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.
- Actuary: A professional who uses statistical data to assess risk and calculate insurance premiums.
- Additional Insured: An individual or entity added to an insurance policy to receive coverage benefits, often in cases involving liability.
- Adjuster: An insurance company representative responsible for assessing claims and determining the amount of compensation owed.
- Agent: A licensed individual or entity authorized to sell insurance policies on behalf of an insurance company.
- Annual Premium: The yearly cost of an insurance policy, typically paid in installments.
- Appraisal: The process of determining the value of property or damages for insurance purposes.
B
- Beneficiary: The person or entity designated to receive the benefits of an insurance policy in the event of a claim.
- Binder: A temporary agreement that provides immediate coverage until a formal policy is issued.
- Broker: An intermediary who works with multiple insurance companies to help clients find the best coverage options.
C
- Claim: A formal request made to the insurance company for coverage or compensation for a loss.
- Coverage: The extent of protection provided by an insurance policy.
- Coverage Limit: The maximum amount an insurance policy will pay for a covered claim.
- Deductible: The amount of money the policyholder is responsible for paying before the insurance company covers the remaining costs of a claim.
- Depreciation: The decrease in the value of property or assets over time, often considered in property insurance claims.
- Exclusion: Specific events or circumstances not covered by an insurance policy.
F
- Flood Insurance: A policy that provides coverage for damage caused by flooding, typically not included in standard homeowners’ insurance.
G
- Grace Period: A specified period after the premium due date during which the policy remains in force, even if the premium is unpaid.
- Guaranteed Issue: Insurance policies that are issued without the need for medical underwriting or health assessments.
I
- 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.
- Insured: The person or entity covered by an insurance policy.
- Insurer: The insurance company providing coverage.
L
- Liability Insurance: Coverage that protects the policyholder from claims and lawsuits related to injuries or damage they may have caused to others.
M
- Moral Hazard: The increased risk associated with policyholders acting recklessly or irresponsibly because they have insurance coverage.
- Premium: The payment made to the insurance company in exchange for coverage.
R
- Rider: An addendum to an insurance policy that modifies or extends coverage.
- Risk: The likelihood of loss or damage occurring, which insurance is designed to protect against.
S
- Subrogation: The process by which the insurance company may seek reimbursement from a third party for a claim it has paid.
T
- 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.
- Underwriter: An individual or entity responsible for assessing the risk associated with insuring a particular person or property and determining the appropriate premium.
- Underwriting: The process of evaluating and assessing the risk associated with an insurance application.
U
- Uninsured Motorist Coverage: Auto insurance coverage that protects the policyholder if they are involved in an accident with an uninsured or underinsured driver.
V
- 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
- Waiting Period: The period of time a policyholder must wait before certain coverage benefits take effect.
