Glossary of Insurance Terms & Definition
0-9
- 1099-R Form
- A tax form used to report distributions from retirement plans, including annuities and pensions, for tax purposes.
- 401(k) Plan
- A retirement savings plan offered by employers that allows employees to contribute a portion of their salary to a tax-advantaged investment account for retirement.
- 403(b) Plan
- A retirement savings plan similar to a 401(k) but offered to employees of tax-exempt organizations, such as schools and non-profit organizations.
- 529 Plan
- A tax-advantaged savings plan designed to help families save for future education expenses, such as college tuition.
- 72(t) Distribution
- A method to withdraw funds from an Individual Retirement Account (IRA) or other retirement plan before age 59½ without incurring the early withdrawal penalty.
- 401(k) Rollover
- The process of transferring funds from one 401(k) plan to another or from a 401(k) plan to an IRA without incurring taxes or penalties.
- 1095-A, 1095-B, and 1095-C Forms
- Forms used to report health insurance coverage information to the IRS as required by the Affordable Care Act (ACA).
- 100% Coinsurance
- A provision in health insurance policies where the insurance company covers the full cost of covered medical services after the deductible is met.
- 1099-INT Form
- A tax form used to report interest income earned on investments or bank accounts during the tax year.
A
- Actual Cash Value (ACV)
- The current market value of property or belongings at the time of a loss, which may take into account depreciation.
- Actuary
- A professional who uses statistical data and mathematical models to assess and manage risk for insurance companies. Actuaries help determine premium rates and set aside reserves for future claims.
- Additional Insured
- An individual or entity added to an insurance policy, in addition to the primary policyholder, who is also covered by the policy. This is common in liability insurance.
- Adjuster
- An insurance company representative responsible for investigating and settling insurance claims. They assess the extent of damages and determine the appropriate payout to the policyholder.
- Adverse Selection
- The tendency for individuals with a higher risk of making a claim to seek insurance coverage more actively than those with lower risk. Insurance companies use various underwriting techniques to mitigate adverse selection.
- Annual Premium
- The total amount of money an insured person or entity pays to an insurance company for coverage for one year.
- Appraisal
- An assessment of the value of an insured item or property, often conducted by a qualified appraiser, to determine its worth in the event of a claim.
- Automobile Insurance
- Insurance coverage designed to protect against financial loss resulting from accidents, theft, or other damage involving a motor vehicle.
- Accident
- an unforeseen event or circumstance that occurs without deliberate intent.
- Accident Insurance
- provides coverage for unforeseen bodily injuries resulting from accidents
- Accident Only
- a policy that offers coverage, either individually or in combinations, for death, dismemberment, disability, or expenses related to hospitalization and medical care resulting from accidents or specific types of accidents
- Accident Only or AD&D
- Policies falling under the category of Accident Only or Accidental Death and Dismemberment (AD&D) provide coverage, either individually or combined, for death, dismemberment, disability, or expenses related to hospitalization and medical care caused by accidents or specified types of accidents. Various types of coverage are available, including student accident, sports accident, travel accident, blanket accident, specific accident, or accidental death and dismemberment (AD&D).
- Accidental Bodily Injury
- an unexpected physical injury sustained by a person due to an accident
- Accidental Death & Dismemberment
- a policy that pays out a predetermined benefit in the event of death and/or dismemberment resulting from accidents or specified types of accidents
- Accumulation Period
- the duration during which the insured individual must incur eligible medical expenses, amounting to at least the deductible amount, to establish a benefit period under a major medical expense or comprehensive medical expense policy
- Admission
- The provision of inpatient care in a hospital for the treatment of any medical condition.
- Admitted Assets
- The assets of an insurance company that can be accurately valued and included on the company’s balance sheet. They are critical for assessing the financial stability and viability of the insurer.
- Admitted Company
- An insurance company that holds a valid license to conduct insurance business within one or more states. It may be domiciled in a different state or country but is authorized to operate within the specified states.
- Advance Premiums
- Payments made for an insurance policy after it has been processed but before its effective date. These payments represent a liability for the insurance company and are not included in the written premium or the unearned premium reserve
- Adverse Selection
- A social phenomenon in insurance where individuals with a higher-than-average risk of experiencing losses seek greater insurance coverage compared to those with lower risk. This can result in an imbalance in the insurance risk pool
- All-Risk
- An open peril policy, offers broad coverage for a wide range of potential losses.
- Alternative Workers’ Compensation
- Coverage options beyond the standard workers’ compensation insurance. It includes elements such as employer’s liability and excess workers’ compensation, such as large deductible plans and managed care arrangements.
