Insurance Glossary
Common insurance terms explained simply
A
Actuary
A professional who uses mathematics, statistics, and financial theory to assess risk and uncertainty in the insurance and finance industries.
Adjuster
An insurance professional who evaluates claims and determines the amount the insurer should pay.
B
Beneficiary
The person or entity designated to receive the proceeds of an insurance policy upon the insured's death or a specific event.
Binder
A temporary agreement that provides insurance coverage until a formal policy is issued.
C
Claim
A formal request to an insurance company for coverage or compensation for a covered loss or policy event.
Coinsurance
The percentage of costs a policyholder shares with the insurance company after meeting the deductible.
Copay
A fixed amount a policyholder pays for a covered service, with the insurer paying the remainder.
Coverage
The scope of protection provided by an insurance policy, including what events and losses are included.
D
Deductible
The amount a policyholder must pay out of pocket before the insurance company begins to cover costs.
Depreciation
The decrease in value of an insured item over time due to age, wear, and tear.
E
Endorsement
A modification to an insurance policy that changes the terms, coverage, or conditions. Also called a rider.
Exclusion
Specific conditions, situations, or circumstances that are not covered by an insurance policy.
G
Grace Period
A period after the premium due date during which the policy remains in force without penalty.
I
Indemnity
A principle of insurance that aims to restore the insured to the same financial position they were in before the loss.
L
Liability
Legal responsibility for one's actions that may result in financial obligations, covered by liability insurance.
Limit
The maximum amount an insurance policy will pay for a covered loss or during a policy period.
Loss
The amount of financial damage suffered by the insured, which may be covered by insurance.
P
Peril
A specific risk or cause of loss covered by an insurance policy, such as fire, theft, or windstorm.
Policy
The written contract between an insurer and policyholder that outlines coverage, conditions, and exclusions.
Premium
The amount paid regularly to an insurance company in exchange for coverage under a policy.
R
Rider
An add-on to an insurance policy that provides additional benefits or coverage. Also called an endorsement.
Risk
The chance of loss or the uncertainty of an event occurring that could lead to a financial loss.
S
Subrogation
The right of an insurer to pursue a third party that caused an insurance loss to the insured.
T
Term
The length of time an insurance policy is in effect, after which it must be renewed or it expires.
U
Umbrella Policy
An extra liability policy that provides coverage beyond the limits of existing policies.
Underwriting
The process by which insurers evaluate risk and decide whether to accept an application and at what premium.
W
Waiver
The voluntary relinquishment of a known right or privilege, often used in riders that waive premiums under certain conditions.