Insurance Lingo Explained

This is a guest post by Chris Pentago, RealInsurance’s Car Insurance marketing consultant.

Insurance documents are difficult to completely understand even with a patient agent’s explanation. Depending on what type of insurance you are considering will depend what terms you actually come across. The following are common insurance terms you may need to understand, regardless if you are seeking health, life, vehicle, or other types of coverage. “You” refers to You, the Insured.

 

People:

Adjuster – the insurance company’s representative who investigates the claim and acts on the insurance company’s behalf in order to obtain an agreement for the (settlement) amount.

Agent – the individual licensed to sell, negotiate, or create the insurance contract on behalf of the insurance company. If the “agent” is not licensed, he or she cannot sell, negotiate, or create insurance contracts for you, the insured.

Applicant – an individual making application to insure himself or herself, or someone else, under an insurance contract.

Beneficiary – the person receiving proceeds from a life insurance policy when the insured dies.

Broker – an individual who represents the insured during the process of negotiating and purchasing an insurance contract

Dependent - an individual who relies on another for support and maintenance.

Fiduciary – an agent or broker who handles the insured’s funds in a trust capacity.

Insured – YOU or the organization that is protected by the insurance.

Insurer – the insurance company that covers the insured against loss, provides benefits, or provides services.

Policyholder – the individual (usually the insured) that has possession of the policy.

Policyowner – the individual (may or may not be the insured) who is entitled to exercise the rights and privileges in the policy.

Underwriter – the individual that evaluates and classifies the amount of risk, and determines if the insured is accepted or rejected for coverage.

 

Insurance and Contracts Terms:

Actual Cash Value – the calculated amount paid to the insured for damages or for a property’s current replacement value minus depreciation.

Annuity – a contract that provides income for a specified period of years, or for life.

Application – the document you complete that provides information for underwriting the policy. The application is NOT the insurance policy.

Buyer’s Guide – the booklet that describes insurance policies and concepts and general information to help the applicant make an informed decision.

Claim – the insured’s request to be paid for damages or losses in accordance with provisions outlined in the insurance contract.

Coercion – be aware if an agent (unlawfully) tries to purposely persuade you (the applicant) to purchase a specific policy.

Contract – an agreement between two or more parties that is enforceable by law.

Disclosure – the act of identifying the name of the agent or broker or representative of the insurance company during the sale of any policy.

Effective Date – the date the insurance policy begins.

Exclusion – causes of loss, exposures, conditions, etc. that are listed in the policy for which benefits will not be paid.

Expiration – the date specified in the policy as the date of termination of the policy.

Fraud – intentionally distorting facts in an effort to encourage someone to give up money or other items of value.

Free Look – by law the policyowner has a period of days in which to inspect the new policy. If the policyowner decides not to keep the policy during this “free look” period, he or she is entitled to a full refund of the paid premium.

Group Life Insurance – life insurance that is provided for members of a group (such as that provided to employees by their employer).

Grace Period – the period of time after the premium due date has passed, during which the premium may still be paid, and the policy remains in force.

Hazard – a situation, condition, or event that increases the likelihood of a loss.

Issue Age – the individual’s age when the policy is issued.

Joint Life Insurance Policy – a single policy that is designed to insure two or more lives.

Lapse – the policy terminates because the premium has not been paid by the end of the grace period.

Life Expectancy – the average number of years remaining for a person of a given age to live as shown on the mortality table.

Nonrenewal – termination of a policy by the insurer (on the anniversary of the renewal date).

Preferred Risk – applicants determined by the underwriter as being less risky (less chance of them filing a claim for losses or damages) may be covered at a reduce rate.

Premium – the periodic payment to the insurance company to keep the insurance policy in force.

Principal Amount – the full face value of the policy.

Rebating – incentive offered during the sale of the policy for products not specified in the policy.

Renewability Clause – policy clause that defined the insurance company’s AND insured’s right to cancel or renew coverage.

Representations – statements made by the applicant on the insurance application that are believed to be true but not guaranteed to be correct.

Rider – supplemental agreement attached to (and becomes part of) the policy to either expand or waiver coverage, or include a condition.

Term Insurance – insurance protection for a specified period of time.

Universal Life Insurance – insurance that has adjustable life insurance coverage and a flexible premium.

Waiting Period – the time between the beginning of a disability and the start of disability benefits or the time between signing the contract and when coverage becomes effective.

Waiver – the insured’s voluntary agreement to reject a known or legal right or advantage of the contract.

Warranty – conditions stated in the policy that, when breached, voids coverage.

Whole Life Insurance – insurance that is kept in force for the entire life and that pays a benefit to the beneficiary upon the insured’s death.