The above description provides a brief overview of the terms and phrases used within the insurance industry. These definitions are not applicable in all states or for all insurance and financial products. This is not an insurance contract. Other terms, conditions and exclusions apply. Please read your official policy for full details about coverages. These definitions do not alter or modify the terms of any insurance contract. If there is any conflict between these definitions and the provisions of the applicable insurance policy, the terms of the policy control

A

Accident

an unexpected event or circumstance lacking deliberate intent.

Accident Insurance

insurance for an unforeseen injury.

Accidental Death & Dismemberment

a policy that grants benefits in the event of accidental death and/or dismemberment.

Actual Cash Value

repayment value for the loss of, or damage to, property. This is usually the replacement cost, minus depreciation.

Actuary

a professional who analyzes the probabilities of risk and risk management.

Adjuster

a professional who investigates claims and recommends settlement options.

Admitted Asset

assets which can be valued to determine the financial viability of a company.

Affiliate

a person or entity that is under common control with the insurer.

Agent

a person who sells, services, or negotiates insurance policies.

Aggregate

the maximum or total amount of coverage payable for a loss.

All-Risk

also known as “open peril,” this type of policy covers a broad range of losses.

Ambulatory Service

also known as “outpatient” services; these are provided to members who are not confined to a healthcare institution.

Appraisal

an estimate of value.

Arbitration

a resolution tactic whereby an insurance company and the insured agree to settle a disputed claim by accepting the decision of a third party.

Assessed Value

estimated value of one’s property by a taxing entity.

Asset

probable future economic benefits obtained a result of past transactions or events.

Asset Risk

risk assigned to a company’s assets.

Assisted Living Care

a policy which provides coverage only while the policyholder resides at an assisted living facility.

Authorized Company

a licensed insurer recognized by the state.

Auto Liability

coverage that protects against motor vehicle-related injuries. Also covers damage to the property of others caused by accidents arising out of ownership, maintenance, or the use of a motor vehicle.

Auto Physical Damage

coverage which insures against damage to the insured’s automobile.

Automobile Liability Insurance

coverage for injury and property damage caused either by ownership or operation of an automobile.

B

Beneficiary

an individual who may receive payment due to a will, life insurance policy, retirement plan, annuity, trust, or other contract.

Benefits

total amount of health care services paid to a member.

Blanket Coverage

coverage for property and liability that extends to multiple locations or people.

Boat Owner’s / Personal Watercraft

coverage for bodily injury and property damage as well as damage to pleasure boats, motors, trailers, boating equipment, and personal watercraft.

Bodily Injury

an industry-specific term that refers to physical injury.

Book Value

original cost of real and/or personal property, including acquisition costs and accumulated depreciation.

Broker

an insurance professional who receives a commission from the sale and service of insurance policies.

Builders Risk Policies

coverage for buildings in the course of construction. This may also include machinery and equipment used during construction.

Burglary and Theft

protection against the theft or destruction of property caused by breaking and entering, burglary, forgery or counterfeiting, fraud, kidnap, and ransom.

Business Interruption

protects against the loss of income due to property damage to a business.

Business Owners Policy

business insurance typically for property, liability, and business interruption coverage.

C

Calendar Year Deductible

the amount one must pay before the insurance company pays for further costs.

Carrier

the policy provider to whom the policyholder will pay premiums; ultimately responsible for paying out claims.

Casualty Insurance

includes workers compensation, errors and omissions, fidelity, crime, glass, boiler, and various malpractice coverages.

Catastrophe Loss

a massive loss with little ability to forecast.

Claim

a request made to the insurance company to submit a payment due to a loss incurred under policy.

Class Rating

a method of determining rates for applicants using a set of characteristics, such as demographic and geographic location.

Coinsurance

a property insurance policy clause meant to encourage policyholders to carry a reasonable amount of insurance. If the clause is broken, the policyholder shares a higher proportion of the loss.

Combinations

a package policy composed of personal, automobile, and homeowners insurance.

Commencement Date

the date a policy goes into effect. Also known as “effective date.”

Commercial Auto

a policy which covers costs associated with injuries or property damage caused by an employee in an insured commercial vehicle.

Commercial Property

property insurance sold to commercial businesses.

Commission

a percentage of premium paid to agents by insurance companies for the sale of policies.

Completed Operations Liability

covers a contractor’s liability for property damage or injuries to a third party from defective work. This coverage often extends beyond the completion date of contracted operations.

Comprehensive (Hospital and Medical)

line of business providing for specific medical coverages. This may include hospital, surgical, or other major medical coverages.

Comprehensive General Liability (CGL)

coverage of all business liabilities unless specifically excluded in the policy.

Comprehensive Personal Liability

a policy which protects the policyholder and their family (within the context of their personal lives) against liability stemming from an accident.

