Ultimate Insurance Glossary
We know…we use a lot of unfamiliar lingo in this industry…but we have you covered! (No pun intended…hehe…) Here is your guide to our commonly used insurance terms:
More than you ever want to know about insurance.
Accident – An unforeseen circumstance or event that is unexpected
Accident Insurance – insurance for unexpected bodily injury.
Accident Only – an insurance policy that provides coverage, singly or in combination,
for death, dismemberment, disability. This can also cover hospital and medical care caused by or as a result of an accident.
Accidental Bodily Injury – Bodily injury to a person due to an unexpected event.
Accidental Death & Dismemberment – an insurance policy that pays a specified amount in the case of death and/or dismemberment caused by accident.
Actual Cash Value – Value of an item minus depreciation.
Actuary – Professional who analyzes risk and loss assessment for an insurance company. He Helps determine premium rating factors.
Adjuster – claims investigator who helps analyze the financial loss due to an accident.
Admitted Company – Insurance company who does business in other states outside of their home state.
Advance Premiums – Insurance payment made before the start of the policy.
Adverse Selection – the social occurrence whereby prospective clients with a higher than average of claims of loss, seek more insurance coverage than those with less risk.
Agent – A Licensed individual who sells, services, or negotiates insurance policies. They can be independent or captive to a particular company.
Allied Lines – Typical coverages are written associated property insurance, e.g., glass, tornado, windstorm and hail; sprinkler and water damage; explosion, riot, and civil commotion, etc.
All-Risk – commonly referred to as open peril, this type of policy covers a broad range of potential claims.
Appraisal – Value estimation
Arbitration – nonbiased third party problem resolution tactic.
Assessed Value – the taxable value of an item or property.
Assigned Risk – A market pool established through a government entity to write policies where the risk ‘s too big for the insurance company to offer coverage.
Authorized Company – Admitted insurance carrier authorized to offer policies in your state.
Auto Liability – Damage, both bodily injury, and property, covered under an auto insurance policy that protects other drivers during an accident. Individual states determine the guidelines for “at fault.”
Auto Physical Damage – Commonly referred to as Comprehensive and Collision coverage. This helps protect your vehicle from damage due to a covered peril.
Automobile Liability Insurance – typical insurance for bodily injury and property damage that may occur by operation of a vehicle or even ownership of a vehicle.
Boatowners/Personal Watercraft – an Insurance policy that helps protect personal watercrafts such as boats and jet skis. This policy includes liability coverage and can also include physical damage.
Bodily Injury – physical injury including sickness or disease to an individual.
Broker – An insurance professional who writes, services, and offers insurance policies through multiple different carriers.
Builders’ Risk Policies – Insurance policy to help protect a structure as it is being built, while it is under the course of construction.
Burglary and Theft – Insurance for property that has been taken, both on and off premise. Includes, theft, burglary, kidnapping, and fraud.
Business Auto – auto insurance policy for vehicles being used in a commercial capacity.
Business owners Policy – standard insurance policy to cover the liability and exposure of an individual company.
Captive Agent – An insurance agent who is contracted to sell one insurance company or its affiliates.
Cash – a medium of exchange.
Catastrophe Loss – an unforeseen event that causes severe loss across an area.
Claim – a request made by the insured to their insurance company for damage due to a covered loss.
Claims-made Form – A form that only pays out if both the event that causes the claim and the request to file the claim are submitted during the term of the policy.
Class Rating – A method used to help determine insurance rates based on a given set of characteristics. This can be based on personal demographic information such as age, gender, etc. and also based on geographic location. i.e. Zip code.
Combinations – packages policies bundles together such as auto and home insurance.
Commencement Date -This is the effective date of the policy.
Commercial Auto – Auto insurance policy for vehicles that are used in a commercial capacity.
Commercial Earthquake – insurance for commercial property for damage caused by an earthquake.
Commercial Flood – insurance for commercial property for damage resulting from a flood.
Commercial General Liability – commercial liability that is both flexible & broad coverage with two major sub-lines: Covers both the premise and products or completed operations.
Commercial Multiple Peril – the policy that packages two or more insurance policies protecting a business from various property and liability risk exposures.
