This glossary explains common insurance terms in simple, clear language. Use the navigation below to jump to a specific letter.
A
Accident – An unexpected event that may result in damage or injury, often triggering insurance coverage.
Actual Cash Value (ACV) – The value of property at the time of loss, considering depreciation.
Adjuster – A representative of the insurer who investigates and settles claims.
Agent – A licensed professional who sells insurance on behalf of a company.
Annual Limit – The maximum an insurer will pay for covered services in a policy year.
B
Beneficiary – The person or entity designated to receive insurance benefits.
Binder – Temporary insurance providing proof of coverage until the full policy is issued.
Bodily Injury Liability – Coverage for injuries to others caused by the policyholder.
Broker – An independent professional who represents the buyer and shops among insurers.
C
Cancellation – Termination of an insurance policy before its expiration date.
Claim – A formal request for payment under an insurance policy.
Collision Coverage – Pays for damages to your vehicle from a collision, regardless of fault.
Comprehensive Coverage – Covers damage to your vehicle from non-collision events (theft, fire, weather).
Coverage – The specific protection provided by an insurance policy.
Co-pay – A fixed amount a policyholder pays for covered health services.
D
Declarations Page – The summary of an insurance policy including coverages, limits, and premiums.
Deductible – The amount a policyholder pays out-of-pocket before insurance coverage applies.
Dependent – A family member covered under another person’s health plan.
Disability Insurance – Coverage that provides income if the insured cannot work due to illness or injury.
E
Effective Date – The date when insurance coverage begins.
Endorsement (Rider) – A modification to an insurance policy that adds or limits coverage.
Exclusion – A provision in the policy that eliminates coverage for certain risks or conditions.
F
Face Value – The death benefit amount in a life insurance policy.
First-Party Coverage – Insurance that pays benefits directly to the policyholder.
Flood Insurance – Specialized coverage for damage caused by flooding, usually excluded from homeowners insurance.
G
Grace Period – Extra time allowed to pay a premium before coverage lapses.
Group Insurance – Coverage offered to a group, typically by an employer.
H
Hazard – A condition that increases the likelihood of a loss occurring.
Health Insurance – Coverage for medical expenses, doctor visits, and hospital care.
Homeowners Insurance – Protects a home and belongings against risks like fire, theft, and liability.
I
Indemnity – The principle of restoring an insured to the financial position prior to a loss.
Insurable Interest – A legitimate interest in the preservation of property or life insured.
Insured – The person or entity covered by an insurance policy.
Insurer – The company that provides insurance coverage.
L
Liability Insurance – Protection against claims of injury or damage caused to others.
Limit of Liability – The maximum amount an insurer will pay for a covered loss.
Long-Term Care Insurance – Coverage for services like nursing home or assisted living care.
Loss Ratio – Ratio of claims paid compared to premiums collected.
M
Medical Payments Coverage – Pays for medical expenses after an auto accident, regardless of fault.
Mortgage Insurance – Protects lenders if a borrower defaults on a mortgage loan.
Mutual Insurance Company – An insurer owned by its policyholders.
N
Named Insured – The individual specifically listed on the policy as covered.
No-Fault Insurance – Coverage where each party’s insurer pays for their own losses regardless of fault.
Notice of Loss – Notification to an insurer that a loss has occurred.
P
Personal Injury Protection (PIP) – Pays medical expenses and lost wages after an auto accident.
Policy – A legal contract between the insurer and insured.
Policyholder – The person or organization that owns an insurance policy.
Premium – The payment made to keep an insurance policy active.
Primary Coverage – The first insurance to pay before any secondary policies apply.
Property Damage Liability – Covers damage to another person’s property caused by the insured.
R
Reinsurance – Insurance purchased by an insurer from another company to reduce risk exposure.
Renewal – The process of continuing an insurance policy after its term expires.
Replacement Cost – The cost to replace damaged property without deduction for depreciation.
Rider – An amendment to a policy that modifies coverage.
Risk – The chance of loss or damage occurring.
S
Salvage – Remaining value of damaged property after a loss.
Schedule – A list of covered items with their values stated in the policy.
Subrogation – The insurer’s right to recover costs from a third party responsible for a loss.
Surrender Value – The cash value a policyholder receives when canceling certain life insurance policies.
T
Term Life Insurance – Life insurance coverage for a specific period of time.
Theft Coverage – Insurance that protects against loss from burglary or theft.
Total Loss – When the cost of repair exceeds the value of the insured property.
U
Umbrella Policy – Extra liability coverage beyond standard policy limits.
Underwriting – The process of evaluating risk and determining policy terms.
Uninsured Motorist Coverage – Protects against damages caused by a driver without insurance.
Utilization Review – Evaluation of medical necessity in health insurance claims.
W
Waiting Period – The time before certain benefits become payable under a policy.
Whole Life Insurance – Permanent life insurance providing lifelong coverage and cash value.
Workers’ Compensation – Insurance providing benefits to employees injured on the job.