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Insurance Terms and Glossary
Actual Cash Value – An amount equivalent to the fair market value of an item or property at the time of loss, less any allowance for depreciation.
Actuary – A mathematical and statistical expert who calculates risks, forecasts and other financial values for the insurance industry.
Adjustable Rate – An interest rate that varies based current market rates.
Adjuster – A person who investigates and settles insurance claims.
Admitted Assets – An insurance company’s assets that have met state law guidelines as being easily converted to cash.
Agent – A person licensed to sell insurance on behalf of an insurance company.
Aggregate Limit – The maximum dollar amount of all claims that will be paid during a policy’s contract period.
Annuitization – To convert a deferred annuity contract’s account balance to income payments.
Annuity – A contract where the buyer deposits money initially and later receives payments at regular intervals, usually for life.
Assets – All of the property owned by a business or individual that has a present market value or worth.
Automobile Liability Insurance – Protection for the insured against liability claims arising from their ownership or use of automobiles.
Benefit Period – The amount of time on a contract that insurance coverage is effective and benefits will be paid.
Broker – An insurance salesperson that searches the marketplace, in the interest of clients, to find the best policy.
Broker–Agent – An insurance salesperson who acts both as an agent representing insurance companies and as a broker working in the best interests of clients.
Casualty – A liability or loss resulting from an accident.
Casualty Insurance – Insurance that is primarily concerned with legal liability for personal injuries or damage to the property of others.
Claim – Contact made to an insurance company alerting them that payment of the benefit is due under the policy’s contract terms.
Coinsurance – Where the insured shares in the cost of covered services on a percentage basis.
Collision Insurance – Optional coverage that pays for damages due to the insured’s car striking another object.
Commercial Lines – Property and liability policies written specifically for businesses.
Commission – A percentage of the policy premium paid to an agent or insurance salesperson as compensation for services.
Comprehensive Insurance – An optional auto insurance coverage that covers damage to the policyholder’s car caused by fire, theft, vandalism, falling objects and other dangers.
Copayment – Part of a cost–sharing policy where the insured pays a set amount before receiving a specified service.
Cost–of–Living Adjustment (COLA) – An annual adjustment in wages that corresponds with a change in the cost of living.
Coverage – The total amount of protection provided under an insurance contract.
Coverage Area – The geographic area where an insured is protected under their policy.
Deductible – The amount which a policyholder agrees to pay toward the total amount of an insured loss.
Dividend – A return of part of the annual premium to the policyholder based on the insurance company’s earnings.
Elimination Period – The amount of time a policyholder must be insured before he or she is eligible to receive benefits.
Employers Liability Insurance – Coverage that protects against liability that may be imposed on an employer outside the constraints of a workers’ compensation law.
Exclusions – Specified conditions or risks that a policy does not cover.
Expense Ratio – The calculation of an insurance company’s operating expenses to premiums.
Exposure – The possibility of risk or loss that an insurance company accepts from its policyholder in exchange for the premium.
Extended Replacement Cost – Pays an additional amount beyond the policy limit to replace a damaged home.
General Liability Insurance – Coverage protecting businesses from most liability risks other than automobile and professional liability.
Grace Period – Period of time after the due date of a premium during which the policy remains active without penalty.
Guaranteed Renewable – A policy that the insurer is required to renew until the policyholder reaches a certain age, as long as premiums are paid on time.
Health Maintenance Organization (HMO) – Prepaid insurance plans that provide comprehensive health care to its members.
Health Savings Account – Tax–free savings account used solely for health care expenditures.
Hurricane Deductible – An amount added to a homeowner’s insurance policy to limit an insurer’s loss from hurricane damages.
Inflation Protection – The clause in an insurance policy that increases benefit levels to account for anticipated increases in the cost of covered services.
Insurance Adjuster – An individual who settles claims brought by policyholders on behalf of an insurance company.
Investment Income – The money an insurance company received in premiums but has not yet paid out on claims.
Liability Insurance – Coverage designed to protect the policyholder from financial loss due to liability resulting from bodily injuries or property damage.
Licensed – An agent or insurer who has completed certification in order to operate and conduct business in the insurance industry.
Living Benefits – Allows terminally ill policyholders to collect part of their life insurance benefits before death to pay for medical expenses.
Loss Ratio – The percentage of premiums an insurer spends on claims.
Losses Incurred (Pure Losses) – The total losses incurred by an insurance company during a particular time period.
Net Income – The income that a company has after subtracting costs and expenses from the total revenue.
Net Premium – The total policy premium minus commissions and expenses.
Noncancellable – A policy that guarantees you can receive coverage as long as you make timely premium payments.
Nonstandard Auto (High Risk Auto or Substandard Auto) – Coverage for drivers who are unable to purchase standard coverage because of a variety of factors including lack of experience, poor driving record, etc.
Other Income/Expenses – Represents income and expenses other than normal business operations.
Out–of–Pocket Limit – The maximum amount an insured will be required to pay for covered services during a specified time period.
Personal Injury Protection – Automobile insurance coverage that typically requires insurance companies to provide first–party coverage without regard to fault.
Personal Lines – Insurance policies that are written specifically for individuals and their property.
Policy – A written document that outlines the terms and conditions of the insurance coverage.
Pre–Existing Condition – A physical or mental condition which existed prior to the effective date of an insurance policy.
Preferred Auto – Coverage offered to drivers who have a clean driving record.
Preferred Provider Organization (PPO) – A network of healthcare providers who give medical care to enrolled persons at a discounted rate.
Premium – The payment or one of the regular payments made to an insurance company in exchange for protection from risk, as specified on the insurance policy.
Profit – Gross income minus expenses.
Renewal – Continuing an insurance contract beyond its original term by the insurer’s acceptance of the premium for a new policy term.
Replacement Cost – The amount needed to replace damaged property without cost to the insured for depreciation.
Risk Management – Controlling the various risks that a company may be subject to.
Standard Auto – Insurance for average drivers with relatively few accidents on their record.
State of Domicile – The state where an individual or business is permanently residing or doing business.
Stop Loss – The dollar amount on claims when the insurance company begins to pay at 100% per insured individual.
Subrogation – Gives the insurer full rights to recover damages against the person responsible for the loss.
Tort – A wrong or injury caused by one person to another, resulting in legal liability.
Total Loss – A claim for the maximum amount covered by the insurance policy.
Underwriter – An individual working for an insurance company who determines whether or not that company should accept the risk for a particular policy.
Underwriting – The process by which an insurer determines whether or not it will accept the risk for a specific insurance policy.
Unearned Premium – The portion of an insurance premium that falls under the unexpired part of the policy period.
Uninsured Motorist Coverage – Insurance that covers a policyholder’s collision with a driver who does not have liability insurance.
Universal Life Insurance – A flexible policy where excess premiums are invested in interest–yielding accounts.
Variable Life Insurance – A flexible type of coverage whose value depends on how well the investments chosen are performing.
Viator – The owner of a life insurance policy who sells it to a third party and receives a lump sum cash payment in return.
Waiver of Premium – A provision in an insurance policy that waives the collection of premiums should the policyholder become unable to work due to an accident or injury.
Whole Life Insurance – A policy that has been kept active with the required payments and which pays a lump sum upon the insured’s death.