- Ambulatory Services
- “Outpatient” services, encompass healthcare services provided to individuals who are not confined to a healthcare institution.
- Annual Statement
- A mandatory report that insurance companies must submit to each state in which they operate.
- Annuitant
- The recipient of annuity payments, or the person for whose life the annuity is payable.
- Annuities – Immediate Non-variable
- Annuity contracts that guarantee fixed payments to the annuitant starting at the end of the first payment interval following the purchase of the annuity. While the interval may vary, these annuity payments must commence within 13 months.
- Annuity
- An annuity is a contractual agreement that provides a regular income stream for a specified period or for the lifetime of one or more individuals. It serves as a financial tool to ensure periodic payments to the annuitant(s).
B
- Beneficiary
- A person or entity named in an insurance policy to receive the benefits or proceeds in the event of a covered loss or the policyholder’s death.
- Binder
- A temporary insurance contract that provides coverage until a formal policy is issued. It is often used to provide immediate coverage while the application is being processed.
- Bodily Injury Liability
- This type of insurance coverage pays for injuries or death that the policyholder or covered individuals cause to others in an accident for which they are at fault.
- Broker
- An insurance intermediary who represents clients (policyholders) and works with multiple insurance companies to find the best insurance coverage and rates for their clients’ needs.
- Business Interruption Insurance
- A type of coverage that compensates a business for lost income and operating expenses due to a covered event, such as a fire or natural disaster, that interrupts normal business operations.
- Binder Letter
- A formal document issued by an insurance company to provide evidence of temporary insurance coverage while the formal policy is being prepared.
- Blanket Insurance
- A policy that covers multiple properties, items, or risks under a single, consolidated limit of insurance.
- Benefit Period
- In health insurance, the specified period during which a policyholder is eligible to receive benefits for covered medical expenses or disability.
- Brokerage Fee
- The fee or commission paid to an insurance broker for their services in arranging insurance coverage on behalf of a policyholder.
- Business Owners Policy (BOP)
- A bundled insurance policy designed for small businesses that typically includes property insurance, liability insurance, and business interruption coverage in a single package.
- Binder of Insurance
- A temporary proof of insurance that provides immediate coverage until the formal insurance policy is issued.
- Boiler and Machinery Insurance
- Coverage that protects against damage to boilers, machinery, and equipment due to accidents, explosions, or other unforeseen events.
- Burglary Insurance
- A type of property insurance that provides coverage for losses resulting from theft, burglary, or robbery.
- Blue Book Value
- The standard reference guide used to determine the estimated value of a vehicle or other property for insurance purposes, especially in auto insurance claims.
- Builder’s Risk Insurance
- Coverage that protects a construction project, including materials and equipment, against losses or damage while under construction.
- Business Liability Insurance
- Insurance coverage that protects a business from legal claims and financial losses resulting from liability claims, such as personal injury or property damage claims.
C
- Cancellation
- The termination of an insurance policy before its expiration date. This can be initiated by either the policyholder or the insurance company.
- Claim
- A formal request made by a policyholder to their insurance company for coverage or compensation for a loss or damage covered by the policy.
- Co-Insurance
- A cost-sharing arrangement in which the policyholder and the insurance company share the cost of covered expenses after the deductible has been met. For example, an 80/20 co-insurance split means the insurer pays 80% of covered costs, and the policyholder pays 20%.
- Coverage
- The scope and extent of protection provided by an insurance policy. It specifies what types of risks or events are insured against and to what extent.
D
- Deductible
- The amount of money that a policyholder is responsible for paying out of pocket before their insurance coverage kicks in. Higher deductibles often result in lower premiums.
- Depreciation
- The decrease in the value of an insured item over time due to factors like age, wear and tear, or obsolescence. Insurance policies may factor in depreciation when determining claims payouts.
E
- Exclusion
- Specific situations, risks, or items that are not covered by an insurance policy. Policyholders need to be aware of these exclusions to understand their coverage limitations.
F
- Floater
- An insurance policy or endorsement that provides additional coverage for specific high-value items, such as jewelry, art, or musical instruments, which may not be adequately covered by a standard policy.
G
- Grace Period
- A specified period (typically 30 days) after the premium due date during which the policy remains in force, even if the premium payment is late. If the premium is paid within the grace period, coverage continues without a lapse.
H
- Hazard
- A condition or situation that increases the likelihood of a loss occurring. Insurers assess hazards when underwriting policies to determine risk levels.
I
- Indemnity
- The principle that insurance policies are designed to compensate policyholders for their losses or damages, returning them to their financial state before the covered event occurred.
