Insurance glossary

Actual cash value

A loss-settlement approach that generally considers depreciation when valuing damaged or lost property. The method and deductions depend on the policy.

Example: A five-year-old appliance may be valued at less than the cost of a new equivalent.

Additional insured

A person or organization added to a policy for certain coverage under an endorsement or contract provision. The scope of protection may be narrower than for the named insured.

Adjuster

A person who investigates or evaluates a claim and helps determine the insurer's response under the policy.

Aggregate limit

The maximum a policy may pay for all covered claims of a specified type during a stated period, subject to the contract.

Annual deductible

A deductible calculated over a defined benefit or policy year rather than separately for each eligible claim. The details differ by product.

Appraisal

A process used to estimate the value of property or the amount of certain losses. Some insurance contracts have a formal appraisal dispute provision.

Assignment of benefits

An arrangement allowing a third party to receive certain insurance benefits or claim payments, subject to the policy and applicable law. Review its consequences before signing.

Balance billing

Billing for the difference between a provider's charge and the amount an insurer or plan allows. Certain health-care protections limit it in specified circumstances.

Beneficiary

A person or entity designated to receive a benefit from a policy, most commonly under life insurance.

Benefit period

The period during which a policy may pay a particular benefit after eligibility conditions are met. Definitions vary by coverage.

Binder

Temporary evidence of insurance coverage issued before the final contract is delivered, subject to the binder's terms and applicable law.

Bodily injury liability

Coverage that may respond to certain legal obligations arising from injury to other people, subject to limits and exclusions.

Business interruption

Coverage for qualifying loss of business income and sometimes extra expenses resulting from a specified insured interruption. Triggers, waiting periods and calculations are contract-specific.

Cancellation

Ending insurance coverage before the scheduled expiration date. Notice requirements, refunds, fees and permitted reasons can be regulated or set by the policy.

Cash value

A value that can accumulate within certain permanent life insurance policies and may be available through surrender or loans, subject to charges and other conditions.

Claim

A request to an insurance company for payment or another benefit under a policy after a potentially covered event.

Claim denial

A decision by an insurer not to pay all or part of a request for benefits. The insurer should explain the contractual or legal grounds and relevant review or appeal options.

Coinsurance

A percentage share of an eligible cost that the policyholder pays, often used in health insurance. The applicable share and timing depend on plan rules.

Collision coverage

Optional auto insurance coverage that may pay for covered damage to your own vehicle from a collision, subject to its deductible and exclusions.

Commercial general liability

Business insurance that commonly addresses specified third-party bodily injury, property damage and personal or advertising injury claims, subject to conditions and exclusions.

Comprehensive coverage

Auto coverage commonly used for covered non-collision damage to your own vehicle, such as certain theft or weather losses. The exact events depend on the policy.

Coordination of benefits

Rules that help determine which of two or more applicable health plans pays first and how benefits are coordinated. They do not guarantee full payment of every bill.

Copayment

A fixed amount charged to the insured for certain services under a health plan, subject to the plan's terms.

Coverage

The risks, people, property, services or events that a policy agrees to insure, within stated conditions and limits.

Coverage territory

The geographic area where a policy's protection can apply, subject to the contract's definition and conditions.

Covered peril

A cause of loss that falls within the risks insured under a policy. Policies may identify named perils or broader categories with exclusions.

Cyber liability insurance

Insurance addressing specified cyber incidents, privacy or network-security claims and related expenses. It does not automatically pay every ransomware or fraud loss.

Declarations page

The summary section of an insurance policy showing information such as the insured, policy period, covered items, selected limits and deductibles.

Deductible

The amount or portion of a covered loss that the policyholder is responsible for before an applicable insurance payment, depending on the coverage.

Example: If a covered $2,000 loss has a $500 deductible and no other restrictions apply, the insurer's portion could be $1,500.

Depreciation

A reduction in value often associated with age, wear, condition or obsolescence. It may affect actual cash value claim settlements.

Elimination period

A waiting interval after the onset of a qualifying disability or loss before specified benefits become payable, if the remaining policy terms are met.

Endorsement

An amendment to an insurance contract that changes its coverage, conditions or other terms. It may be called a rider in some products.

Errors and omissions insurance

Professional liability insurance that may cover certain claims alleging mistakes, negligent advice or failures in covered services. Coverage is contract-specific.

Excess insurance

Insurance that can provide additional protection above a specified underlying policy or retention when its own conditions are satisfied.

Exclusion

A policy provision identifying a risk, event, property type or circumstance that is not covered.

