insurance policy.
  • Coverage Area: A specific area such as a state or country in which coverage exists that excludes coverage outside of the area.
  • Crash Test Ratings: Ratings on a vehicle’s performance during simulated or controlled crash tests.
  • Credit Risk: A person or entity which has a higher chance of default on policy premiums. Some insurance companies compare credit risk to overall responsibility of the driver, and those with higher risk can sometimes be charged higher premiums.
  • Crime Insurance: Coverage for damage or loss incurred during a crime such as theft or burglary. Some areas with higher crime rates may lead customers to choose this additional option.
  • Date Restrictions: Some policies only cover a vehicle during seasonal use, such as watercraft. Coverage is only in effect during the dates set in the policy.
  • Death Benefit: Payments made to a beneficiary due to the death of a person in a covered accident.
  • Declarations Page: A specific part of your policy which describes the type and dollar limits of coverage.
  • Deductible: A portion of a claim that is paid by the insured which is a set amount, agreed upon during the purchase of the policy. Higher deductible usually result in lower premiums. This amount is paid either per occurrence or per calendar year, depending on the coverage type. It is to be paid to the servicing agent who is repairing the damaged property.
  • Defensible Space: A designated area around a fireplace or home, which reduces the risk of fires or accidents.
  • Defensive Driving Course: A traffic safety course which improves driving skill. It may be taken to prevent a citation from being placed on your driving record or to reduce insurance premiums.
  • Deposit: A monetary contribution toward premiums which guarantees a set amount for scheduled payments.
  • Depreciation: When the actual value of property is lowered to reflect age, misuse, or neglect.
  • Driving Record: A detailed account of an individual’s driving violations.
  • Drought: A recorded deficiency in rainfall that leads to loss of property or increases dangerous fire conditions.
  • Driving Under the Influence: Driving a motor vehicle when you are under the effects of drugs or alcohol. Each state has a legal limit for alcohol use and if you test above that limit you will be cited for a “DUI” or “DWI”. Severe penalties have been placed in each state and special insurance may  be needed after conviction of a DUI or DWI.
  • Effective Date: The start date of policy coverage.
  • Elimination Period – The time which must pass after filing a claim before a policyholder can collect insurance benefits. Also known as “waiting period.”
  • Emergency Coverage: Coverage for services, such as towing, after an accident.
  • Endorsement: These are changes to your original policy and can include adding additional drivers or selecting additional coverage or deductibles.
  • Evidence of Insurance: A written proof of insurance coverage for a specific period of time.
  • Exclusions: Any policy exception that is not covered under your policy.
  • Excluded Driver: Any licensed driver that is excluded from your policy. This person will not be covered in the event of an accident because they have been excluded from the policy.
  • Extended Replacement Cost: Additional coverage for replacement value of your property. If labor and material costs rise you may not be able to replace your property to its previous condition at the previous market value.
  • Family Member: A person who resides with you at the same address who is also related to you. However, a college student who lives away from home is also usually considered as a family member for policy purposes.
  • FEMA: Federal Emergency Management Agency. Handles emergency situations such as severe storms and the destruction they cause.
  • Financing Entity – Provides money for purchases.
  • Financial responsibility laws: Laws that make it illegal to not have the minimum state standards of liability insurance.
  • Fire Insurance: Coverage that pays for loss associated with fire.
  • Floater: Additional coverage for personal items that may not always be at home or in your possession, such as jewelry or art. It may also cover these items during transit or when being serviced or repaired.
  • Flood Insurance: Additional coverage for loss associated with flood waters. This coverage may be mandatory depending on the zoning laws of your area.
  • Full Coverage: Covers liability, collision and comprehensive on a specific vehicle. Most financed vehicles are required to carry full coverage.
  • Gap Insurance: The market value of your vehicle may be lower than the balance owed on your loan. Gap insurance covers the difference in the event of a total loss.
  • Garage Address: This is your primary residence where your vehicle is kept the majority of the time.
  • Glass Insurance: Additional coverage for loss associated with glass windows and doors.
  • Grace Period: Additional time that you have to pay your premium without penalty or policy cancellation.
  • Graduated Driver license: A license that limits the driving privileges until further experience is gained.
