Understanding Insurance Just Got Easier
Insurance Glossary
Confused by the terms in your policy? Our glossary breaks down common life and health insurance terminology so you can make informed decisions with confidence.
A type of insurance policy that pays benefits to the beneficiary if the insured dies or suffers dismemberment (loss of limb, sight, etc.) due to an accident.
The person or entity designated to receive the death benefit from a life insurance policy or the proceeds of a financial account.
The person or organization that receives proof of insurance coverage but is not the insured.
The amount a policyholder must pay out-of-pocket before the insurance company begins to pay for covered services.
A federal law that sets minimum standards for most voluntary retirement and health plans in private industry to protect individuals in these plans.
The stated dollar amount of insurance coverage provided by a life insurance policy, paid to the beneficiary upon the insured’s death.
Insurance that provides coverage for bodily injury, property damage, and personal injury claims made against a business.
A type of health insurance plan that requires members to use a network of doctors and get referrals from a primary care physician for specialist services.
A financial arrangement in which individuals or entities pay premiums in exchange for protection against specified risks or losses.
A life insurance policy a business takes out on a critical employee whose loss would significantly affect operations. The business is the beneficiary.
The termination of an insurance policy due to non-payment of premiums.
Also known as Medigap, this insurance policy helps cover healthcare costs not covered by Medicare Parts A and B, such as deductibles and copayments.
Expenses for medical care that aren’t reimbursed by insurance, including deductibles, copayments, and coinsurance.
A specific risk or cause of loss covered by an insurance policy, such as fire, theft, or windstorm.
The process of restoring a lapsed insurance policy after it has been canceled due to non-payment, usually within a specified timeframe and with certain conditions.
An additional charge added to a premium, often due to increased risk factors like traffic violations or claims history.
A pricing method used when underwriting life or health insurance for individuals considered higher risk, resulting in higher premiums.
The process used by insurers to evaluate the risk of insuring a person or entity and determine appropriate premiums and coverage.
The time between the start of a policy or plan and when coverage begins or a benefit becomes payable.
A
Accidental Death & Dismemberment (AD&D)
A type of insurance policy that pays benefits to the beneficiary if the insured dies or suffers dismemberment (loss of
Accumulated Value
The savings component of a permanent life insurance policy that grows over time on a tax-deferred basis and can be
B
Beneficiary
The person or entity designated to receive the death benefit from a life insurance policy or the proceeds of a
Binder
A temporary insurance contract that provides proof of coverage until a formal policy is issued.
Broker
A licensed insurance professional who represents the insured and helps them find and purchase insurance coverage from multiple insurers.
Business Owner Policy (BOP)
A packaged policy that combines general liability and property insurance specifically for small to mid-sized businesses.
c
Certificate Holder
The person or organization that receives proof of insurance coverage but is not the insured.
Claim
A formal request by a policyholder to an insurance company for payment or services covered under the policy.
Claimant
The person or entity making an insurance claim, whether the policyholder or a third party.
Class of Business
A category used by insurers to group similar businesses for underwriting and rating purposes.
Class Rating
An underwriting method where insurance rates are determined based on groups of similar risks, rather than individually.
Commercial Property Insurance
Insurance that covers a business’s physical assets such as buildings, inventory, and equipment against risks like fire, theft, and natural
d
Deductible
The amount a policyholder must pay out-of-pocket before the insurance company begins to pay for covered services.
Dividend
A portion of an insurance company’s profits returned to policyholders, typically in participating whole life insurance policies.
E
Exclusive Provider Organization (EPO)
A type of health insurance plan that covers services only if you use doctors, specialists, or hospitals in the plan’s
Employee Retirement Income Security Act (ERISA)
A federal law that sets minimum standards for most voluntary retirement and health plans in private industry to protect individuals
Errors & Omissions Insurance (E&O)
A form of professional liability insurance that protects businesses and professionals against claims of inadequate work or negligent actions.
Exclusion
Specific conditions or circumstances that are not covered by an insurance policy.
