55 insurance terms you should know about
There is a lot of jargon in the insurance business. Insurance Business went to the websites of several reputable industry groups and looked through their glossaries to find the most important insurance terms that every customer should know. This will help your clients understand all of these different phrases better.
In this part of our client education series, we will explain the meanings of common industry buzzwords. This will help consumers understand how different insurance policies work so they can find the coverage that best fits their needs. We want agents and brokers to send this article to their clients to help them figure out how to deal with all of these issues.
If you want to find the definition of a certain word right away, press control + F (or command + F on a Mac) and then type in the word.
How to understand common insurance terms
The following insurance terms fall into five groups:
- General terms: for insurance jargon that applies to all policies
- Auto insurance terms: These are words that only apply to car insurance.
- Accident and health insurance buzzwords: health insurance terms
- Home insurance terms: for terms that are often used in property insurance, such as homeowners’, landlords’, and renters’ policies
- Life insurance terms are words and phrases that are often used in life insurance policies.
- The definitions below came from the glossaries of industry groups like the National Association of Insurance Commissioners (NAIC), the Insurance Information Institute (TRIPLE-I), and the International Risk Management Institute (IRMI), as well as from several insurance industry experts, including myself!
These are the total costs that an insurance company pays for a policyholder’s health care services, like doctor and hospital bills.
calendar year deductible
This is the amount the policyholder must pay in a given year before the health insurance company starts paying.
Coinsurance is the portion of covered services that the policyholder must pay for after the deductible. Most of the time, coinsurance rates are given as a percentage. For instance, if the insurance company pays 80% of the claim, the policyholder is responsible for the other 20%.
Most of the time, this is a flat fee that the policyholder pays for certain medical services. The insurance company pays for the rest.
Health insurance for a group
This is a plan sponsored by an organisation or employer that covers members, employees, and their dependents under a single policy.
care for a long time
Long-term care insurance, which is also called LTCI, pays for medical and non-medical services for older people who can’t take care of themselves anymore. It covers people who are cared for at home, in nursing homes, assisted living facilities, or adult day care centres.
Provider outside of the network
This is a term for health care providers who are not in the network of a health plan. Policyholders can use providers who aren’t in their network, but they usually have to pay more for their services.
This is the most the policyholder will pay for coverage in a year. This is on top of the regular premiums and includes coinsurance, copayments, and deductibles. Once the out-of-pocket maximum has been reached, the health insurance will pay for all costs for the rest of the year.
Need more information? Check out our list of the 10 biggest US health insurance companies.
Actual cash value coverage
This pays for the property’s value at the time of the loss, taking into account how much it has lost in value. This is different from replacement cost coverage, which we will talk about below.
Coverage for higher living costs
This pays for the costs if a covered loss makes the home unsafe to live in. Most homeowner’s, condo, and renter’s insurance policies cover meals and hotel stays as a matter of course. “Loss of use coverage” is another name for this kind of policy.
Appraisals are often done to get a good idea of how much it will cost to rebuild a house, to settle disagreements about how much a claim is worth, and to make sure that personal belongings are covered enough.
This is how much a property will sell for on the market.
Coverage for medical bills (property)
This kind of policy pays for the medical bills of guests who get hurt by accident on the property, no matter who was at fault. Coverage does not include the owner’s family members.
This means things like a garage, fence, or shed that are on the property but are not directly attached to the house. Homeowners’ insurance may cover these, depending on the policy.
Coverage for personal injuries
This kind of policy covers more than just injuries and damage to property. There were false arrests, invasions of privacy, libel, slander, and wrongful evictions, among other things.
Coverage for replacement costs
This accounts for the cost of fixing or replacing damaged property without taking into account its value going down over time. This type of insurance covers the house, which is also called the dwelling, as well as personal items.
Coverage for scheduled personal property
This type of rider lets the homeowner raise the limits of their policy to cover high-value items like jewellery, artwork, musical instruments, and other collectibles.
Water backup protection
This optional coverage pays for damage caused by clogged drains, backed-up sewer lines, and broken sump pumps, as well as mould growth caused by these problems.
The person or organisation that the policyholder chooses to receive the death benefit is called the beneficiary. This can be the insured person’s spouse, immediate family, other relatives, friends, business partners, or even a charity. Policyholders can name more than one person or group as a beneficiary on their life insurance plans. They can also decide how much each person or group will get.
Term life insurance that can be changed
Without a medical exam, this kind of policy can be changed into permanent insurance. No matter how sick the insured person is, the insurance company has to renew the policy, as long as the policy conditions are met.
This is the amount that the insurance company pays to the beneficiary after the death of the policyholder.
The benefit is paid out either at the end of the contract period or when the policyholder dies. Typical life insurance policies, on the other hand, don’t pay out until after the insured person dies.
Coverage for living benefits
If the policyholder gets a disease that will kill them, this rider will pay for their long-term care.
Permanent life insurance
Permanent policies cover the policyholder for life and build up a cash value that can be used as collateral if the policyholder needs to borrow money.
This is the amount the insurance company will pay the policyholder if they decide to end the policy before its expiration date. Often, the value is much lower than the actual benefit.
Life insurance for a set amount of time
This kind of policy gives a death benefit if the insured person dies within a certain time frame. This means that the person who is insured can only get the payment while the plan is still in effect.
Insurance that covers everything
Universal life insurance is a type of permanent policy that helps you save money by giving you different ways to pay your premiums. Your earnings depend on how well the market does.
Insurance that covers your whole life
Whole life insurance is a type of permanent policy where savings can grow at a guaranteed rate.
Read about the 15 largest life insurance companies in the United States if you want some ideas.
Why is it important to understand these terms for insurance?
Since insurance is meant to protect a person’s assets and loved ones, it takes careful planning and research to buy a policy. Customers can find the best insurance policy for their needs if they know what these insurance terms mean. When everyone speaks the same language, it’s easier for people to find the right coverage without getting frustrated or upset.
Do you want us to explain any other insurance terms? Leave them in the comments, and we’ll add them to the next version.