31 Insurance Terms You Need To Know

Have you ever reviewed an agreement, policy, or other insurance document and thought, “What in the world does THAT mean?” If so, you’re not alone. Understanding insurance terminology can be overwhelming at times, so we’ve compiled a list of some of the most common insurance-related words and phrases, defined in simple terms.

1. Accident Only (AD&D)
Accident Only policies, also known as AD&D policies, cover death, disability, dismemberment, or medical care as a result of a specified accident.

2. Actual Cash Value
Actual Cash Value is the replacement value (including depreciation) for lost or damaged property.

3. Actuary
An actuary is a professional who analyzes risk and risk management. The probability of risk is calculated to help determine premiums, dividends, and other insurance industry standards.

4. Adjuster
Adjusters investigate claims and develop settlement options based on damage estimates and policy coverage.

5. Aggregate
Aggregate Limit is the maximum total value of coverage payable for loss(es) during a policy period.

6. Asset
Assets are things with economic value that contribute to future net cash inflows.

7. Beneficiary
A beneficiary is an individual who receives payment from a will, life insurance policy, retirement plan, annuity, trust, or other contract.

8. Blanket Coverage
A type of liability coverage, blanket coverage covers multiple persons or properties under one policy.

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9. Broker
Brokers are professionals who make commission on selling insurance policies. They work on behalf of the customer and are not restricted to selling policies for a specific company.

10. Cash Equivalent
Cash equivalents are low-return, short-term, low-risk, highly liquid investments. For example, U.S. government Treasury bills, bank certificates of deposit, bankers’ acceptances, corporate commercial paper, and other money market instruments are cash equivalents.

11. Claim
A claim is the official request to the insurance company for payment due to any loss covered under the policy agreement.

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12. Contingent Liability
Contingent liability is potential liability that may or may not occur depending on the outcome of future events. For example, if you guarantee your son’s car loan, you have contingent liability. If he fails to make his payments, you have no liability. However, if he makes all payments and successfully pays off the loan, you are not liable.

13. Coinsurance
Coinsurance is the percentage of healthcare costs the policyholder is responsible for AFTER the deductible has been met.

14. Copay
A copay is the fixed amount the policyholder is required to pay for routine healthcare services until the deductible is reached. For example, if a visit to your primary care physician costs $100, but you copay is set at $20, you will pay $20 and your insurance company will pay $80.

15. Declaration
Also known as the information page, the declaration is a page at the beginning of a policy that specifies key policy information such as the name and address of the insured, policy terms and limits, and more.

16. Deductible
Your deductible refers to the amount you are required to pay on a claim before the insurance company will cover the rest. Health insurance policy deductibles apply per term. Auto insurance policy deductibles generally apply per claim.

17. Dividend
Dividends are portions of an insurance company’s profits paid to holders of applicable policies. You most often see dividend options on whole-life policies.

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18. Fair Value
The fair value of an asset is the quoted market price at which it could be bought or sold.

19. Fixed Annuity
A fixed annuity allows for the accumulation of capital on a tax-deferred basis. In exchange for a lump sum of money, a life insurance company guarantees the principal investment, at a fixed interest rate, to be paid back to the investor in even amounts over a set time period or for the remainder of the investors life after a certain point. Many retirees use fixed annuities to guarantee a steady source of income.

20. Health Maintenance Organization (HMO)
The Health Maintenance Organization is a medical group plan that provides physician, hospital, and clinical services to members for a flat fee.

21. Medicare
Medicare is a state program that provides hospital and medical insurance to people over 65 years old.

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22. Medigap
Medigap refers to supplementary private health insurance products that help with costs that Medicare does not cover.

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23. Net Income
To calculate net income, subtract all expenses from gross income.

24. Occurrence
In insurance terms, “occurrence” refers to an accident during the policy period that results in bodily injury or property damage to the insured.

25. Out-Of-Pocket Maximum
Your out-of-pocket-maximum is the absolute max amount of healthcare costs you (the policyholder) can incur in a calendar year. The out-of-pocket max limits the amount you’ll have to pay per term, including co-payments, deductibles, and co-insurance. Once you hit your term max, your insurer is responsible for the full cost of all future healthcare claims for that term.

26. Policy
Your insurance policy is the document that details your insurance agreement.

27. Premium
Your premium is the price you pay an insurance company for policy coverage.

28. Title Insurance
Title insurance guarantees the validity of a personal property title.

29. Total Revenue
Total revenue is the sum of all income before expenses are subtracted.

30. Variable Annuity
Unlike fixed annuities, in a variable annuity contract, the initial payment to the insurance company is invested in various stocks and bonds. Therefore, variable annuity payout amounts are not guaranteed because they depend on the success of the investment.

31. Workers’ Compensation
Workers’ comp is a type of insurance that covers an employer’s liability for employee injuries or deaths that occur on-the-job.

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If you have questions about insurance terminology or need further explanation of your plan and coverage, contact McInturff, Milligan & Brooks via the form below or at (423) 639-5171.

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