Commercial Package Policy – additional coverage options beyond a business owners policy to cover other perils.
Commercial Property – Insurance policy to protect a property used for commercial purposes.
Commission – A percentage of the insurance premium the insurance agent earns from the insurance company for sale and service of an insurance policy.
Concurrent Causation – loss covered by an insurance policy when two or more perils occur at the same time.
Conditions – requirements stated in an insurance policy that is upheld by all parties to make the contract valid.
Condos – Home owners insurance for Condos. Typically referred to as an HO6.
Date of Issue – Date the insurance carrier issues the insurance policy.
Declarations – the Comprehensive document that stated coverage limits on an insurance policy.
Deductible – the Monetary portion of the claim the insured is responsible for in the event of a claim.
Difference In Conditions (DIC) Insurance – a special form of open-peril coverage to help protect against specific loss such as earthquake and flood.
Direct Loss – Damages caused by a covered peril.
Dwelling Property/Personal Liability – a special form of package policy composed of dwelling fire and/or allied lines, and personal liability insurance.
Earned Premium – Premium made through coverage on an insurance policy.
Earthquake – Coverage to property caused by earthquakes.
Effective Date – Date the insurance policy is active and in force.
Endorsement – Insurance policy change to modify coverage provided.
Excess and Umbrella Liability – Excess liability policy to mitigate losses where damage caused exceeds the current liability limit on the individual policy.
Expense Ratio – Percentage of premium used to service insurance policy and pay claims.
Exposure – the risk of unexpected loss.
FAIR Plan – Fair Access to Insurance Requirements – state pools designed to provide insurance to property owners who are unable to obtain property insurance through conventional means.
Fair Value – the amount at which an item could be bought or sold in a current transaction between willing parties.
Federal Flood Insurance – coverage for qualifying residents and businesses in flood prone regions through the National Flood Insurance Act, a federally subsidized flood insurance program enacted in 1968.
Fees Payable – fees that have been incurred but not yet paid.
FEMA – Federal Emergency Management Agency – an independent agency, tasked with responding to, planning for, mitigating and recovery efforts of natural disasters.
Financial Responsibility Law – a statute requiring drivers to show the capacity to pay for automobile-related losses, whether on their own or through an insurance policy.
Fire – coverage provided due to fire, even caused by lightning, to property.
Fire Legal Liability – coverage for property damaged by fire due to the negligence of a person. For example, a renter causes a fire and burns down an apartment building.
Flood – coverage to help protect from a flood (outside water coming in).
Hard Market – High demand for insurance but low supply or availability of providers.
Hazard – peril which tends to increase the probability or severity of a loss.
Homeowners Insurance – insurance policy to cover one’s property and possessions inside. This includes fixed homes, mobile homes, condos and renters insurance.
Incurred But Not Reported (IBNR) – Reserves insurance companies set aside for potential claims or estimated claims for the year.
Incurred Claims – Claims already paid out plus funds set aside for future claims not yet reported.
Incurred Losses – sustained losses, paid or not, during a specified time period.
Independent Adjuster – Independent contractor to investigates insurance claims for a fee.
Independent Agent – an Insurance agent who sells and services multiple companies.
Independent Contractor – an individual that works for themselves providing goods or services to clients for a fee.
Insurable Interest – The insured (policy holder) would sustain a direct loss if an event were to occur.
Insurance – transferring financial risk across a pool
Insurance to Value – Amount of insurance purchased vs. the actual replacement cost.
Insured – person who is covered by an insurance policy.
Insurer – the insurance company itself
International – business outside of the US.
Lapse – termination of an insurance policy for failure to pay the required premium.
Liability – your responsibility to others for damage that you have caused.
Limits – the maximum amount paid out on an insurance policy.
Line of Business – classification of insurance policy: auto, home, motorcycle, etc.
Long Duration Contracts – contracts longer than 13 months
Loss – physical damage to property or bodily injury
Loss Frequency – how many claims paid out during the life of an insurance policy.
Loss of Use Insurance – protection against loss of use of an item due to a covered claim. i.e. Rental car reimbursement when your vehicle is in the shop due to a claim.