  • Gross Negligence: Reckless behavior that specifically harms another without regard for their safety or property.
  • Guaranteed Renewal: A policy that is automatically renewed after each policy term as long as premiums are paid accordingly.
  • Guaranteed Replacement cost coverage: Additional coverage that will pay the full replacement value of property that has incurred loss to restore it to its original condition prior to the loss.
  • Hazard: Any safety issue, such as exposed wiring or dry brush, that could cause a fire.
  • Health Maintenance Organization (HMO) – Prepaid group health insurance plan that entitles members to services of participating physicians, hospitals and clinics. Emphasis is on preventative medicine, and members must use contracted health-care providers.
  • Health Reimbursement Arrangement – Owners of high-deductible health plans who are not qualified for a health savings account can use an HRA.
  • Homeowners Insurance: A policy which covers the homeowner’s property and also liability coverage for anyone injured at his property.
  • Independent Insurance Agents & Brokers of America (IIABA) – Formerly the Independent Insurance Agents of America (IIAA), this is a member organization of independent agents and brokers that monitors industry issues. Numerous state associations are affiliated with the IIABA.
  • Insurance Adjuster – A representative of the insurer who seeks to determine the extent of the insurer’s liability for a loss when a claim is submitted. Independent insurance adjusters are hired by insurance companies on an “as-needed” basis and might work for several insurance companies at the same time. Independent adjusters charge insurance companies both by the hour and by miles traveled. Public adjusters work for the insured in the settlement of claims and receive a percentage of the claim as their fee.
  • Interest-Crediting Methods – There are at least 35 interest-crediting methods that insurers use. They usually involve some combination of point-to-point, annual reset, yield spread, averaging, or high water mark.
  • Lapse: A period of no coverage, such as periods of non-payment or periods of time between policy effective dates.
  • Lay Up Period: Periods of time when you will not use the insured vehicle or craft and are not covered.
  • Liability Coverage: Coverage that pays someone that you have injured or property you have damaged if you are declared at-fault.
  • Least Expensive Alternative Treatment – The amount a health insurance company will pay based on its determination of cost for a particular procedure.
  • Leverage or Capitalization – Measures the exposure of a company’s surplus to various operating and financial practices. A highly leveraged, or poorly capitalized, company can show a high return on surplus, but might be exposed to a high risk of instability.
  • Licensed Driver: A person who has fulfilled a states requirements for driving a vehicle and has been issued a currently valid license.
  • Limits: The maximum amount of coverage provided under the policy or exceptions that are not covered.
  • Limited Liability: Minimum coverage for liability claims.
  • Living Benefits – This feature allows you, under certain circumstances, to receive the proceeds of your life insurance policy before you die. Such circumstances include terminal or catastrophic illness, the need for long-term care, or confinement to a nursing home. Also known as “accelerated death benefits.”
  • Loss: Any personal or financial damage that may be caused by another person, accident or other serious event.
  • Manufactured home coverage: Coverage specifically for mobile homes.
  • Material Misrepresentation: When someone acquires coverage for property and falsely states its value or condition.
  • Mediation: An agreement between two opposing sides with the assistance of a neutral third party.
  • Mortgage Guarantee Insurance: Coverage to protect mortgage companies from default on a homeowners loan.
  • Mortgage Insurance Policy – 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 Coverage: Coverage pertaining to registered motorcycles including liability, collision and comprehensive.
  • Motor Vehicle Report: A detailed accounting of a driver’s driving history and citations.
  • Medical Payment Coverage: Covers payments of medical expenses such as ER Visits, and Ambulance transportation associated with an auto accident. There is usually a set monetary limit on this coverage.
  • Named Perils: Specific hazards that are called out within a policy and may limit coverage based upon further neglect of these safety issues.
  • Navigational Limits: Coverage only within certain boundaries of water and if you travel further you will not be covered.
  • National Flood Insurance Program (NFIP): An insurance risk pool that helps defray the insurance companies costs associated with severe flooding.
  • National Association of Insurance Commissioners (NAIC) – Association of state insurance commissioners whose purpose is to promote uniformity of insurance regulation, monitor insurance solvency and develop model laws for passage by state legislatures.