Comprehensive / Major Medical

also known as major medical health insurance. These plans cover a wide range of health services in accordance with state and federal laws.

Conditions

policy specific requirements which must be upheld by the insured to qualify for compensation.

Contractual Liability

liability coverage of the insured who has assumed the legal liability of another party by written or oral contract.

Convertible Term Insurance Policy

a policy that may be converted to permanent insurance.

Copay

a cost-sharing mechanism where the insured pays a specified dollar amount and the insurance company pays the remainder.

Covered Lives

the total number of lives insured, including dependents, under a policy.

Crop Insurance

protects against the loss or damage to crops from a variety of perils, including fire, lightning, loss of revenue, tornado, windstorm, hail, flood, rain, or insects.

D

Deductible

the amount paid out of pocket by the policyholder before a provider will pay any expenses.

Direct Loss

damage to covered property caused by a covered peril.

Directors & Officers Liability

coverage protecting directors or officers of a corporation from liability arising from the performance of their professional duties.

Disability Income

a policy which compensates the insured individual for a portion of the income they lose due to a disabling injury or illness.

Disability Income – Long-Term

policies that provide a weekly or monthly income benefit for more than five years.

Disability Income – Short-Term

policies that provide a weekly or monthly income benefit for up to five years.

Dividend

a “return of premium,” which means your insurance company will give you back part of the amount you paid for your insurance policy. However, not all insurance companies pay dividends, nor do all insurance policies.

Dwelling Coverage

the portion of a Homeowner’s Insurance Policy that covers the physical structure of the insured home.

Dwelling Fire Policy

In addition to coverage against fire and smoke, these policies may also cover damages from wind, explosions, or vandalism.

E

Early warning system

a regulatory system designed to identify practices and trends that contribute to systemic risk.

Earthquake

property coverage for losses resulting from an earthquake. Excluded are losses resulting from fire, explosion, flood, or tidal wave.

Electronic Data Processing (EDP) Policies

protection against losses arising from damage to electronic data processing equipment and its software.

Elevators and Escalators Liability

coverage for bodily injury or property damage arising from the use of elevators or escalators operated, maintained, or controlled by the insured.

Employee Benefits Liability

employer protection for claims arising from provisions in an employee benefits insurance plan.

Employee Retirement Income Security Act of 1974 (ERISA)

established standards for private pension plans, including vesting requirements and funding mechanisms.

Employers Liability

coverage of employers arising out of injuries to employees.

Employment Practices Liability Coverage

insurance for employers which covers wrongful termination, discrimination, or sexual harassment of current or former employees.

Environmental Impairment Liability (EIL)

coverage for negligence resulting in pollution or environmental contamination.

Environmental Pollution Liability

coverage for bodily injury or property damage arising from exposure to toxic chemicals, waste materials, or other pollutants.

Errors and Omissions Liability

coverage relating to the performance of professional duties. Popular with accountants, insurance adjusters, architects, engineers, lawyers, and stockbrokers.

Event Cancellation

coverage for financial loss due to the cancellation or postponement of a specific event because of weather or some other uncontrollable occurrence.

Excess and Umbrella Liability

covers a much higher limit and goes above and beyond claims directly relating to home or auto. This is mainly used to protect assets from unforeseen events.

Extra Expense Insurance

property coverage for extraordinary expenses stemming from an interruption of business, such as a backup generator in case of power failure.

F

Fair Access to Insurance Requirements (FAIR plan)

state pools designed to provide insurance to property owners who are otherwise unable to obtain property insurance.

Federal Flood Insurance

coverage through the National Flood Insurance Act for qualifying residents and businesses in designated flood regions.

Fees Payable

fees incurred but not yet paid.

Fidelity

a bond or policy covering an employer’s potential losses incurred as a result of fraudulent employee acts.

Financial Guaranty

policy under which a loss is payable upon a failure to perform a financial obligation.

Financial Responsibility Law

requires a motorist to prove they can pay for damages resulting from an automobile-related accident.

Fire

coverage protecting against the loss to property from damage caused by fire or lightning.

Fire Legal Liability

coverage for a negligent act which allows a spreading fire to cause bodily injury or property damage.

Flood

coverage protecting the insured against loss or damages due to flooding.

Foreign Insurer

industry term for an insurance company that sells policies in a state other than its home location.

Fraternal Insurance

group coverage available to members of a fraternal organization.

G

Group Accident and Health

insurance often issued to employees, which covers sickness, accidental injury, and accidental death.

H

Hazard

a circumstance which increases the probability of damage or risk.

Health Insurance

a generic term applying to insurance plans that compensate the enrollee for losses caused by injury or illness. This also includes related medical expenses.

