InsuranceWorld.com - Glossary

Glossary of Insurance Terms

Below is an alphabetized list of some of the terms and acronyms you may encounter regarding insurance. To find the term you are looking for, either scroll down the list or click a letter from the definition quick links to go there directly.



A

absolute assignment
The transfer of all the rights of ownership in a life insurance policy to another person.
accelerated benefits
Benefits that are available before death in such cases as a terminal illness.
accident Only Coverage
Provides coverage for death, dismemberment, disability or medical care caused by an accident.
Actual Cash Value (ACV)
The amount it will cost to replace property at the time of the loss deducting depreciation.
actual cost
Amount paid for an asset not the market value.
actuary
A professional that deals with risk and the financial impact of risk.
adjustable life insurance
Allows changes in the face amount, premium, period of protection of the insurance policy.
agency underwriter
Insurance agency underwriters assess the eligibility of customers for insurance applications.
American Association of Insurance Services (AAIS)
The national insurance advisory organization.
American Insurance Association (AIA)
Insurance trade organization the represents insurers.
Annual Renewable Term (ART) life insurance
A short term life insurance (usually one year) but the policy is guaranteed to be able to be extended for a certain number of years.
annuitant
A person that receives benefits from an insurance policy or annuity.
annuity certain
An annuity that pays monthly for a certain amount of time and a certain amount of money.
assigned risk plans
Insurance that is available to those usually denied insurance, the policy is purchased from a pool of insurers.

B

bankruptcy
There are two types of bankruptcy Chapter 7 and Chapter 13. With Chapter 7 your property will be liquidated and Chapter 13 reorganizes consumers debt, both are under the protection of the courts.
beneficiary
The primary beneficiary receives the insurance benefits upon the death of the policyholder.
benefit
The amount of money payable to the insured or their beneficiary when the insured suffers an insured loss.
binder
Insurance coverage that goes into effect until the formal policy is approved or denied.
Blue Cross Blue Shield Association (BCBSA)
The national association of Blue Cross Blue Shield companies.
book value
Value of an asset for accounting purposes.
broker
A representative that sells insurance products to consumers, they represent the person seeking insurance not the insurance companies.
buy-back deductible
The deductible can be removed with the payment of an additional premium.

C

cash flow underwriting
Coverage is provided for an amount that is less than needed to pay the claim but with high premiums. Insurers believe that they can make a profit on the premiums.
cash surrender option
When you surrender an insurance policy that has a cash value you receive the premiums you paid plus any earnings.
cash surrender value
The amount of money you receive when you cancel an insurance policy.
catastrophe hazard
A hazard that often cannot be insured like a hurricane.
caveat emptor
Buyer beware.
cede
When a company reinsures its liability with another company.
certificate of insurance
Document that states who an insurance policy if for and for what amount.
claim
An application to receive the benefits of an insurance policy.
claimant
Person making a demand for the payment of insurance benefits.
claims adjuster
A professional that evaluates the damage to a person or property in an insurance related event.
clause
A provision in an insurance policy that states the coverage available when other insurance covers the same property.
co-insurance
An insurance policy provision whereby the insurer and the insured share the costs.
collision coverage
Insurance that pays for repairs or replacement of a vehicle regardless of fault in an accident.
commercial insurance
Small business insurance such as property, liability and workers' compensation.
comprehensive coverage
Auto insurance that pays for damages from theft, vandalism and natural disasters.
conditional receipt
Insurance coverage that goes into effect until the formal policy is approved or denied.
contestable period
Period of time that the insurer has to void the policy or payment of benefits.
contingency beneficiary
The contingency beneficiary is the secondary beneficiary should something happen to the primary beneficiary.
contract
A legally binding agreement.
co-pay
The insured pays a portion of the out-of-pocket expenses.
Cost-of-living adjustment (COLA)
Social Security adjustment in order to counteract the effects of inflation.
credit life insurance
Insurance that will pay off outstanding credit balances upon the death of the policyholder.
critical illness
Illnesses such as heart attack of a specified severity, terminal illness, traumatic head injury, total and permanent disability, etc.

