Insurance terms are frequently challenging to grasp. Understanding each term of an insurance policy is critical when purchasing one to ensure that you choose the one that best serves your needs. When seeking to obtain an insurance policy, many laypeople are baffled by words such as absolute value and renter’s policy.
This glossary was written for informational purposes. While it may not cover every single insurance phrase in the world, it will provide you with a basic understanding of common insurance terminology that you may encounter when reviewing a basic insurance policy.
- Accidental Damage
Accidental damage refers to any sudden/unexpected harm to your property. The incidental damage insurance would cover any unintentional damage to property that has been previously insured.
- Actual Value
The actual value is the replacement value after the depreciated value has been removed. Insurance companies often use the actual cost value method to decide on the value of a destroyed or lost property right before it was destroyed or lost
An actuary is an insurance professional who provides administrative services to an insurance company by assessing risks and estimating premiums.
- Additional Insured
The term “additional insured” refers to a person or a group of people who enjoy the benefits of a particular insurance policy other than the person who originally purchased the insurance.
- Admitted Company
Insurance licenses are governed and regulated by domestic jurisdiction. An admitted company is a company licensed in a particular state to provide insurance to the members of that state only. The National Association of Insurance Commissioners works with state governments to regulate the insurance industry and protect consumers.
- Agreed Value
Agreed value refers to the amount of money previously agreed upon by the insurance company and the insured for a property. The property is appraised at the beginning of the policy to determine its value and is appraised before the policy is renewed.
- All-Risk Insurance
All-risk insurance automatically covers all types of risks that are not omitted explicitly in a policy.
An appraisal is the assessment of a property to determine its value. It is done by an insurance professional and used to determine the premium payment to the insured should the property be lost or destroyed.
When there is an insurance dispute between an insurance company and an insured, arbitration is often employed. Arbitration is a non-biased third party that has been chosen by both parties to resolve disputes. Insurance companies and the insured party often prefer this option as it is cheaper and consumes lesser time than attempting to resolve the issue in court.
- Auto Insurance or Auto Policy
Auto insurance or auto policy provides property, auto liability, and medical coverage for your vehicle. Property coverage covers damage to the car; liability coverage covers your legal expenses to repair damages to others’ properties, and medical care coverage for treating the injured at hospitals, providing lost wages, or funeral expenses. Some companies such as GEICO Insurance Agency and Golden Rule Insurance Company offer comprehensive auto insurance.
- Auto Theft
Auto theft coverage is sometimes included in auto insurance. Here the insurance company provides coverage should the vehicle be stolen.
A binder serves as a temporary policy, and it is an agreement provided by an insurer as proof of insurance until the policy can be issued.
- Bodily Injury Liability Coverage
Bodily injury liability coverage offers coverage for the medical/funeral bills if the insured is legally found to have caused an accident that leads to a bodily injury or someone else’s death. Additional hazards may be covered if initially included in the policy.
A broker is an insurance professional who assists prospective insurance buyers in choosing the right policies that will most benefit them. The broker represents the insurance buyers and deals directly with insurance companies.
- Buildings Insurance
Buildings insurance covers the cost of rebuilding a structure if it is destroyed in a fire, storm, explosion, flood, or earthquake. The insurance would also usually cover the cost of repairing damages to any part of the residential or business building due to thefts, vandalism, or collisions with aircraft or vehicles.
- Business Owners Policy
A business owners policy provides coverage against loss of goods, equipment, property, and even business interruption. A business owners policy may include coverage for losses relating to the business building, merchandise, and immobile or mobile equipment. The business owner may also include additional coverage in the contract, such as crime and forgery, although this will often increase the premium payment. It is a policy that is best suited for small and mid-business owners.
An insurance policy or bond may be terminated before its expiry date. This termination is often referred to as a cancellation, and it may be tone by the insurer or the insured.
An insurance carrier is a company that offers insurance policies for sale. Insurance carriers are often referred to as insurance companies.
- Certificate of Financial Responsibility
Certificate of Financial Responsibility is often a part of auto insurance; it proves that a person maintains the minimum liability insurance required by the law. Usually, after a person has had their license suspended after a car crash, they may be required to get this certificate.