  • Negligence: Careless regard for the safety of another or their property.
  • No Fault: Several states have no fault laws that allow you to use your own medical payment insurance regardless of who may have been at fault for the accident. It allows for the patient to receive immediate medical care.
  • Non Renewal: A policy that will not automatically renew at the end of the policy term.
  • Notice of Loss: As a policy holder you must notify your insurance company of any loss immediately or risk losing the ability to file a claim or have the claim denied.
  • Occurrence: Each individual event such as an accident.
  • Operators: Only specific drivers or operators are allowed to operate the vehicle or craft. If anyone else operates the craft it is not covered.
  • 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.
  • Package Policy: A policy that offers discounts for multiple policies such as home and auto.
  • Passive Alarm: An alarm that is activated automatically and emits a warning sound. It also disables the vehicle until disarmed.
  • Personal Injury Protection: Also known as medical payment insurance. It covers medical costs and treatment associated with an accident up to a certain monetary policy limit.
  • Personal Watercraft: Vehicles such as jet ski’s that operate in the water and are not classified as a boat.
  • Pet Coverage: Additional coverage for pets that are injured during an accident.
  • Policy: The written coverage details that you plan entails.
  • Policy Holder: The person who purchases the policy, usually the beneficiary.
  • Preferred Auto: Insurance coverage at a discount that is given to drivers who have exceptionally good driving records or are considered low risk.
  • Premium: The cost of the policy that must be paid in order to be covered.
  • Proof of Loss: Any documentation that can show that there has been property loss such as accident reports or police reports.
  • Proof of coverage: Written document that shows insurance coverage for the specific property for a specific time period.
  • Property Damage Coverage: Coverage for any damage to your property such as broken windows.
  • Recreational Vehicle (RV): Coverage for motor homes, trailers and campers.
  • Reinstatement: When a policy lapses due to non payment, once you pay your premium you policy may become effective again.
  • Renewal: At the end of a policy term you have the option of renewing your policy for another term.
  • Rental Car Reimbursement: Coverage associated with paying for a rental car when your vehicle is damaged or being repaired due to an accident.
  • Rental Property: Any property that is leased or rented.
  • Renters Policy: A policy that covers loss to personal property in a rental property.
  • Replacement Cost: The actual material and labor costs to replace damaged property to restore it to the original condition prior to the occurrence.
  • Rider: Any additional coverage added to your policy.
  • Risk Ratio: All risk factors associated with a policyholder and their property that determines the insurance premium.
  • Road Side Assistance Coverage: Additional coverage that provides assistance such as towing, battery jump start or emergency key replacement services.
  • Salvage: When a vehicle is considered a total loss and unrepairable.
  • SR 22: Insurance required for convicted DUI or DWI drivers.
  • Supplemental coverage: Any additional coverage added to a policy.
  • 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 doesn’t build up any of the nonforfeiture values associated with whole life policies.
  • Total Loss: When property is so damaged that the repair cost is more than the market value of the vehicle.
  • Towing and Labor: Additional coverage that covers expenses associated with towing a vehicle.
  • Umbrella Policy: Provides personal liability insurance when other policies are not effective at covering all possible events under the current policies.
  • Under writer: Person who determines insurance premiums and policy limits.
  • Uninsured/Underinsured Coverage: Coverage for when an accident is caused by someone who does not have enough coverage to cover your loss or has no insurance coverage at all.
  • Universal Life Insurance – A combination flexible premium, adjustable life insurance policy.
  • Unearned Premiums – That part of the premium applicable to the unexpired part of the policy period.
  • Vehicle Identification Number (VIN): Every vehicle has a specific identifying number.
  • Valuation – A calculation of the policy reserve in life insurance. Also, a mathematical analysis of the financial condition of a pension plan.
  • Variable Life Insurance – A form of life insurance whose face value fluctuates depending upon the value of the dollar, securities or other equity products supporting the policy at the time payment is due.
  • Water Damage Policy: Covers damage to property caused by water damage such as plumbing issues but not flood water.
  • Whole Life Insurance – Life insurance which might be kept in force for a person’s whole life and which pays a benefit upon the person’s death, whenever that might be.