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Glossary
Plain-language definitions of insurance terms.
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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.
Life
Beneficiary
The person or entity named in a life-insurance policy to receive the payout when the insured dies.
Life
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.
Auto
Business Interruption Insurance
Coverage that replaces lost income and helps pay ongoing expenses when a covered event forces a business to pause operations.
Business
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...
Business
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.
Life
Cash Value
The savings component of certain life-insurance policies (whole, universal) that grows over time and can sometimes be borrowed against.
Life
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...
Business
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...
Health
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%").
Health
Collision Coverage
Auto coverage that pays for damage to your own vehicle from a collision with another vehicle or object.
Auto
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.
Business
Comprehensive Coverage
Auto coverage for non-collision damage to your vehicle: theft, vandalism, hail, fire, hitting an animal, etc.
Auto
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...
Life
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").
Health
Cyber Liability Insurance
Coverage that helps a business respond to data breaches and cyberattacks, including notification costs, legal expenses, and sometimes ransom and recovery.
Business
Death Benefit
The amount an insurer pays to the beneficiaries when the insured person dies, as stated in the policy.
Life
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...
Auto
Dwelling Coverage
The part of a homeowners policy that pays to repair or rebuild the physical structure of your home from a covered loss.
Home
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...
Health
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.
Health
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.
Life
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...
Health
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...
Home
Formulary
The list of prescription drugs a health plan covers, often organized into tiers that determine your share of the cost.
Health
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.
Life
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...
Auto
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.
Auto
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.
Business
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
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...
Health
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...
Health
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...
Home
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...
Home
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.
Life
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.
Home
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.
Home
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...
Health
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.
Auto
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...
Health
Medigap
Private insurance, also called Medicare Supplement, that helps pay costs Original Medicare does not cover, such as certain copayments, coinsurance, and deductib...
Health
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...
Auto
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.
Auto
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.
Home
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.
Health