- Collision Coverage
Collision coverage/insurance is also often part of auto insurance; it provides coverage against loss caused by the damage or destruction of the vehicle in an accident with another vehicle or object. Collision insurance is often required when leasing a car but is optional if the car is paid off.
After an individual or a business entity has suffered a loss of insured property, they file a formal request to the insurance company. This formal request is known as an insurance claim. The insurance company must first validate the claim and approve it before issuing out payment to the insured.
The claimant files a formal request to an insurance company after incurring a loss of an insured property.
- Claim Examiner
The job of the claim examiner is to review the claim submitted by a claimant. The claim examiner then proceeds to investigate the claim and may deny or approve a claim based on the inference made from the investigation.
- Comparative Negligence
Insurers use the rule of comparative negligence to ensure fair payment of insurance claims. An insurance company can determine who is to be blamed for an accident and to what extent through the use of the rule; the payment is then made accordingly. For instance, if a claimant is responsible for 40% of an accident, they will be paid only 60% of the total insurance payment.
- Competitive Estimate
The act of collecting several quotes for repair work following an accident is known as a competitive estimate. Although the law does not require it, some insurance companies may require you to get a competitive bid to ensure that you choose the best possible repair work.
- Continuous coverage
Continuous coverage/insurance is a type of insurance that is done without any lapses. Most people prefer this type of insurance for a car and health insurance, protecting a person from losing money in an unexpected accident.
- Credit Card Insurance
Credit card coverage helps to pay for outstanding balances on your credit card and can help to make monthly payments to the credit card company in a situation where your income is interrupted by an unforeseen event.
- Credit Life Coverage
This type of life insurance policy pays off a borrower’s debts after the borrower is dead. This type of insurance protects the borrower’s successors from making loan payments after the borrower’s death.
- Customized Insurance
Customized insurance is a particular type of insurance that has been recognized in the insurance industry as the future of insurance marketing. It is done by providing personalized insurance to clients, ensuring that the insurance provided is tailored to clients’ needs.
- Current Market Value
The current market value estimates the current resale value of an asset or property for the insurer and the insured. The current market value is connected to its accessibility, and it is the ease with which an asset may be changed from investment to cash.
A declaration is the opening page of a policy that provides the named insured, address, insurance duration, and other essential information that differs from person to person
A deductible is a sum of money that you are personally liable to pay toward an insured loss. When a calamity hits your house, or you are involved in a vehicle accident, the deductible amount is removed from your claim settlement. It is a way by which the insurer and the insured share risk, and the higher the deductible, the lower the rates for insurance coverage.
Depreciation is the decline in the value of an asset through time, generally due to age, abrasive wear from usage, or economic collapse. Depreciation is deducted from the recoverable amount of covered property to determine the actual cash value to be paid.
- Dwelling Fire Insurance
Dwelling Fire insurance is also known as a landlord’s coverage, and it is especially suitable for a real property that is frequently leased to others. The insurance generally covers against structural losses and loss of lease payments but allows for other additional coverages.
A declaration included in an insurance contract that can modify, erase, or extend coverage, terms, or conditions.
Exclusion is a clause in an insurance contract that refers to hazards, risks, situations, or assets not covered by the plan. They are often included in the insurance form, which is used to create the plan.
- Escape of Water
Water damage produced from an internal water source, such as a broken pipe, a leaky washer, or a malfunctioning machine, is referred to as an escape of water. Usually, typical house insurance plans will cover flooding as long as your residence is not in a floodway and you have not concealed details about your home previously suffering from floods. This type of insurance differs from flood insurance coverage in that it only covers flooding caused by an internal water source. On the other hand, flood insurance coverage covers flooding caused by an external water source such as heavy rainfalls, hurricanes, or rivers.
- Emergency Road Service Insurance
Suppose your vehicle breaks down or becomes disabled. In that case, emergency road service insurance typically covers mechanical work at the breakdown location, tow payments to the nearest auto repair if the insured car cannot be driven, tow payments if the insured car is stuck on or close to a public road, and provision of tires, oil, battery, or gas required to restore an insured vehicle to a drivable state.