Loss Payable Clause – third party mortgagee with a financial interest in the property.
Loss Ratio – the percentage of incurred losses to earned premiums.
Loss Reserve – the amount that insurance companies set aside to cover claims incurred but not yet paid.
Loss Reserves – an estimation of loss Reserve for the year
Losses Incurred – Claims that have been paid
Losses Incurred But Not Reported (IBNR) – reserves set aside for claims that have not been reported to the insurance company yet.
Mandated benefits – insurance required by state or federal law.
Market Value – fair value or an item derived from current market standards.
Mobile Homes – Homeowners – insurance for Mobile homes not in transport
Mobile Homes under Transport – coverage for mobile homes while under transport.
Moral Hazard – personality characteristics on an individual that increase the likelihood of a claim.
Mortgage – a loan used to secure a piece of property.
Multi-Peril Insurance – combining several types of property insurance in one policy for both business and personal use.
Named Insured – the individual defined as the insured in the policy contract.
Named Peril Coverage – insurance for losses explicitly identified in the policy contract.
Negligence – failure to exercise reasonable judgment or consideration to oneself or others resulting in loss or damage.
NFIP – National Flood Insurance Program – In consideration of the National Flood Act of 1968, insurance and floodplain management for personal and business property
Nonadmitted Insurer – insurance company, not licensed or contracted to provide insurance within a given state.
Occurrence – also referred to as an accident. Exposure to conditions as a result of bodily injury or property damage that was not expected.
Other Liability – Protection from the insured from legal liability arising from negligence, carelessness, or a failure to act resulting in property damage or personal injury to others.
Owner Occupied – home in which the owner resides and owns the structure.
Package Policy – two or more policies combined into a single policy.
Peril – the root cause of damage to one’s possession. Hail, fire, theft, etc.
Personal Auto Policy – insurance policy designed to cover personal automobiles for personal use.
Personal Earthquake – earthquake insurance for personally owned structure. Nonbusiness.
Personal Flood – Flood insurance for personally owned structure. None business.
Personal GAP Insurance – credit insurance that helps fill in the gap between the loan amount and actual cash value.
Personal Injury Liability -Coverage for an individual who has been discriminated against, maliciously prosecuted, slandered, a victim of identity theft, violation of rights, etc.
Personal Injury Protection Coverage/PIP – For states with “no-fault” laws – help for treatment of injuries when an accident occurs.
Personal Property – insured possessions, not including motor vehicles, homes, motorcycles, etc. This is coverage for items such as electronics, clothing, furniture, etc.
Policy – a written contract establishing an insurance agreement.
Policy Period – time in which insurance coverage is in effect.
Pool – a group of people who through risk sharing help to limit individual exposure to loss.
Preferred Risk – a person who exhibits a low risk for liability loss than a standard insured.
Premium – Money charged for the insurance coverage.
Premiums Earned – the portion of the premium for insurance that has already been provided.
Premiums Written – total premiums generated from all policies (contracts) written by an insurer within a specified period.
Primary Insurance – The insurance policy that takes precedence when there is multiple insurance policies involved in settling a claim.
Prior Approval Law – the regulatory requirement for insurance companies to have all insurance rates and forms sent to the state the policy is written through.
Private Passenger Auto – includes: Auto Liability, Personal Injury Protection, Medical Payments, Uninsured/Underinsured; Comprehensive, and Collision.
Producer – also referred to as an agent.
Property – coverage protecting policy holder against loss or damage to real or personal property from different perils. This includes fire, lightning, glass breakage, tornado, windstorm, hail, water damage, etc.
Provisions – contingencies as stated in an insurance policy.
Proximate Cause – situation covered under insured’s policy agreement.
Public Adjuster – independent claims adjuster representing policyholders (insured) instead of representing the insurance companies.
Pure Premium – that portion of the premium equal to expected losses.
Pure Risk – circumstance including the possibility of loss or no loss but also includes no possibility of gain.
Rate – Cost per unit of insurance
Rebate – a refund of part or all of a premium payment.
Renters Insurance style=”font-weight: 400;”> – Content coverage for the renter.