D

daily benefit amount
A part of a long term care policy that pays a daily benefit selected by the policy holder.
death benefit
A lump sum benefit paid to a surviving spouse of a beneficiary.
declarations page
A summary of the terms of the policy.
deductible
An amount that the insured pays before the benefit begins.
deferred annuity
Deferred payment of lump sums or installments.
depreciation
A decrease in the worth of an asset over time.
disaster-relief program
A program designed to assist a community in the event of a natural or civil disaster.
dismemberment
The loss of life, hands, feet, speech, hearing, and sight.
dividend
Payments made to shareholders by a company.

E

earned premium
A portion of the insurance premium that is considered 'earned' by the insurer by being exposed to loss.
economic whole life policy
A portion of the dividends is used for buy additional insurance for a bigger death benefit.
effective date
The date when the insurance policy becomes effective.
employer paid plan
A health insurance plan paid for by the employer that covers its employees.
endorsements
An agreement in writing expanding or limiting benefits (same as a rider).
equity indexed universal life insurance
The interest crediting rate rises and falls with a particular index.
escrow
When money is placed with a third party until certain conditions are met.
estate planning
An estate plan includes a will or a trust to be implemented in the event of your death.
evidence of insurability
A medical questionnaire that proves your good health.
exclusion
Items your insurance policy does not cover.
expiration date
Date when the policy expires of ends.
extended limits
Provides you with the amount of money needed to replace your home in the same quality even if that cost exceeds the value of the insurance policy.
extended replacement coverage
Coverage for replacing your home that exceeds the amount covered by your policy.
extended term insurance option
Cashing in a cash value insurance policy and buying a term policy for the same amount.

F

face value
The dollar amount of the insurance purchased.
family policy
Life insurance for all family members in one policy.
Federal Emergency Management Agency (FEMA)
A United States agency that responds to disasters.
Fee-For-Service plan (FFS)
For a higher premium you can choose your own doctors and hospitals.
first party loss
A third party is not involved, only the insurer and the insured.
fixed income assets
Assets such as mortgage loans, stocks and bonds.
floater policy
Insurance coverage for removable belongings.
fraternal benefit society
A non-profit organization that provides insurance to its members.
free examination period
"Free look" period of time the policy owner has to review the policy and return it for a full refund. Optional.

G

grace period
The length of time after a premium payment is due and remains unpaid.
group plan
An insurance policy that covers a group of individuals.
guaranteed insurability
The insured can purchase additional life insurance without proving their insurability.
guaranteed issue term life insurance
An insurance policy that provides a death benefit after a certain period of time has elapsed.
guaranteed renewable
The insured can continue the policy up to reaching a certain age.
guaranteed replacement value
Coverage to replace your home as it was before the damage regardless of the amount of money.

H

Health Maintenance Organizations (HMO)
Health insurance with low payments, must get a referral from your primary physician to see specialists.
hereditary condition
A medical condition that is inherited genetically.

I

immediate annuity
An annuity that pays you a monthly income on the money you invest with an insurance company.
indemnity (fee-for service) plan
A health insurance plan that allows you to choose the doctors and hospitals you use while paying a yearly deductible.
indeterminate premium whole life policy
A policy that has two rates, a maximum and a minimum.
individual insurance plan
A health insurance plan that covers one person.
inherent vice
Loss caused by the subject matter insured rather than from an outside source.
insurability
An insured is deemed insurable when their application is approved.
insured
Having an insurance policy.
insurer
An insurance company.
insurer of last resort
State insurers that provide coverage for individuals that private insurance will not insure.
interest sensitive whole life policy
The face amount of the policy changes in relation to the earnings of the insurer.

J


K


L

lapsed policy
An insurance policy that has been terminated because the premiums were not paid after the grace period ended.
level term life insurance
Premiums remain the same throughout the term of the policy.
liability
The responsibility for negligence.
limited pay whole life policy
Insurance that covers the policyholders whole life but premiums are only paid for a certain amount of time.
limited policy
A health insurance policy that covers the policyholder for something specific.
limits
The most amount of insurance for a given loss.
living benefit
A cash payment that is part of the policy amount provided to the policyholder while they are still living.
Lloyd's of London
A market for insurance sellers and buyers.
long term care
Health care services for disabled or ill policyholders.
long term disability
A disability that prevents the policyholder from performing any job.
loss
The dollar amount that an insurance claim is worth.
loss of use
Covers extra living expenses when a homeowner and renter cannot use their home.

