Insurance Terms –
A Dictionary To Make Shopping For Insurance
Insurance Rates Online is happy to provide this dictionary
of common insurance terms for general information only. If you
have any questions concerning the specific meaning of this
terminology in your policy, please contact your insurance
company or insurance agent.
Act of God – Incidents resulting from
natural causes, such as floods, earthquakes, lightning, etc,
which could not be controlled or prevented.
Actual Cash Value – The current fair market
value of an item, which equals the replacement cost less
depreciation, unless otherwise specifically defined in an
Additional Equipment Endorsement – Covers
specified parts and equipment not installed by the
Adjuster – An insurance company employee
who determines compensation for damage caused by an accident or
other covered loss.
Agent – Individual or organization licensed
and approved by the state to sell and service insurance
Agreed Value – The value of an item as
agreed upon by you and the insurance company at the time the
policy is written.
Assigned Risk – A pool of drivers with poor
driving records who are assigned to insurance companies
participating in the assigned risk pool. Some states require
insurance companies to accept a share of high-risk drivers in
order to sell insurance in that state.
Assignment of Benefits – A signed
authorization to your medical provider assigning payment to be
made directly to them for your medical treatment.
Binder – Written notification from your
insurance agent that coverage is in force, protecting you until
the actual policy is written.
Bodily Injury Liability (BI) – Your
liability to others for injuries to them, including medical,
death and hospital expenses. Normally shown as Per Person/Per
Accident, the minimum is usually $15,000/$30,000, but it can
increase up to $250,000/$500,000 or higher if necessary.
Cancellation – Termination of an insurance
policy prior to its normal expiration date.
Certificate of Coverage – A document issued
to a member of a group health insurance plan showing evidence
of participation in the insurance program.
Certificate of Creditable Coverage – A
document from your prior insurance company or health plan
documenting the length of time you were covered.
Claim – Notice to an insurance company that
payment is due under policy provisions.
CLUE – A Comprehensive Loss Underwriting
Exchange report which offers the claim history of an existing
COBRA – Consolidated Omnibus Budget
Reconciliation Act is a federal law which extends your current
group health insurance if your work status changes through a
qualifying event, such as termination or reduction of hours to
part time status. The normal extension period is 18 months.
Collision Coverage – Covers damage to your
vehicle caused by collision with another vehicle or any other
object, regardless of fault, based on the fair market value of
the vehicle. Collision coverage does not cover bodily injury or
property damage liability.
Combined Single Limit Auto Policy – Uses a
single limit amount for bodily injury liability coverage and
property damage liability coverage, which is usually the total
amount of the bodily injury per occurrence amount and property
damage coverages. The policy will pay up to the single limit
for either type (bodily injury or property damage) of
Comprehensive Coverage – Covers damage to
your car caused by something other than collision, such as
fire, theft, windstorm, flood, vandalism, etc. It is based on
the fair market value of the vehicle.
Co-pay – Usually associated with health
insurance, the amount that is paid by the consumer at the time
of usual medical services, such as doctor’s appointments.
Amounts paid as co-pays do not counted toward deductible
Coverage A – Home insurance which covers
your house and anything installed in it, such as plumbing
fixtures, carpeting, fireplaces, etc.
Coverage B – Homeowners insurance covering
other structures on your property that is separated from your
primary dwelling, such as sheds, garages, or hot tubs.
Coverage C – A type of home insurance
coverage which protects your personal property anywhere in the
Coverage D – As part of a home insurance
policy, this covers living expenses if you cannot live in your
home due to damage from a covered loss.
Declarations Page (DEC) – The first page of
an insurance policy which contains the full legal name of the
insurance company, effective date and expiration date of the
policy, premium amount, deductibles, and the amount and types
Deductible – A specified amount which must
be paid up front by the insured person before covered benefits
are payable from the insurance company. Deductibles are
included in auto insurance (comprehensive and collision),
health insurance, home insurance, and motorcycle insurance.
Endorsements/Riders – A written agreement
that adds or subtracts special coverages into your policy, such
as special equipment added to a vehicle (auto insurance), or
specific personal property (homeowners insurance).
Exclusion – A provision within an insurance
policy that denies or restricts coverage for certain persons,
property, locations, or perils.
Forced Insurance – Comprehensive and
collision coverage insurance purchased by the lien holder on
your vehicle (whoever you have the loan from) if you fail to do
so. It is very expensive and the cost will be added to your
Grace Period – The brief period of time
after your policy premium due date during which the coverage is
still in force.
Guaranteed Issue – If you lose your
coverage from an employer sponsored group health plan, you are
guaranteed the right to purchase individual health insurance
coverage, even with a preexisting health condition, as a result
Health Maintenance Organization (HMO) –
Plan members are required to obtain health care services from
providers affiliated within the HMO. Care is directed by a
primary care physician. Usually services from non-affiliated
providers will not be covered. Frequently a small co-pay is
required. Geographic limitations to service may also be
incorporated in this policy.
