Understanding insurance terminology is essential for making informed decisions about your coverage. This glossary explains the most important insurance terms you need to know, from basic concepts to more complex terminology used in policies and the industry.
A - C Terms
Act of God: An event beyond human control, such as natural disasters, that may be covered by insurance.
Adjuster: An insurance professional who evaluates claims to determine the amount the insurer should pay.
Agent: A licensed professional who sells insurance policies on behalf of an insurance company.
Beneficiary: The person or entity designated to receive the death benefit from a life insurance policy.
Claim: A request for payment from an insurance company for a covered loss.
Coinsurance: A cost-sharing arrangement where the policyholder pays a percentage of covered costs.
Collision Coverage: Auto insurance that pays for damage to your vehicle from accidents.
Comprehensive Coverage: Auto insurance that pays for damage from non-collision incidents like theft or weather.
Copayment (Copay): A fixed amount the policyholder pays for covered services.
D - L Terms
Deductible: The amount the policyholder pays before insurance coverage begins.
Depreciation: The decrease in value of property over time.
Exclusion: A specific condition or situation not covered by the insurance policy.
Grace Period: The time allowed after a premium due date to make payment without policy lapse.
Indemnity: The principle that insurance restores the policyholder to financial position before loss.
Liability Coverage: Insurance that pays for damages you cause to others.
Lapse: When a policy terminates due to non-payment of premiums.
M - P Terms
Peril: A specific cause of loss, such as fire or theft, that may be covered by insurance.
Policy: The written contract between the insurer and policyholder.
Premium: The amount paid for insurance coverage.
Primary Insurance: The insurance that pays first when multiple policies cover the same loss.
R - U Terms
Rider: An amendment to an insurance policy that adds or modifies coverage.
Subrogation: The insurer's right to pursue recovery from third parties after paying a claim.
Underwriting: The process of evaluating risk to determine coverage eligibility and premiums.
Umbrella Policy: Additional liability coverage that exceeds underlying policy limits.
Conclusion
Familiarizing yourself with these insurance terms helps you understand your policies and make informed decisions about your coverage. When in doubt, always ask your insurance professional for clarification.