Replacement Cost – cost to replace an item that is not adjusted for depreciation.
Reported Losses – Claims reported to the insurance company before compensation being made.
Reserve – Money set aside from insurance premiums to pay future claims.
Residence – where the insured lives or resides.
Residual Market Plan – program set in place for people who do not qualify for traditional insurance policy because of increased risk
Retrospective Rating – the process of determining insurance rates based on loss history.
Rider – a change to an insurance policy.
Risk – unknown factor or occurrence that may occur.
Risk Retention Group – group-owned insurance company which is organized for the purpose of assuming and spreading the liability risks between its members.
Salvage – the value of an item after a loss.
Self-Insurance – the individual is responsible for liability and claims. The individual acts as the insurance company.
Situs of Contract – the state or jurisdiction in which the insurance policy is issued.
Soft Market – abundant insurance available with lower premiums.
Standard Risk – normal risk insured at normal current insurance rates.
State of Domicile – the state where the insurance company’s home office is based out of.
Stock Insurance Company – Insurance company owned by stock owners.
Subrogation – insurer has the right to go after the negligent third party to recuperate claims paid out.
Subrogation Clause – statement in the insurance policy that gives the carrier an option for subrogation for a claim that has been paid out. Seeking reimbursement from the third party who is responsible for the loss.
Substandard Risk – prospect who is subject to higher insurance cost due to risk factors than the insurance premiums of a standard risk.
Surety Bond – a three-party agreement whereby an insurance company assumes an obligation or responsibility to pay a debt should the principal obligor become in default.
Tenants – person renting a home in which they do not own.
Term – length of time an insurance policy is in effect.
Third Party – the person other than the policy holder or insurance company who has incurred losses or is entitled to receive payment due to a claim.
Total Liabilities – maximum money an insurance policy pays out.
Unallocated Loss Adjustment Expense (ULAE) – expenses for loss adjustments that cannot be specifically tied to a claim.
Umbrella and Excess (Personal) – non-business excess liability policy that kicks in when the liability exposure of a claim exceeds the primary insurance policy liability limits.
Underinsured Motorist Coverage – option to protect bodily injury for damage to you when struck by another driver who does not have an active insurance policy in place.
Underwriter – the professional who analyzes risk when insurance assets.
Underwriting – the process by which an insurance company examines a risk to see if they are willing to offer coverage.
Underwriting Risk – the portion of the risk-based monetary formula calculated requirements for reserves plus the premiums for an insurance company.
Unearned Premium – the amount of premium owed by the insured to the insurance company for coverage that has been provided by not yet paid.
Valued Policy – an insurance policy where the value is agreed upon in advance. This is not a direct relation to the amount of the insured loss.
Valued Policy Law – legislation set in place by the state that specifies the policy holder insured shall receive the face amount of the policy in the event of a total loss to a dwelling, rather than the actual cash value.
Written Premium – the premium of the insurance policy over the policy term.
Ultimate Insurance Glossary FAQs
Q1: What is an insurance premium?
A1: An insurance premium is the amount of money you pay to an insurance company in exchange for coverage. It is typically paid on a regular basis, such as monthly or annually, and it helps maintain your insurance policy. Premiums can vary based on factors like the type of insurance, coverage level, and your personal details.
Q2: How can I lower my insurance premiums?
A2: You can lower your insurance premiums by taking steps such as maintaining a good driving record, bundling multiple insurance policies with the same company, increasing your deductibles, and inquiring about available discounts. For personalized guidance on lowering your premiums, please call us at 1.888.445.2793.
Q3: What is a deductible in insurance?
A3: A deductible is the amount of money you agree to pay out of pocket before your insurance coverage kicks in. For example, if you have a $500 deductible and you make a claim for $1,000, you would pay the first $500, and your insurance would cover the remaining $500. Choosing a higher deductible can often result in lower premium costs.
Q4: What are some other terms for the insurance policyholder?
A4: The insurance policyholder is also commonly referred to as the insured, the policy owner, or the policyholder. These terms all refer to the individual or entity that holds and is responsible for an insurance policy.
Last Updated on by Camron Moss