HIPPA – Health Insurance Portability and
Accountability Act requires that if you have recently lost your
employer sponsored group health plan, you are ensured the right
to purchase individual health insurance coverage even with a
preexisting health condition. This is a called “guaranteed
issue.” HIPPA requirements begin after COBRA has been
HSA – Health Savings Account
Inflation Guard – Provision in homeowners
insurance which automatically increases dwelling insurance to
help prevent your home from being underinsured.
Indemnity Policy – A traditional
“fee-for-service” policy with almost unlimited choices in
medical services providers. After meeting a specified
deductible, charges are reimbursed at a specified
Individual Health Insurance Policy – A
policy which covers a single individual or specified related
individuals, such as a spouses, a parent and children, etc, and
is not part of a group health plan.
Insurance Policy – A written agreement
between a consumer and an insurance company for specified
coverage for a specific time period
Insured – The policyholder entitled to
receive covered benefits in case of loss or accident.
Insurer – The insurance company who issues
the insurance policy.
Liability Insurance – Coverage for legal
liability resulting from bodily injuries to other individuals
or damage to their property.
Limit of Liability – The maximum amount
you’ll have to pay in the event of a loss.
Limits – The maximum amount of benefits
payable by the insurance company in the event of a loss.
Loss Settlement – The amount you’ll receive
in case of irreparable damage or stolen property which was not
Medical Payments – Pays for medical and
covered expenses following an accident without regard for
liability, up to a policy specified limit.
Medical Payments Insurance – Pays for
reasonable expenses for individuals (outside the immediate
family) who are accidentally injured on your premises or areas
adjoining your property, such as sidewalks or alleys. Coverage
is not in force if you were operating a business out of the
home, because the property was a rental, or due to acts
intended to hurt another person.
Non-Renewal – Termination of an insurance
policy at its normal expiration date.
Peril – Events that cause damage to
property, such as fire, windstorm or theft.
Personal Lines – Insurance for individuals
and families, such as automobile and home insurance
Physical Damage Coverage – A component of
motorcycle insurance which includes comprehensive, collision,
and custom parts & accessories coverage.
Policy – A contract that defines the rights
and duties of the insurance company and the insured.
POS (Point Of Service) – Health care plan
featuring lower medical costs in exchange for more limited
Pre-Existing Condition – Medical condition
which existed prior to the start of coverage by a new insurance
company. If you have been previously insured without a break in
coverage of more than 62 days, your new insurance company must
Preferred Provider Organization (PPO) –
This type of plan provides a list of “preferred” providers from
which to choose. Highest monetary benefit is available when
using health care providers on the list. When an
“out-of-network” provider is used, a smaller percentage of
expenses or no expenses at all may be covered.
Premium – The amount paid to an insurance
company for specific coverage through an insurance policy.
Property Damage Liability (PD) – Your
liability for damage to someone else’s property including
Property Insurance – Home insurance
coverage for your personal or actual property.
Quotation – An estimate of the cost of
insurance based on information provided to the agent, broker or
Recision – Cancellation of a policy back to
its effective date, with return of all charged premiums.
Rental Reimbursement – If you lose the use
of your car due to accident or damage, this coverage will
provide a daily allowance for use towards a rental car. Usually
the daily limit and number of days are specified in the policy
Replacement Cost – The actual cost to
replace lost or damaged property with new property of like kind
or quality in the local market.
Salvage – Property so damaged that it is
legally signed over to the insurance company as part of the
loss settlement. Insurance companies frequently sell salvaged
property to reduce the amount of their loss.
Stated Amount – A value amount you select
on an item at the time a policy is purchased. If the item is
irreparably damaged or stolen and not recovered, the insurance
company will pay either the stated amount or the value as
determined by a third party, whichever is less. The deductible
also applies to the settlement amount.
Surcharge – An extra charge applied to the
premium, usually after an at-fault accident or moving
Towing & Labor – Optional coverage for
reasonable and necessary towing and labor, usually subject to
policy terms, usually only a few dollars extra.
Umbrella Policy – Broad liability
protection over and above your auto or homeowner policies
Underwriting – The process by the insurance
company of assessing the risk associated with the applicant,
based on other applicants with similar risk, to decide whether
insurance coverage will be offered, usually based on 3-5 years
of prior history.
Uninsured Motorist Property Damage (UMPD) –
Pays for property damage to your car following a collision with
an identified uninsured driver. Check with your insurance
company to see if this amount is limited.
Uninsured/Underinsured Motorist – Provides
liability insurance when the party at fault does not have the
state required minimum liability coverage, or the minimum
liability coverage is insufficient to cover the injuries
sustained in the accident.
Uninsured/Underinsured Motorist Bodily
Injury – Covers medical or death expenses when
involved in a collision with a driver who does not have any or
sufficient liability coverage to pay for damages. Check with
your insurance company to determine if the amount is
VIN – Vehicle Identification Number; each
motor vehicle has a unique VIN number