Below is a list of commonly used terms in the insurance world.  Familiarize yourself with them so you can better understand your policy.

 

Accidental Death Benefit - In a life insurance policy, benefit in addition to the death benefit paid to the beneficiary, should death occur due to an accident. There can be certain exclusions as well as time and age limits.

Actual Cash Value - Cost of replacing damaged or destroyed property with comparable new property, minus depreciation and obsolescence. For example, a 10-year-old tv will not be replaced at current full value because of a decade of depreciation.

Actuary - A specialist in the mathematics of insurance who calculates rates, reserves, dividends and other statistics.

Adjuster - A representative of the insurer who seeks to determine the extent of the insurer's liability for loss when a claim is submitted.

Agent -individual who sells and services insurance policies in either of two classifications:

1. Independent agent represents at least two insurance companies and (at least in theory) services clients by searching the market for the most advantageous price for the most coverage. The agent's commission is a percentage of each premium paid and includes a fee for servicing the insured's policy.
2. Captive agent represents only one company and sells only its policies. This agent is paid on a commission basis in much the same manner as the independent agent.

Annuitization - Process by which you convert part or all of the money in a qualified retirement plan or nonqualified annuity contract into a stream of regular income payments, either for your lifetime or the lifetimes of you and your joint annuitant. Once you choose to annuitize, the payment schedule and the amount is generally fixed and can't be altered.

Annuity - An agreement by an insurer to make periodic payments that continue during the survival of the annuitant(s) or for a specified period.

Attained Age - Insured's age at a particular time.

Automobile Liability Insurance - Coverage if an insured is legally liable for bodily injury or property damage caused by an automobile.

Broker - Insurance salesperson that searches the marketplace in the interest of clients, not insurance companies.

Casualty - Liability or loss resulting from an accident.

Claim - A demand made by the insured, or the insured's beneficiary, for payment of the benefits as provided by the policy.

Collision Insurance - Covers physical damage to the insured's automobile (other than that covered under comprehensive insurance) resulting from contact with another inanimate object.

Commercial Lines - Refers to insurance for businesses, professionals and commercial establishments.

Comprehensive Insurance - Auto insurance coverage providing protection in the event of physical damage (other than collision) or theft of the insured car.

Convertible - Term life insurance coverage that can be converted into permanent insurance regardless of an insured's physical condition and without a medical examination. The individual cannot be denied coverage or charged an additional premium for any health problems.

Death Benefit - (Face Amount) The limit of insurance or the amount of benefit that will be paid in the event of the death of a covered person.

Deductible - Amount of loss that the insured pays before the insurance kicks in.

Dividend - The return of part of the policy's premium for a policy issued on a participating basis by either a mutual or stock insurer. A portion of the surplus paid to the stockholders of a corporation.

Exclusions - Items or conditions that are not covered by the general insurance contract.

Exposure - Measure of vulnerability to loss, usually expressed in dollars or units.

Expanded Replacement Cost - This option extends replacement cost loss settlement to personal property and to outdoor antennas, carpeting, domestic appliances, cloth awnings, and outdoor equipment, subject to limitations on certain kinds of personal property; includes inflation protection coverage.

Floater - A separate policy available to cover the value of goods beyond the coverage of a standard renters insurance policy including movable property such as jewelry or sports equipment.

Grace Period - The length of time after a premium is due and unpaid during which the policy, including all riders, remains in force.

Guaranteed Issue Right - The right to purchase insurance without physical examination; the present and past physical condition of the applicant are not considered.

Guaranteed Renewable - A policy provision in many products which guarantees the policyowner the right to renew coverage at every policy anniversary date.

Guaranty Association - An organization of life insurance companies within a state responsible for covering the financial obligations of a member company that becomes financially insolvent.

Hazard - A circumstance that increases the likelihood or probable severity of a loss.

Indemnity - Restoration to the victim of a loss by payment, repair or replacement.

