Demystifying Insurance Jargon: Your Comprehensive Glossary of Key Terms

 Introduction

Insurance is a complex world with its own language of industry-specific terms and jargon. For those not well-versed in insurance terminology, deciphering policy documents and understanding coverage options can be challenging. In this comprehensive guide, we’ll demystify the world of insurance by providing you with a glossary of key terms and explanations. Armed with this knowledge, you’ll be better equipped to navigate the insurance landscape, make informed decisions, and ensure you have the coverage you need.

  1. Actuary: A professional who uses statistical data to assess risk and calculate insurance premiums.
  2. Additional Insured: An individual or entity added to an insurance policy to receive coverage benefits, often in cases involving liability.
  3. Adjuster: An insurance company representative responsible for assessing claims and determining the amount of compensation owed.
  4. Agent: A licensed individual or entity authorized to sell insurance policies on behalf of an insurance company.
  5. Annual Premium: The yearly cost of an insurance policy, typically paid in installments.
  6. Appraisal: The process of determining the value of property or damages for insurance purposes.

B

  1. Beneficiary: The person or entity designated to receive the benefits of an insurance policy in the event of a claim.
  2. Binder: A temporary agreement that provides immediate coverage until a formal policy is issued.
  3. Broker: An intermediary who works with multiple insurance companies to help clients find the best coverage options.

C

  1. Claim: A formal request made to the insurance company for coverage or compensation for a loss.
  2. Coverage: The extent of protection provided by an insurance policy.
  3. Coverage Limit: The maximum amount an insurance policy will pay for a covered claim.
  4. Deductible: The amount of money the policyholder is responsible for paying before the insurance company covers the remaining costs of a claim.
  5. Depreciation: The decrease in the value of property or assets over time, often considered in property insurance claims.
  6. Exclusion: Specific events or circumstances not covered by an insurance policy.

F

  1. Flood Insurance: A policy that provides coverage for damage caused by flooding, typically not included in standard homeowners’ insurance.

G

  1. Grace Period: A specified period after the premium due date during which the policy remains in force, even if the premium is unpaid.
  2. Guaranteed Issue: Insurance policies that are issued without the need for medical underwriting or health assessments.

I

  1. Indemnity: The principle of insurance that states the policyholder should be compensated for their losses, returning them to the same financial position as before the loss occurred.
  2. Insured: The person or entity covered by an insurance policy.
  3. Insurer: The insurance company providing coverage.

L

  1. Liability Insurance: Coverage that protects the policyholder from claims and lawsuits related to injuries or damage they may have caused to others.

M

  1. Moral Hazard: The increased risk associated with policyholders acting recklessly or irresponsibly because they have insurance coverage.
  2. Premium: The payment made to the insurance company in exchange for coverage.

R

  1. Rider: An addendum to an insurance policy that modifies or extends coverage.
  2. Risk: The likelihood of loss or damage occurring, which insurance is designed to protect against.

S

  1. Subrogation: The process by which the insurance company may seek reimbursement from a third party for a claim it has paid.

T

  1. Term Life Insurance: A type of life insurance that provides coverage for a specific period (the “term”) and does not have a cash value component.
  2. Underwriter: An individual or entity responsible for assessing the risk associated with insuring a particular person or property and determining the appropriate premium.
  3. Underwriting: The process of evaluating and assessing the risk associated with an insurance application.

U

  1. Uninsured Motorist Coverage: Auto insurance coverage that protects the policyholder if they are involved in an accident with an uninsured or underinsured driver.

V

  1. Variable Life Insurance: A type of life insurance that includes an investment component, allowing the policyholder to invest in various assets within the policy.

W

  1. Waiting Period: The period of time a policyholder must wait before certain coverage benefits take effect.