Explanation of benefits

A health insurer's statement describing how a submitted claim was processed, including allowed charges, payments and the member's potential share. It is not itself a bill.

Formulary

A health plan's list or structure of covered prescription drugs, often organized into tiers with different cost-sharing and approval rules.

Grace period

A specified period after a payment due date during which coverage may remain in force, subject to policy terms and law. Never assume a grace period applies.

Guaranteed issue

A feature under which an insurer must offer qualifying coverage to eligible applicants without specified health underwriting barriers. Eligibility and product rules may still apply.

Indemnity

A principle or contractual arrangement intended to compensate for a covered loss according to the policy, subject to valuation, limits and other conditions.

Insurable interest

A legally recognized relationship to a person or property that supports buying or maintaining certain insurance coverage. Requirements vary by type and jurisdiction.

Insured

The person or entity protected under the terms of an insurance contract.

Insurer

The company or organization assuming insured risks under a policy.

Liability coverage

Coverage that may respond to certain covered legal responsibilities to others for injury, property damage or other specified claims.

Loss of use

Coverage that may pay certain additional living expenses or similar costs if an insured property cannot be used after a covered loss. Limits and conditions vary.

Medical payments coverage

Coverage that may pay specified medical expenses after certain accidents without determining legal liability, subject to policy limits and conditions.

Named peril

A risk specifically identified as covered in an insurance contract. Losses from unlisted causes may not qualify unless another provision applies.

Network

A group of health-care providers that contract with a health plan or insurer. Costs and covered benefits can differ for in-network and out-of-network care.

Nonrenewal

An insurer's decision not to continue a policy at its scheduled expiration, subject to notice requirements and applicable rules.

Open enrollment

A designated period when eligible people can enroll in or change certain health coverage without another qualifying enrollment event.

Out-of-pocket maximum

In a health plan, a cap on specified covered cost-sharing for a defined period. Premiums and some expenses may not count toward it.

Per-occurrence limit

The maximum a policy may pay for a defined single occurrence, subject to aggregate limits and other coverage conditions.

Personal injury protection

Auto insurance benefits that may pay certain qualifying medical expenses and related losses following an accident under applicable state law and policy terms.

Policy

The insurance contract setting out covered risks, exclusions, conditions, rights and obligations.

Policy limit

The maximum amount an insurer may pay for a particular coverage or claim, subject to the policy's terms.

Policy period

The start and end dates during which the policy may provide coverage, subject to its conditions.

Pre-existing condition

A health or medical condition that existed or showed specified symptoms before coverage began. How it affects eligibility or claims depends on the insurance type and law.

Premium

The amount charged for insurance coverage, which may be billed monthly, annually or on another schedule.

Prior authorization

A health plan's process for reviewing some services or medications before they are furnished. Authorization does not necessarily guarantee payment.

Property damage liability

Coverage that may pay for qualifying damage the insured is legally responsible for causing to someone else's property.

Reinsurance

Insurance purchased by an insurer to transfer part of its own covered risk to another insurer or reinsurer; it is generally not a direct consumer policy.

Replacement cost

A property loss-settlement method generally based on the cost to repair or replace covered property with comparable property, subject to policy terms, limits and conditions.

Rider

An addition or amendment that changes the terms of a policy. The word is common in life and health insurance.

Risk pooling

Combining financial risks across many insured people or entities so collected premiums can help fund qualifying claims and expenses.

Self-insured retention

An amount an insured must generally pay or absorb before a particular insurer's obligations attach, depending on the contract.

Subrogation

A process in which an insurer that paid a covered claim may seek reimbursement from a party legally responsible for the loss, where allowed.

Term life insurance

Life insurance designed to provide a death benefit if the insured dies while coverage is in force during a specified term. Most term policies do not build cash value.

Umbrella insurance

Liability insurance that may add protection above certain underlying limits and sometimes cover other specified liability risks, subject to exclusions and attachment rules.

Underwriting

The insurer's process of assessing risk and deciding whether and on what terms to offer coverage.

Uninsured motorist coverage

Auto coverage that may provide specified benefits when an accident involves a driver without applicable liability insurance. State rules and policy provisions vary.

Universal life insurance

A permanent life insurance design that may allow changes to premiums or death benefits within contract rules. Cash values, charges and policy duration depend on funding and terms.

Waiting period

A period before a policy benefit becomes available or specific coverage starts, depending on the insurance product and contract.

Waiting period for pet insurance

A period after starting a pet policy before certain accident or illness benefits become available, subject to the insurer's conditions.