- Face amount
Also known as a death benefit, a face amount is the total sum of money received by the insured’s beneficiaries at the time of the insured’s death.
- Floodplain Management
Floodplain management is the effort by the community to avoid or decrease floods which can help build a stronger community. Every government parastatal, including federal, state, local government, and property owners, have a role in decreasing flood risk and strengthening communities. It is overseen by community officials.
- Financial Guarantee coverage
Financial guarantee coverage protects against financial loss caused by failure or bankruptcy, changes in the market, currency fluctuations, limitations by a foreign jurisdiction, or devaluation of certain items.
- Gap Insurance
Gap insurance is an optional vehicle insurance policy that assists in paying your car loan if your car is wrecked or robbed while you owe a sum greater than its depreciated worth. Gap insurance covers the difference between the depreciated value of your automobile and the outstanding loan on it. The insurance protects all kinds of personal vehicles, from an SUV to a recreational vehicle.
- Good Driver Discount
A good driver discount is an insurance concession offered to drivers who have no traffic accidents or violations within a specified timeframe. Many companies offer good driver discounts to clients who have not been found guilty of a traffic violation or been involved in an automobile accident during the policy period.
- Guaranteed Insurability
In most cases, this is a voluntary component of life or medical insurance. It provides the insured the right to acquire extra insurance without passing a medical check-up or providing other proof of good medical condition.
- Health Insurance plans or Health Coverage
Health plans or health insurance plans are contracts in which an insurance company agrees to pay part or all of a person’s medical expenses. Health plans generally cover the insured’s surgical, medical, prescription medication, and occasionally dental expenditures. The insured must have made initial premium payments or a health insurance premium to be able to file a claim. A health insurance plan may be open to the public at special periods known as the enrollment period. Some insurers are primarily health insurance companies will sometimes work directly with a health care provider to offer coverage for members.
- Homeowner Insurance
Homeowners insurance is a real estate property policy that protects the real estate from damage and losses. The insurance also covers furniture and other valuables in the home, and Homeowners insurance includes property insurance for incidents in the house.
- Identity Theft Coverage
Identity theft coverage is commonly available as an add-on to homeowner insurance. It is done to protect against a malicious occurrence in which an impostor gets vital confidential info, such as Social Security or driver’s license numbers, to disguise as the policyholder. The data can be used to make illegal credit transaction payments, products in the victim’s name, and it can also be utilized to give the thief fake credentials. This insurance offers coverage for an insured’s expenditures for an identity fraud detected during the policy term.
- Incontestable Clause
An incontestability provision or clause prohibits an insurer from withholding benefits meant for the insured based on application misrepresentation. The provision is only applicable when the contract has been in place for a specific period, usually two years.
- Insurance Agent
An insurance agent is an insurance professional that sells for an insurance company in exchange for a commission. To do this, the insurance agent assists clients in selecting the appropriate plans to purchase while representing the company in the process. In most cases, private insurance brokers serve well over one insurance company.
- Insurance Card
As evidence of insurance, the policyholder is issued a card. The card provides the name, address, insurance number, expiry date, insurance firm, and the automobile insured in the event of an accident. The insurance provider will typically issue an identification card for every vehicle protected by a contract.
- Insurance Protection
Insurance protection is the responsibility to protect a person or a business entity guaranteed by insurance services. An insurer or insurance company provides insurance coverage, such as vehicle insurance, health insurance, rent reimbursements, and so on, in the case of unanticipated events.
The term “insured” refers to any individual or organization legally permitted to enjoy the benefits of an insurance contract, which is often in monetary form. Insurers pay insureds when they suffer insured losses, damages, or injuries that allow for reimbursement based on the contract terms.
An insurer also known as the primary insurer is a business entity in charge of settling claims under an insurance policy. An insurer issues insurance plans, whereas those contracts cover the policyholder.
A lapse is the cancellation of an insurance contract, usually due to the policy holder’s inability or disinterest in paying the premiums.
A lease is an implicit agreement that specifies the terms whereby a landlord agrees to rent a facility to a tenant. The rental contract guarantees the tenant usage of the property for an agreed-upon period, and the landlord is guaranteed regular money during the contract term.
