Glossary
Plain-language definitions of insurance terms.
- Actual Cash Value
- What your damaged property was worth at the time of the loss — the replacement cost minus depreciation for age and wear.
- Adjuster
- The person — often employed by the insurer, sometimes independent — who investigates a claim, estimates the loss, and recommends what the insurer should pay.
- Annuity
- A contract with an insurer in which you pay a lump sum or series of payments in exchange for income later, often in retirement. Types and terms vary widely.
- Beneficiary
- The person or entity named in a life-insurance policy to receive the payout when the insured dies.
- Binder
- A short-term document confirming that coverage is in force while the formal policy is being issued.
- Bodily Injury Liability
- The portion of an auto liability policy that pays for injuries you cause to other people in an accident, up to the policy limits.
- Business Interruption Insurance
- Coverage that replaces lost income and helps pay ongoing expenses when a covered event forces a business to pause operations.
- Business Owners Policy (BOP)
- A package that bundles general liability and commercial property coverage, and often business interruption, for small to mid-sized businesses at a lower cost th...
- Cash Surrender Value
- The amount a permanent life policyholder receives if they cancel the policy, equal to the cash value minus any surrender charges and outstanding loans.
- Cash Value
- The savings component of certain life-insurance policies (whole, universal) that grows over time and can sometimes be borrowed against.
- Certificate of Insurance (COI)
- A one-page document that proves a business carries certain insurance, listing coverages, limits, and dates. Clients and landlords often request one before doing...
- Claim
- A formal request to your insurer for payment under a policy after a covered loss.
- COBRA
- A federal law that lets many employees keep their employer health coverage for a limited time after leaving a job, usually by paying the full premium themselves...
- Coinsurance
- The percentage of a covered cost you pay after meeting your deductible — common in health policies (e.g., "insurer pays 80%, you pay 20%").
- Collision Coverage
- Auto coverage that pays for damage to your own vehicle from a collision with another vehicle or object.
- Commercial Auto Insurance
- Coverage for vehicles a business owns or uses for work. Personal auto policies usually exclude business use, so a separate policy is often needed.
- Comprehensive Coverage
- Auto coverage for non-collision damage to your vehicle: theft, vandalism, hail, fire, hitting an animal, etc.
- Contestability Period
- A window, usually the first two years of a life policy, during which the insurer can investigate and deny a claim for material misstatements made on the applica...
- Coordination of Benefits
- The rules that decide which plan pays first when you are covered by more than one policy, so the total paid does not exceed the actual cost of the loss.
- Copay
- A fixed dollar amount you pay for a covered service — common in health insurance ("$30 office visit").
- Cyber Liability Insurance
- Coverage that helps a business respond to data breaches and cyberattacks, including notification costs, legal expenses, and sometimes ransom and recovery.
- Death Benefit
- The amount an insurer pays to the beneficiaries when the insured person dies, as stated in the policy.
- Declarations Page
- The summary at the front of an insurance policy listing the named insured, coverages, limits, deductibles, premium, and policy period. Read this first.
- Deductible
- The amount you pay out of pocket on a covered claim before your insurance starts paying.
- Diminished Value
- The loss in resale value a vehicle may suffer after being repaired from an accident. Whether you can recover it from an insurer depends on the claim and your st...
- Dwelling Coverage
- The part of a homeowners policy that pays to repair or rebuild the physical structure of your home from a covered loss.
- Endorsement
- A written change to an insurance policy — adding, removing, or modifying coverage. Sometimes called a "rider".
- EPO
- An Exclusive Provider Organization covers only in-network providers except in emergencies but, unlike an HMO, usually does not require referrals to see speciali...
- Exclusion
- A specific loss, peril, or condition the policy does not cover. Always read the exclusions section before assuming you are covered.
- Explanation of Benefits (EOB)
- A statement from your health insurer showing what a provider billed, what the plan paid, and what you may owe. It is not a bill.
- Final Expense Insurance
- A small whole-life policy designed to cover funeral and burial costs. It is easier to qualify for but costs more per dollar of coverage than larger policies.
