No insurance resource would be complete without a comprehensive glossary of terms. We’ve compiled a list of terms and their definitions to better help you navigate the sometimes confusing world of insurance.
Automobile Liability Insurance
Coverage if an insured is legally liable for bodily injury or property damage caused by an automobile.
Casualty Insurance
That type of insurance that is primarily concerned with losses caused by injuries to persons and legal liability imposed upon the insured for such injury or for damage to property of others. It also includes such diverse forms as plate glass, insurance against crime, such as robbery, burglary and forgery, boiler and machinery insurance and Aviation insurance. Many casualty companies also write surety business.
Coinsurance
In property insurance, requires the policyholder to carry insurance equal to a specified percentage of the value of property to receive full payment on a loss. For health insurance, it is a percentage of each claim above the deductible paid by the policyholder. For a 20% health insurance coinsurance clause, the policyholder pays for the deductible plus 20% of his covered losses. After paying 80% of losses up to a specified ceiling, the insurer starts paying 100% of losses.
Collision Insurance
Covers physical damage to the insured’s automobile (other than that covered under comprehensive insurance) resulting from contact with another inanimate object.
Comprehensive Insurance
Auto insurance coverage providing protection in the event of physical damage (other than collision) or theft of the insured car. For example, fire damage or a cracked windshield would be covered under the comprehensive section.
Copayment
A predetermined, flat fee an individual pays for health-care services, in addition to what insurance covers. For example, some HMOs require a $10 copayment for each office visit, regardless of the type or level of services provided during the visit. Copayments are not usually specified by percentages.
Death Benefit
The limit of insurance or the amount of benefit that will be paid in the event of the death of a covered person.
Deductible
Amount of loss that the insured pays before the insurance kicks in.
Elimination Period
The time which must pass after filing a claim before policyholder can collect insurance benefits. Also known as “waiting period.”
Extended Replacement Cost
This option extends replacement cost loss settlement to personal property and to outdoor antennas, carpeting, domestic appliances, cloth awnings, and outdoor equipment, subject to limitations on certain kinds of personal property; includes inflation protection coverage.
General Liability Insurance
Insurance designed to protect business owners and operators from a wide variety of liability exposures. Exposures could include liability arising from accidents resulting from the insured’s premises or operations, products sold by the insured, operations completed by the insured, and contractual liability.
Guaranteed Renewable
A policy provision in many products which guarantees the policyowner the right to renew coverage at every policy anniversary date. The company does not have the right to cancel coverage except for nonpayment of premiums by the policyowner; however, the company can raise rates if they choose.
Health Savings Account
Plan that allows you to contribute pre-tax money to be used for qualified medical expenses. HSAs, which are portable, must be linked to a high-deductible health insurance policy.
Living Benefits
This feature allows you, under certain circumstances, to receive the proceeds of your life insurance policy before you die. Such circumstances include terminal or catastrophic illness, the need for long-term care, or confinement to a nursing home. Also known as “accelerated death benefits.”
Personal Injury Protection
Pays basic expenses for an insured and his or her family in states with no-fault auto insurance. No-fault laws generally require drivers to carry both liability insurance and personal injury protection coverage to pay for basic needs of the insured, such as medical expenses, in the event of an accident.
Pre-Existing Condition A coverage limitation included in many health policies which states that certain physical or mental conditions, either previously diagnosed or which would normally be expected to require treatment prior to issue, will not be covered under the new policy for a specified period of time.
Preferred Provider Organization
Network of medical providers who charge on a fee-for-service basis, but are paid on a negotiated, discounted fee schedule.
Replacement Cost
The dollar amount needed to replace damaged personal property or dwelling property without deducting for depreciation but limited by the maximum dollar amount shown on the declarations page of the policy.
Term Life Insurance
Life insurance that provides protection for a specified period of time. Common policy periods are one year, five years, 10 years or until the insured reaches age 65 or 70. The policy doesn’t build up any of the nonforfeiture values associated with whole life policies.
Umbrella Policy
Coverage for losses above the limit of an underlying policy or policies such as homeowners and auto insurance. While it applies to losses over the dollar amount in the underlying policies, terms of coverage are sometimes broader than those of underlying policies.
Universal Life Insurance
A combination flexible premium, adjustable life insurance policy.
Whole Life Insurance
Life insurance which might be kept in force for a person’s whole life and which pays a benefit upon the person’s death, whenever that might be.