- Insured
- The person or entity covered by an insurance policy. This is typically the policyholder, but it can also include additional insured parties, such as beneficiaries or dependents.
J
- Joint Life Insurance
- A life insurance policy that covers two or more individuals, often spouses, under a single policy.
K
- Key Person Insurance
- A type of life insurance policy taken out by a business on the life of a key employee or owner. In the event of the key person’s death, the business receives a payout to help mitigate financial losses.
L
- Liability Insurance
- A type of insurance that provides coverage for claims made against the policyholder for injuries, property damage, or other financial obligations resulting from their actions or negligence.
M
- Mutual Insurance Company
- An insurance company owned by its policyholders. Policyholders have a stake in the company’s profits and may receive dividends or premium reductions based on the company’s financial performance.
N
- Named Peril
- A specific risk or peril explicitly listed in an insurance policy as covered. Only the perils named in the policy are eligible for claims.
O
- Option
- An agreement giving the buyer the right to buy or receive, sell or deliver, enter into, extend or terminate, or effect a cash settlement based on the actual or expected price, level, performance or value of one or more Underlying Interests.
- Owner Occupied
- Homeowners insurance sold to owners occupying the described property.
- Officer
- A president, vice-president, treasurer, actuary, secretary, controller and any other person who performs for the company functions corresponding to those performed by the foregoing officers.
- Ocean Marine
- Provides coverage for a wide range of risks associated with ocean and inland water transportation.
- Officer
- Individuals holding key positions within a company, such as the president, vice-president, treasurer, actuary, secretary, controller, and others who perform functions equivalent to those performed by the aforementioned officers.
P
- Premium
- The periodic payment made by the policyholder to the insurance company in exchange for insurance coverage. Premiums can be paid monthly, quarterly, annually, or in other intervals.
- Policy
- A legally binding contract between the insurance company and the policyholder that outlines the terms, conditions, coverage, and obligations of the insurance agreement.
- Policyholder
- The individual or entity that owns an insurance policy and is entitled to the benefits and protection provided by the policy.
Q
- Quote
- A formal estimate of the cost of an insurance policy or coverage provided by an insurance company to a prospective policyholder. Quotes include premium amounts and coverage details.
R
- Rider
- Also known as an endorsement or addendum, a rider is a supplementary document added to an insurance policy to modify or expand its coverage. Riders can be used to cover specific risks or items not included in the standard policy.
S
- Subrogation
- The process by which an insurance company that has paid a claim on behalf of a policyholder seeks to recover the amount paid from the responsible party. It helps prevent the policyholder from being financially responsible for losses caused by others.
T
- Term Life Insurance
- A type of life insurance that provides coverage for a specified term, such as 10, 20, or 30 years. If the insured person dies during the term, a death benefit is paid to the beneficiaries. Term life insurance typically does not have a cash value component.
U
- Underwriting
- The process by which insurance companies assess and evaluate the risk associated with insuring a specific person, property, or event. Underwriting helps determine the premium and coverage offered to the policyholder.
- Underinsured Motorist Coverage (UIM)
- An optional coverage that provides protection for policyholders when they are involved in an accident with a driver who has inadequate insurance coverage to pay for the resulting damages.
- Uninsured Motorist Coverage
- Coverage that protects policyholders if they are involved in an accident with a driver who does not have insurance. UM coverage helps pay for medical expenses and property damage.
V
- Variable Life Insurance
- A type of life insurance policy that allows the policyholder to invest a portion of their premiums in various investment options, such as stocks or bonds. The death benefit and cash value can vary based on the performance of these investments.
W
- Waiting Period
- The specified period of time that must pass before certain coverage or benefits within an insurance policy become effective. This is commonly found in disability insurance and long-term care insurance.
- Whole Life Insurance
- A type of permanent life insurance that provides coverage for the entire lifetime of the insured. It also includes a cash value component that grows over time and can be borrowed against or withdrawn.
- Waiver of Premium
- An optional provision in some insurance policies that waives the premium payments if the policyholder becomes disabled and is unable to work for an extended period. The policy remains in force without premium payments during this time.
X
- X-Date (Expiration Date)
- The date on which an insurance policy expires. It is crucial for policyholders to renew their policies before the expiration date to maintain coverage.
Y
- Yearly Renewable Term (YRT)
- A type of term life insurance where the policy is renewed on an annual basis, typically with an increasing premium as the insured ages. It provides temporary coverage for a specific term but can be renewed annually without the need for a medical exam.
Z
- Zero Deductible
- Some insurance policies, such as health or car insurance, offer a zero deductible option where the policyholder does not need to pay any out-of-pocket expenses before the insurance coverage begins.