Glossary of Insurance terms

By Sharina Avila

1. Actuary: A professional who analyzes the financial consequences of risk

and uncertainty.

2. Adjudication: The process by which an insurance company determines

whether a claim is payable.

3. Aggregate Limit: The maximum amount an insurer will pay for all covered

losses during a policy period.

4. ALE (Additional Living Expenses): Expenses that a policyholder incurs

while their home is being repaired or rebuilt after a covered loss.

5. Amortization: The gradual reduction of a debt over a given period.

6. Annuitant: A person who receives benefits from an annuity.

7. Arbitration: A method of resolving disputes outside the courts, where an

impartial third party makes a decision.

8. Beneficiary: The person designated to receive benefits from an insurance

policy or annuity.

9. Binder: A temporary insurance contract providing coverage until the

permanent policy is issued.

10. Captive Agent: An insurance agent who only sells policies from one

insurance company.
11. Coinsurance: A provision in which the policyholder and the insurer share

costs, typically as a percentage.

12. Comprehensive Coverage: Insurance that covers damages to your car

that are not caused by a collision.

13. Contingent Beneficiary: The person entitled to receive benefits if the

primary beneficiary is deceased.

14. Covenant: A formal agreement or promise in a contract.

15. Deductible: The amount the policyholder must pay out-of-pocket before the

insurance company pays a claim.

16. Endorsement: A written amendment or addition to an insurance policy.

17. Exclusion: Specific conditions or circumstances for which the policy does

not provide coverage.

18. Fiduciary: A person who holds a legal or ethical relationship of trust with

one or more parties.

19. Grace Period: The additional time allowed for payment of a premium after it

is due, during which the policy remains in force.

20. Indemnity: Compensation for damage or loss.

21. Insurable Interest: A financial interest in the life or property insured, which

must exist at the time of the loss.

22. Lapse: Termination of a policy due to non-payment of premiums.

23. Loss Ratio: The ratio of claims paid to premiums earned.

24. Moral Hazard: The tendency of a person with insurance to take greater

risks because they are protected.

25. Mortality Table: A table showing the probability of death at each age.
26. Mutual Insurance Company: An insurance company owned by its

policyholders.

27. Peril: The cause of a possible loss, such as fire or theft.

28. Policyholder: The person or entity who owns an insurance policy.

29. Premium: The amount paid for an insurance policy.

30. Primary Insurance: The insurance policy that pays first when a loss occurs.

31. Pro Rata: The proportional distribution or allocation of a cost.

32. Reinsurance: Insurance purchased by an insurance company from another

insurer to manage risk.

33. Rider: An add-on to a policy that provides additional benefits or coverage.

34. Salvage: The property remaining after a loss, which may be sold to reduce

the loss.

35. Surcharge: An extra charge added to a policyholder’s premium.

36. Surety Bond: A contract among at least three parties that guarantees the

performance of an obligation.

37. Surrender Charge: A fee charged when a policyholder cancels a policy

before its maturity date.

38. Subrogation: The process by which an insurance company seeks

reimbursement from the responsible party for a claim it has already paid.

39. Third-Party Administrator (TPA): An organization that processes

insurance claims or certain aspects of employee benefit plans for a separate

entity.

40. Umbrella Policy: Extra liability insurance that provides coverage beyond

the limits of the insured's home, auto, or watercraft insurance.

41. Underwriter: A person who evaluates and classifies risks to accept or reject

them on behalf of the insurer.

42. Utmost Good Faith: The principle that requires both parties to an insurance

contract to act honestly and not mislead or withhold critical information.

43. Valuation: The process of determining the value of a property or asset.

44. Waiver: The voluntary relinquishment of a known right, such as a provision

in an insurance policy.

45. Whole Life Insurance: A type of permanent life insurance that remains in

effect for the insured's entire lifetime and pays a death benefit.

46. Workers' Compensation: Insurance that provides medical benefits and

wage replacement to employees injured in the course of employment.

47. Act of God: An event caused by natural forces beyond human control, such

as a flood or earthquake.

48. Broker: An insurance professional who represents the policyholder and

shops for insurance policies on their behalf.

49. Catastrophic Coverage: Insurance that provides protection against large,

unpredictable losses.

50. Deductible Waiver: A provision that allows the insurer to waive the

deductible under certain conditions.