M

managed care
Programs that deliver health care services to patients by arrangement with doctors and hospitals.
master policy
A group insurance plan policy taken out by an employer.
Medicaid
A federal health insurance program that does not require payment by the insured.
Medicare
A federal health insurance program that covers the cost of doctors, specialists, medical equipment, nursing home services and hospice care. Insured pay a deductible.
mini policy (California)
An insurance policy that covers the dwelling but not non-essential structures like swimming pools, carports, sheds, etc. It keeps the costs of premiums down.
mutual insurance company
A company owned by its policyholders.

N

National Flood Insurance Program (NFIP)
A federal program that provides flood insurance to homeowners and commercial real estate owners.
network health care provider
a list of providers that are approved by your health care insurance company.
no-fault insurance
Auto insurance that will pay out for losses regardless of fault.
non-participating ("non par") whole life policy
No dividends are paid to the insured.
non-participating stock company
A company that sells non-participating insurance; insurance that does not pay dividends.
notarized statement
A document witnessed and sealed by a notary public.

O

optional insurance coverage
Additional insurance coverage that can be added to an insurance policy.
out-of-network health care provider
A healthcare provider that is not included in your health insurance approved provider network.

P

partial disability
A disability that prevents the insured from performing some aspects of their job.
participating stock company
A stock company that pays out dividends.
participating whole life policy
A policy that shares with the policyholder the insurance companies extra earnings.
payout
The monetary amount you receive when you have won a claim.
peril
The cause of property loss.
permanent life insurance
Non-term life insurance.
Point of Service (POS) plan
Provides coverage for the insured to use a primary care physician within the plans network.
policy
The insurance contract that the insurance company gives to the policyholder that sets out the terms of the contract.
policyholder
The insured person or corporation.
pre-existing condition
A health condition that was diagnosed before the insurance policy was put into effect.
Preferred Provider Organizations (PPO)
The insured uses doctors and specialists within the network of the organization.
premiums
The insurance payment that is due in order to keep your insurance policy in effect.
primary beneficiary
The person who will receive the proceeds of an insurance policy upon the death of the policyholder.
Primary Care Physician (PCP)
A family doctor, general practice physician and a pediatric doctor are all considered primary care physicians.
Professional Employer Organization (PEO)
An organization for small business to get access to health insurance.
prorated
To divide proportionately.

Q

quick issue term life insurance
Does not require a medical exam so the policy can be issued quickly.

R

reciprocal insurer
An insurance company the policyholders insure each other.
reinsurance
Insurance companies sharing the risk of an insurance policy.
reinsurer
An insurance company that assumes the risk of an insurance policy from the original insurer.
replacement cost
The replacement of property or goods at market value.
riders
Additional insurance coverage or a modification of coverage that can be added to your policy.
risk
The chance of loss that the insurer incurs.

S

scheduled items
A list of the items that are covered in the insurance policy.
self-insurance
Employer financed insurance coverage for their employees.
settlement of a claim
Receiving a sum of money from the insurer for damages and or losses covered by your insurance policy.
short term disability
A disability that prevents you from working for a short period of time usually a few months.
single premium whole life policy
A fixed interest rate insurance policy that has a cash value.
solvency
When assets exceed liabilities.
State Children's Health Insurance Plan (SCHIP)
A federal health insurance plan for families with children that don't qualify for Medicaid but cannot afford private health insurance.
stock insurance company
An insurance company owned by the stockholders.
stop-loss coverage
An insurance policy for business owners, the insurance provides coverage for medical expenses from a fund that is paid into by the employer. The employer only pays up to a predetermined amount.
surcharge
An additional charge added to your premium.
surrender
Money deducted from the insurance benefit when the policyholder cancels a policy for it's cash value.

T

tax-deferred
Tax is only paid when money is withdrawn from the investment.
temporary life insurance
Payment of a premium submitted with your application that may secure insurance coverage while you wait for a decision.
third party administrator
The insurer outsources claims processing to another company.
third party liability
The legal obligation of a third party (an individual or company).
traditional indemnity
The policyholder can select any doctor, hospital or provider.

U

underwriting
The process where an insurance company reviews applications for insurability and/or risks involved in issuing an insurance policy.
uninsurable
high-risk insurance seekers, either medically from pre-existing conditions or property like homes built in flood plains, etc.

V

variable life insurance
A portion of the premium is allocated to an investment vehicle.

W

wait period
Period of time before the insurance policy takes effect.
waiver of premium
Allows the policyholder to discontinue payment of premiums in the event of a serious illness or disability.

X


Y


Z