Health Maintenance Organization (HMO)

a group plan that provides physician, hospital, and clinical services to members in exchange for a periodic flat fee.

Health Plan

coverage given to an individual, family, or group, in which the policyholder receives a defined set of health care benefits in exchange for paying a fee.

Hold-Harmless Agreement

A contract whereby one party agrees not to sue the other party for any expenses, damages, or losses arising from a transaction or activity between the two.

Homeowners Insurance

a package policy which usually covers the dwelling, apartment structures, personal property, and additional living expenses.

Hospital Indemnity Coverage

provides a predetermined, fixed benefit for contingencies based on a stay at a hospital or intensive care facility.

Hull Insurance

coverage for damages to a vessel or aircraft.

I

Indemnity, Principle of

a general principle which holds that the individual recovering under an insurance policy should be restored to the financial position he or she was in prior to the loss.

Individual Health

health insurance where the policy is issued to an individual and may also cover their dependents.

Inland Marine

coverage for property that may be in transit or movable goods. This also includes essential infrastructure used to transport said goods, including, but not limited to, bridges, tunnels, piers, wharves, docks, power and phone lines, and radio and television towers.

Insurance

a practice or arrangement by which a company or government agency provides a guarantee of compensation for specified loss, damage, illness, or death in return for payment of a premium.

Insured

a person, group of people, or entity covered by an insurance policy.

Insurer

an individual or company authorized to write insurance under the law.

Intermediary

a person, corporation, or other business that arranges the delivery of health services for a health insurer.

Internet Liability Insurance/Cyber Insurance

coverage for internet based commerce, including copyright infringement, libel, and violation of privacy.

K

Key Person Insurance

a policy purchased by a business insuring the life or lives of personnel integral to the business operations.

L

Lapse

termination of a policy due to failure to pay the required renewal premium.

Level Premium Insurance

life insurance policy where the cost is distributed equally over the term of the premium period.

Liability

the portion of a policy which covers you in the event you are found responsible for injuries to others or property.

Life–Endowment

insurance that pays the same amount whether the insured dies or if they live to the end of the coverage term.

Life Settlements

a contract which ensures a transfer ownership of a life insurance policy to a third party for compensation that is less than the expected death benefit.

Lifetime Disability Benefit

a disability income policy provision which reimburses lost wages for the duration of the disability or the remainder of the insured’s life.

Limited Benefit

provides coverage for vision, prescription drug, and/or other single service plans or programs.

Limited Policies

health insurance coverage for a certain ailment, such as cancer.

Liquor Liability

coverage for the liability of a business involved in the retail or serving of alcoholic beverages.

Long-Term Care

policies that provide coverage for not less than one year for diagnostic, preventive, therapeutic, rehabilitative, maintenance, or personal care services.

Long-Term Disability Income Insurance

policy providing monthly income payments for those who become disabled for an extensive length of time, typically two years or longer.

Loss

physical damage covered by an insurance policy. Losses can be in partial or in total.

Loss of Use Insurance

policy providing protection against loss of use due to a covered event.

M

Major Medical

a hospital/surgical/medical expense contract that provides comprehensive benefits.

Malpractice

alleged professional misconduct or negligence, resulting in a loss or injury.

Managed Care

system of healthcare delivery that attempts to influence the utilization, quality, and cost of services provided.

Mandated benefits

insurance required by state or federal law.

Manufacturers Output Policies

provides broad form coverage of personal property of an insured manufacturer, including raw materials and produced goods.

Mechanical Breakdown Insurance

policies covering the repair or replacement costs, arising from the failure of property caused by defects in materials or workmanship. This may also cover normal wear and tear.

Medicaid

policies issued in association with the Federal/State entitlement program that pays for medical assistance for low-income individuals and families.

Medical Malpractice

coverage protecting a licensed healthcare provider or facility against liability resulting from the death or injury due to misconduct, negligence, or incompetence.

Medical Only

line of business that provides medical only benefits without hospital coverage.

Medicare

a state assistance program, passed under Title XVIII of the Social Security Amendments of 1965, to provide hospital and medical expense insurance to those over 65 years of age.

Medicare Advantage Plan

an HMO, PPO, or Private Fee-For-Service Plan that also utilizes the Medicare Advantage Prescription Drug Plan to include drug benefits.

Medicare Part D: Stand-Alone

a plan in which the reporting entity is responsible for reporting claims to the Centers for Medicare & Medicaid Services.

Medicare Supplement

Strictly supplemental coverage sold on an individual or group basis to help fill the “gaps” in the federal Medicare program.

Medigap

private health insurance products which supplement Medicare insurance benefits.

Mobile Homes–Homeowners

homeowners insurance sold to owners occupying a mobile home.

Mobile Homes under Transport

coverage for mobile homes while under transport.