- Lease insurance
Lease insurance is a form of insurance policy that protects landlords. This form of coverage is primarily used to compensate the landlord for losses incurred due to the lease’s cancellation due to damage to property. Generally, it provides rental reimbursement to the landlords, but the damage to property must be explicitly stated in the policy to ensure its coverage.
- Liability Insurance
The word “liability insurance” refers to an insurance policy that protects the insured from liabilities stemming from personal injury and property damages to others. This insurance plan covers all legal expenses and fines that the insured must pay if proven legally accountable. In general, liability insurance plans do not cover intentional harm, and the plans often compensate third parties rather than the insured.
When an insured person uses an asset as collateral for a loan, the creditor claims the item, known as ‘lien.’ During that time, the insured’s claim on the asset is lowered until the loan is entirely paid off.
- Lien Holder
The lienholder is the creditor who has some interest in your asset until you pay it off in full.
- Life Insurance
Life insurance is an agreement between an insurance policy client and an insurance agency. The agency promises to pay an amount of money in return for payment upon the client’s death or after a certain length of time.
The insurance coverage limit or limit is the maximum sum your insurance company will be willing to pay for a claim covered by your contract. Your insurance coverage will pay up to a specific amount if you file a covered claim, and any costs that exceed the limit will be your responsibility. A policy will often include limits in one of its clauses.
- Loan Value
As an insured person, you may be able to get a loan from an insurance company depending on the financial position of your account with the company. The total sum of money that the insured can borrow from the insurer at a fixed rate using the policy’s value as collateral is known as loan value. If the insured dies with the loan wholly or partly unpaid, the sum loaned plus any interest incurred is subtracted from the sum of money due.
- Malicious Mischief
A form of peril that involves deliberate property destruction, malicious mischief is often referred to as vandalism. Although there may be some technical distinction, the two names generally describe the same offense. Property coverage thus protects against these damages.
- Material Misrepresentation
A material misrepresentation occurs in an insurance contract when an individual makes inaccurate statements or omits essential truths that are either elemental to the acceptance of the risk can influence the cost at which insurance is supplied or alter the company’s decision to provide the policy.
- Medical Payments or Medical Expenses
Car insurance often includes medical expenses coverage. These medical expenses coverage could assist with paying your or your passengers’ bills for medical treatment if you are wounded in a vehicle accident, regardless of who was at fault.
- Miscellaneous Insurance
Miscellaneous insurance provides coverage for everything else not covered by marine, life, or fire insurance. It comprises rural or social insurance and other personal insurances such as employee health plans.
Misrepresentation is defined as a false or misleading statement or complete omission of critical facts that, if discovered to be deliberate, permits the insurer to cancel the policy even after the insured has commenced premium payments.
- Policy Period or Policy Term
Policy period or policy term refers to the timeframe within which the policy contract is considered active. It is the period between the initiation of payments by the insured till a pre defined time. The insured is expected to make a regular premium payment as described by the policy contract during that period of time.
- Provider Network
A provider network is a network of health care providers, hospitals, and other health institutions with whom an insurance service has agreements to provide health insurance coverage to its members (they are also called “network providers” or “in-network providers”). Insurance companies may have various networks for various policies; thus, it is vital to perform a thorough search and compare all available options.
- Renewal Policy
A provider network comprises a collection of health care providers, hospitals, and other health institutions with whom an insurance service has agreements to supply medical treatment to its members. Insurance companies may have various networks for various policies; thus, it is essential to perform a thorough search and compare all available options.
- Renter’s Policy
A renter’s policy is a collection of insurance packages created to protect tenants who live in a home. A standard renter’s policy consists of 3 types of packages to cover losses to the insured, their properties, and homes.
- Standard Flood Insurance Policy
A Standard Flood Insurance policy is a policy that covers only one type of peril (flood) that pays for immediate destruction to your covered property asset so long as the property asset was destroyed by flood.
Have you found our library of insurance words and meanings valid? The list covers most of the information you’ll need to comprehend numerous insurance firms’ insurance terminology. To prevent selecting the wrong insurance plan, make sure to heed the suggestions provided.
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