Endorsement
A written modification to an insurance policy that alters its terms or coverage, also known as a rider or amendment.
f
Face Amount
The stated dollar amount of insurance coverage provided by a life insurance policy, paid to the beneficiary upon the insured’s
Fidelity Bond
A type of insurance that protects a business from losses caused by fraudulent or dishonest acts by its employees.
Final Expense Insurance
A type of life insurance policy designed to cover funeral costs and other end-of-life expenses.
g
General Liability
Insurance that provides coverage for bodily injury, property damage, and personal injury claims made against a business.
Grace Period
The time after a premium payment is due during which a policy remains in force without penalty or lapse in
Guaranteed Insurability
A life or health insurance policy feature that allows the insured to purchase additional coverage in the future without undergoing
h
Health Maintenance Organization (HMO)
A type of health insurance plan that requires members to use a network of doctors and get referrals from a
I
Insurance
A financial arrangement in which individuals or entities pay premiums in exchange for protection against specified risks or losses.
Insured
The person or entity covered by an insurance policy.
Insurer
The insurance company that underwrites and issues the policy, assuming the risk in exchange for premium payments.
Irrevocable Trust
A trust that cannot be changed or terminated without the permission of the beneficiary; often used in estate planning and
K
Key-Person Insurance
A life insurance policy a business takes out on a critical employee whose loss would significantly affect operations. The business
L
Lapse
The termination of an insurance policy due to non-payment of premiums.
Liability
Legal responsibility for injury or damage to another person or their property. Liability insurance helps cover associated costs.
Loan Value
The amount of money a policyholder can borrow against the cash value of a permanent life insurance policy.
Long-term Care
Services that help individuals with chronic illnesses or disabilities perform everyday activities, often not covered by regular health insurance.
Loss
The amount of financial damage or injury suffered by the insured that may be covered under an insurance policy.
M
Medicare Supplement
Also known as Medigap, this insurance policy helps cover healthcare costs not covered by Medicare Parts A and B, such
Medigap
See “Medicare Supplement.” A private health insurance plan designed to cover “gaps” in original Medicare coverage.
Modified Endowment Contract (MEC)
A life insurance policy that fails the IRS 7-pay test, causing it to be taxed more like an investment than
O
Out of Pocket
Expenses for medical care that aren’t reimbursed by insurance, including deductibles, copayments, and coinsurance.
P
Peril
A specific risk or cause of loss covered by an insurance policy, such as fire, theft, or windstorm.
Point of Service (POS)
A type of health insurance plan that combines features of HMO and PPO plans. It requires referrals for specialists but
Policy
A formal written contract between the insurer and the insured outlining coverage terms, conditions, and exclusions.
Preferred Provider Organization (PPO)
A health insurance plan that offers more flexibility in choosing doctors and specialists. It allows both in- and out-of-network care
Premium
The amount paid by the policyholder to the insurance company in exchange for coverage.
Producer
A licensed individual or entity (agent or broker) who sells and services insurance policies.
R
Reinstatement
The process of restoring a lapsed insurance policy after it has been canceled due to non-payment, usually within a specified
Rider
An optional add-on to an insurance policy that modifies or adds benefits or coverage.
S
T
Table Rating
A pricing method used when underwriting life or health insurance for individuals considered higher risk, resulting in higher premiums.
Tenants
Individuals who rent or lease residential or commercial property and may be covered under renters insurance for personal belongings and
Term Life Insurance
Life insurance that provides coverage for a specific period (term), such as 10, 20, or 30 years. It pays a
U
Underwriting
The process used by insurers to evaluate the risk of insuring a person or entity and determine appropriate premiums and
Universal Life Insurance
A type of permanent life insurance that includes flexible premiums and death benefits, as well as a cash value component
V
W
Waiting Period
The time between the start of a policy or plan and when coverage begins or a benefit becomes payable.
Whole Life Insurance
A type of permanent life insurance that offers lifetime coverage, fixed premiums, and builds guaranteed cash value over time.