Moral Hazard

characteristics that may increase the probability of losses.

Morbidity

the frequency or severity of disease or illness within a population.

Morbidity Risk

the potential for a person to experience illness, injury, or other impairment.

Multi-Peril Insurance

coverage combining several types of property insurance into one policy.

Municipal Bond Guarantee Insurance

coverage sold to municipalities to guarantee payment on bonds issued.

Municipal Liability

liability coverage for the acts of a municipality.

N

Named Insured

the insured individual defined as the insured in the policy contract.

Negligence

failure to take reasonable action which results in loss or damage.

Net Admitted Assets

total value of assets which are permitted in the annual statement of the insurer.

National Flood Insurance Program (NFIP)

flood insurance and floodplain management for personal and business property administered under the National Flood Act of 1968.

Nuclear Energy Liability

coverage for bodily injury and property damage resulting from the nuclear energy material (whether or not radioactive) on the insured firm’s premises or in transit.

O

Ocean Marine

coverage for ocean and inland water transportation, which can often include cargo, ships or hulls, and earnings.

P

Peril

the cause of property damage or personal injury.

Permanent Life Insurance

coverage which remains active for the life of the insured.

Personal Auto Policy

coverage designed to insure private passenger automobiles and certain types of trucks owned by an individual or married couple.

Personal Injury Liability

coverage for those who have suffered from discrimination, falsely arrested, illegally detained, libeled, maliciously prosecuted, slandered, or had their privacy rights violated.

Personal Injury Protection Coverage (PIP)

automobile coverage available in states which have no-fault laws regarding the treatment of injuries to the insured and their passengers.

Pet Insurance Plans

policy providing veterinary care for a pet animal in the event of its illness or injury.

Policy

a legally binding contract between the insurer and the policyholder which details the rights and responsibilities of both parties. The policy outlines important information about covered risks, premiums, and deductibles.

Policy Period

a set time during which insurance coverage is in effect.

Preferred Provider Organization (PPO)

health plans which often designate certain providers as “preferred.” The insurer will usually provide an incentive to encourage covered individuals to use these providers.

Preferred Risk

one who presents a likelihood of risk lower than that of the standard applicant.

Premium

Money charged for insurance coverage. This does not include other costs like copays or deductibles.

Property Insurance

coverage that takes precedence when more than one policy covers the same loss.

Producer

an insurance professional licensed by a State’s Insurance board to sell insurance.

Property Insurance

coverage which protects against the loss or damage to property from a variety of damages, such as lightning, tornado, windstorm, hail, water, explosion, riots, rain, or damage from aircraft or vehicles.

Q

Quote

An estimate of the cost of insurance, based on information supplied to the insurance company by the applicant.

R

Rebate

a refund of part or all of a premium payment.

Renters Insurance

coverage for the contents within a renter’s residence. This does not include the structure but does include any affixed items provided by the renter.

Rider

an add-on to a policy, which offers benefits above and beyond the policy subject to certain conditions.

Risk

the likelihood that an insured event may occur. In other words, an event in which the insurance company is likely to pay out a Claim.

S

Salvage

value recoverable after a loss.

Short-Term Disability

a company standard, defining a period of time employees that are eligible for short-term disability coverage.

Short-Term Medical

policies that provide major medical coverage for a short period of time.

Solicitor

a licensed employee of a fire and casualty agent or broker who may act for the agent or broker.

Sprinkler Insurance

coverage for property damage caused by the untimely discharge of an automatic sprinkler system.

T

Term

the period of time for which a policy is in effect. This is most commonly found in life insurance, where the Policy is only good for a specific length of time.

Term Insurance

life insurance payable only if the death of the insured occurs within a specified time.

Title Insurance

coverage for losses if a land title has defects that were unknown when the title insurance was written.

U

Underwriter

a professional who identifies, examines, and classifies the amount of risk represented by car, home, property, or individual to be insured.

Underwriting

the process by which an insurance company examines the risk of a car, home, or other property or individual to be insured. This process takes place when you submit your application and is done by an Underwriter from an insurance company.

V

Vision

provides benefits for eye care and related accessories. Generally, provides a stated dollar amount per annual eye examination, glasses, and contacts.

W

Warranty

coverage that protects against manufacturer’s defects past the normal warranty period.

Whole Life Insurance

a policy which may be kept in force for the duration of a person’s life and pays a benefit upon death.

Workers Compensation

insurance that covers an employer’s liability for injuries, disability, or death to persons in their employment, without regard to fault.

Written Premium

the contractually determined amount charged by the insurance company to the policyholder for the effective period of the contract.

Sources:

National Association of Insurance Commissioners (NAISC)

Texas Department of Insurance

California Department of Insurance

New York Department of Insurance