- Flexible Spending Account (FSA)
- An employer-offered account that lets you set aside pre-tax dollars for eligible health costs. Funds are generally use-it-or-lose-it within the plan year, with...
- Flood Insurance
- Separate coverage for flood damage, which standard homeowners and renters policies exclude. It is available through the National Flood Insurance Program and som...
- Formulary
- The list of prescription drugs a health plan covers, often organized into tiers that determine your share of the cost.
- Free Look Period
- A short window after buying a life insurance policy during which you can cancel it for a full refund. The length is set by state law.
- Full Coverage
- An informal term, not an actual policy type, that usually means liability plus collision and comprehensive coverage. Exactly what it includes varies, so confirm...
- Gap Insurance
- Optional auto coverage that pays the difference between what you owe on a loan or lease and the vehicle's actual cash value if the car is totaled or stolen.
- General Liability Insurance
- Coverage that pays for third-party bodily injury and property damage claims arising from your business operations, such as a customer injured at your premises.
- Grace Period
- A short window after a missed premium payment during which the policy stays in force. The length varies by policy type and state.
- Health Reimbursement Arrangement (HRA)
- An employer-funded arrangement that reimburses employees for qualified medical expenses. Only the employer contributes, and the rules vary by the type of HRA.
- Health Savings Account (HSA)
- A tax-advantaged savings account for qualified medical expenses, available only if you are enrolled in a qualified high-deductible health plan. Unused funds rol...
- HMO
- A Health Maintenance Organization is a health plan that generally limits coverage to providers in its network and asks you to choose a primary care physician wh...
- HO-3 Policy
- The most common homeowners policy form. It covers the structure against most causes of loss except those specifically excluded, and personal property on a named...
- HO-6 Policy
- A homeowners policy form for condo owners, covering personal property, liability, and the interior portions of the unit that the condo association's master poli...
- Indemnity
- The principle that insurance is meant to restore you to your pre-loss financial position — not to leave you better off.
- Indexed Universal Life (IUL)
- A form of universal life insurance whose cash-value growth is tied to a market index, with caps and floors that limit both gains and losses.
- Landlord Insurance
- Coverage for a property you rent out to others, typically including the dwelling, liability, and lost rental income. It does not cover a tenant's belongings.
- Lapse
- The end of insurance coverage because a premium was not paid within the grace period. Reinstating a lapsed policy may require a new application or a higher prem...
- Liability Coverage
- Coverage for harm you cause to others. The auto, homeowners, and umbrella policies all have liability components, with different scopes.
- Loss
- Damage, injury, or other event covered by an insurance policy that triggers a claim payment.
- Loss of Use Coverage
- Homeowners or renters coverage that pays the extra cost of living elsewhere, such as hotel and meals, while your home is uninhabitable after a covered loss.
- Medicaid
- A joint federal and state program that provides health coverage to eligible low-income individuals and families. Eligibility rules and covered benefits vary by...
- Medical Payments Coverage (MedPay)
- Optional auto coverage that pays medical bills for you and your passengers after an accident regardless of fault, usually in smaller limits than PIP.
- Medicare Advantage
- A Medicare-approved plan offered by private insurers that bundles Part A and Part B coverage, often with extra benefits. Networks and out-of-pocket costs vary b...
- Medigap
- Private insurance, also called Medicare Supplement, that helps pay costs Original Medicare does not cover, such as certain copayments, coinsurance, and deductib...
- Named Insured
- The person or entity listed by name on the declarations page — usually with broader coverage than household members or other drivers.
- No-Fault Insurance
- A system used in some states where your own insurer pays your injury costs after an accident regardless of who caused it, which can limit when you may sue the o...
- Non-Owner Car Insurance
- A liability policy for people who drive but do not own a car, providing coverage when they borrow or rent vehicles.
- Ordinance or Law Coverage
- Coverage that helps pay the added cost of rebuilding to current building codes after a covered loss, which a standard policy may not fully cover.
- Out-of-Pocket Maximum
- The most you have to pay for covered services in a plan year. After you reach it, the plan pays 100% of covered in-network costs for the rest of the year.
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