Inflation Protection - An optional property coverage endorsement offered by some insurers that increases the policy's limits of insurance during the policy term to keep pace with inflation.

Insurable Interest - Interest in property such that loss or destruction of the property could cause a financial loss.

Liability - Broadly, any legally enforceable obligation. The term is most commonly used in a pecuniary sense.

Living Benefits - This feature allows you, under certain circumstances, to receive the proceeds of your life insurance policy before you die.

Mortgage Insurance Policy - In life and health insurance, a policy covering a mortgagor with benefits intended to pay off the balance due on a mortgage upon the insured's death, or to meet the payments due on a mortgage in case of the insured's death or disability.

Mutual Insurance Companies - Companies with no capital stock, and owned by policyholders.

Named Perils - Perils specifically covered on insured property.

National Association of Insurance Commissioners (NAIC) - Association of state insurance commissioners whose purpose is to promote uniformity of insurance regulation, monitor insurance solvency and develop model laws for passage by state legislatures.

Noncancellable - Contract terms, including costs that can never be changed.

Paid-Up Additional Insurance - An option that allows the policyholder to use policy dividends and/or additional premiums to buy additional insurance on the same plan as the basic policy and at a face amount determined by the insured's attained age.

Peril - The cause of a possible loss.

Personal Injury Protection - Pays basic expenses for an insured and his or her family in states with no-fault auto insurance.

Personal Lines - Insurance for individuals and families, such as private-passenger auto and homeowners insurance.

Policy - The written contract effecting insurance, or the certificate thereof, by whatever name called, and including all clause, riders, endorsements, and papers attached thereto and made a part thereof.

Policyholder Dividend Ratio - The ratio of dividends to policyholders related to net premiums earned.

Preferred Auto - Auto coverage for drivers who have never had an accident and operates vehicles according to law.

Premium - The price of insurance protection for a specified risk for a specified period of time.

Renewal - The automatic re-establishment of in-force status effected by the payment of another premium.

Replacement Cost - The dollar amount needed to replace damaged personal property or dwelling property without deducting for depreciation but limited by the maximum dollar amount shown on the declarations page of the policy.

Solvency - Having sufficient assets--capital, surplus, reserves--and being able to satisfy financial requirements.

Subrogation - The right of an insurer who has taken over another's loss also to take over the other person's right to pursue remedies against a third party.

Surrender Period - A set amount of time during which you have to keep the majority of your money in an annuity contract.

Term Life Insurance - Life insurance that provides protection for a specified period of time.

Tort - A private wrong, independent of contract and committed against an individual, which gives rise to a legal liability and is adjudicated in a civil court.

Total Loss - A loss of sufficient size that it can be said no value is left.

Umbrella Policy - Coverage for losses above the limit of an underlying policy or policies such as homeowners and auto insurance.

Underwriter - The individual trained in evaluating risks and determining rates and coverages for them. Also, an insurer.

Underwriting - The process of selecting risks for insurance and classifying them according to their degrees of insurability so that the appropriate rates may be assigned.

Uninsured Motorist Coverage - Endorsement to a personal automobile policy that covers an insured collision with a driver who does not have liability insurance.  Some states only cover bodily injury for this coverage.

Universal Life Insurance - A combination flexible premium, adjustable life insurance policy.

Variable Annuitization - The act of converting a variable annuity from the accumulation phase to the payout phase.

Variable Life Insurance - A form of life insurance whose face value fluctuates depending upon the value of the dollar, securities or other equity products supporting the policy at the time payment is due.

Variable Universal Life Insurance - A combination of the features of variable life insurance and universal life insurance under the same contract.

Waiver of Premium - A provision in some insurance contracts which enables an insurance company to waive the collection of premiums while keeping the policy in force if the policyholder becomes unable to work because of an accident or injury.

Whole Life Insurance - Life insurance which might be kept in force for a person's whole life and which pays a benefit upon the person's death, whenever that might be.