Your Guide to Insurance Terms & Definitions

Your Guide to Insurance Terms & Definitions

August 16, 2021

Insurance jargon can be confusing to those who don’t use it every day (just like in ANY industry). But, with insurance, it’s important that YOU understand what the words on your policies mean so you can make informed and confident decisions about your coverage and know what questions to ask your agent.

Here is a list of some common insurance terms that we think are important to have in your vocabulary. You can print the list or bookmark it for future reference. And as always, if you have questions or need more information, feel free to contact Schwartz Insurance Group at any time. 

  • 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.
  • Adjuster – A representative of the insurer who seeks to determine the extent of the insurer’s liability for loss when a claim is submitted.
  • Assets – All the available properties of every kind or possession of an insurance company that might be used to pay its debts.
  • Invested Assets – Things such as bonds, stocks, cash and income-producing real estate.
  • All Other Assets – Non-income producing possessions, such as the building the company occupies, office furniture, and debts owed, usually in the form of deferred and unpaid premiums.
  • Total Admitted Assets – Everything a company owns. All other plus invested assets equals total admitted assets.
  • Benefit Period – In health or disability insurance, the number of days for which benefits are paid to the named insured and his or her dependents.
  • Casualty Insurance – That type of insurance that is primarily concerned with losses caused by injuries to persons and legal liability imposed upon the insured for such injury or for damage to property of others.
  • Coinsurance – In property insurance, requires the policyholder to carry insurance equal to a specified percentage of the value of property to receive full payment on a loss. For health insurance, it is a percentage of each claim after the deductible paid by the policyholder.
  • Commercial Lines – Insurance for businesses, professionals or commercial establishments.
  • Comprehensive Insurance – Auto insurance coverage providing protection in the event of physical damage (other than collision) or theft of the insured car.
  • Deductible  Amount the insured pays for healthcare expenses before an insurance company will pay a claim.
  • Earned Premium – The amount of the premium that has been paid for in advance and has been “earned” by virtue of the fact that time has passed without claim.
  • Elimination Period – The time which must pass after filing a claim before policyholders can collect insurance benefits. Also known as “waiting period.” Most commonly found in disability insurance.
  • 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   A period of time beyond a due date during which a financial obligation may be met without penalty or cancellation.
  • Health Savings Account – A personal savings account that allows you to contribute pre-tax money to be used for qualified medical expenses. HSAs, which are portable, must be linked to a high-deductible health insurance plan (HDHP).
  • Lapse Ratio – The ratio of the number of life insurance policies that lapsed within a given period to the number in force at the beginning of that period.
  • Liability Insurance – Insurance that pays and renders service on behalf of an insured for loss arising out of his responsibility, due to negligence, to others imposed by law or assumed by contract.
  • Net Premium – The amount of premium minus the agent’s commission. Also, the premium necessary to cover only anticipated losses, before loading to cover other expenses.
  • Personal Lines – Insurance for individuals and families, such as private-passenger auto and homeowners insurance.
  • Qualifying Event – An occurrence that triggers an insured’s protection.
  • Re-Entry – Re-entry, which is the allowance for level-premium term policy owners to qualify for another level-premium period, generally with new evidence of insurability.
  • Renewal – The automatic re-establishment of in-force status effected by the payment of another premium.
  • Standard Auto – Auto insurance for average drivers with relatively few accidents.
  • Stop Loss – Any provision in a policy designed to cut off an insurer’s losses at a given point.
  • Surrender Charge – Fee charged to a policyholder when a life insurance policy or annuity is surrendered for its cash value.
  • Umbrella Policy – Coverage for losses above the limit of an underlying policy or policies such as homeowners and auto insurance.
  • Unearned Premiums – That part of the premium applicable to the unexpired part of the policy period.
  • Valuation – A calculation of the policy reserve in life insurance. Also, a mathematical analysis of the financial condition of a pension plan.
  • Whole Life Insurance – Life insurance which might be kept in force for a person’s whole life (while possibly accumulating cash value) and which pays a benefit upon the person’s death.