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Insurance Glossary

A

Actual Cash Value
Cost to replace damaged or destroyed items with new items, minus depreciation. Example: An old television will not be replaced at current full value due to depreciation.

Annuity
An agreement by an insurer to make payments that continue during the life of the annuitant(s) for a specified period.

Anti-Theft Device
Anti-theft devices are designed to deter thieves from stealing a vehicle. The most common example is the audible car alarm.

Automobile Insurance
Automobile (auto) insurance is a form of insurance that protects a vehicle in case of accidents or other covered claims. A minimum amount of coverage is required by law in nearly every state.

B

Basic Auto Policy
The Basic Auto Policy is primarily used to insure commercial vehicles. The more common Personal Auto Policy (PAP) is used to insure consumer vehicles.

Basic Limits of Liability
The lowest amount of liability coverage required to comply with a states minimum requirements.

Bodily Injury Liability
Liability coverage protects the insured against financial loss (up to the policy limit) in the event of injury or death as a result of an accident.

C

Casualty
Liability or loss stemming from an accident.

Claim
A request made by the insured, or the insureds beneficiary, for payment of benefits as outlined in the insurance policy.

Collision Insurance
Covers physical damage to a vehicle in the event of an accident.

Comprehensive Insurance
Covers the loss to a vehicle in the event of everything but a collision, such as damage caused by a fire or falling objects. Also protects against theft or vandalism.

Continuous Coverage or Continuous Liability Insurance
The length of time the insured has maintained car insurance coverage.

Copayment
A flat fee that the insured must pay before health care insurance kicks in. For example, many HMOs require a copayment of $10 or more when visiting a doctors office.

Coverage Area
The geographic region covered by travel insurance, as outlined in the policy.

Covered Person
The individual(s) insured under a car insurance policy.

D

Deductible
The deductible is the amount of money the insured must pay before insurance kicks in to pay a claim. Deductibles usually range from $250 to $1,000.

E

Exclusions
Conditions, events and items that are not included for coverage under an insurance contract.

F

Financial Ratings
Financial ratings reflect a rating organization’s opinion on the financial strength and ability to meet ongoing obligations to policyholders. The ratings organizations most commonly identified with the insurance industry are AM Best, Standard & Poor’s and Moody’s.

G

Gap Insurance
If an insured is making lease or loan payments and experiences a total loss, there may be a difference (gap) between the market value of the lost vehicle and the amount owed on it. Gap insurance pays this difference.

H

Hazardous Activity
Dangerous activities such as bungee jumping, motorcycle riding, skydiving, etc. are generally excluded from life insurance coverage.

HMO (Health Maintenance Organization)
A group health insurance plan in which members receive care from contracted health care providers.

L

Lapse in Coverage/Policy Lapse
Any time that a policy has been canceled due to failure to pay a premium.

Liability Insurance
Insurance that protects against loss resulting from an insureds irresponsibility or negligence. For instance, if a homeowner is sued after his or her dog bites a neighbor, liability insurance covers the losses up to the policy limit.

Limit
This refers to the maximum amount your insurance company will pay for all claims arising from a single incident. In terms of Bodily Injury coverage, when purchased in split limits, the second limit is the “per occurrence” limit: e.g. $100,000(per person)/$300,000(per occurrence).

Living Benefits
Also known as accelerated death benefits, this feature allows the insured, under certain circumstances, to receive proceeds of his or her life insurance policy before passing. Qualifying circumstances may include terminal illness, a catastrophic accident or need for long-term care.

M

Medical Payments
Pays for medical and funeral expenses regardless of who is at fault in an auto accident. Covers passengers in the insureds vehicle, and the insured should he or she operate someone else’s vehicle (with their permission).

N

Net Premiums Written
The amound of money a non-life insurance company can expect to receive over the life of a contract less commisions and reinsurance.

No-Fault Insurance
Many states have enacted auto accident compensation laws permitting auto accident victims to collect directly from their own insurance companies for medical and hospital expenses regardless of who was at fault in the accident. Although there are many legal variations of no-fault insurance, most states still allow people to sue the negligent party if the amount of damages exceeds a certain state-determined threshold.

P

Per Person Limit
This refers to the maximum amount your insurance company will pay for any one person’s injuries arising from a single incident. In terms of Bodily Injury is purchased in split limits, the first limit is the “per person” limit: e.g. $100,000(per person)/$300,000(per occurrence).

Personal Auto Policy
The most common auto insurance policy sold today. Often referred to as “PAP,” this policy is written in simple wording and provides coverage for liability, medical payments, uninsured/underinsured motorist coverage, and physical damage protection.

Personal Injury Protection
Personal Injury Protection (PIP) usually includes benefits for medical expenses, loss of income from work, essential services, accidental death, funeral expenses, and survivor benefits.

Physical Damage
Damage to a covered vehicle from perils including (but not limited to) collision with another vehicle or object, fire damage, vandalism and theft.

Point-of-Service Plan
Health insurance that allows the insured to choose between in-network and out-of-network providers each time care is needed.

Policy
A policy is the written documents of a contract for insurance between the insurance company and the insured. Such documents include forms, endorsements, riders and attachments.

Policy Period
The period of time in which a policy is in effect, typically six months to one year.

Policyholder
One who maintains ownership in an insurance policy. This may refer to the policy owner or those covered under the policy.

Pre-Existing Condition
An exclusion in many health insurance plans which excludes previously diagnosed conditions for a specified period of time.

Premium
The price of insurance the insured pays for a specified risk and a specified period of time.

Property Damage Liability Insurance
Protection against liability for damage to another’s tangible property, including loss of use. Although this coverage is different than liability for bodily injury to another person, Bodily Injury and Property Damage Liability protection are generally written together.

R

Reinsurance
Insurance purchased by an insurance company from another insurance company to help insure against loss exposure and manage risk.

Renewal
The process of keeping an active policy in force through the issuance of a renewal policy.

Rental Reimbursement
This optional coverage will reimburse the insured for a rental car if their vehicle is disabled due to a covered loss.

T

Term Life Insurance
A form of life insurance that provides coverage for a specified period of time, or term. Term lengths may range from one to 30 years.

Towing and Labor Costs
This endorsement, which is added to the physical damage coverage, provides reimbursement up to a specified amount to tow the vehicle or pay for on-site labor costs.

U

Underinsured Motorists Bodily Injury
Underinsured motorists bodily injury coverage pays for a covered person’s bodily injuries if the at fault party doesn’t have enough insurance coverage.

Uninsured Motorists Bodily Injury
Uninsured motorists bodily injury coverage pays for a covered person’s bodily injuries if the at fault party doesn’t have insurance coverage or if the accident was a hit and run.

W

Whole Life Insurance
A form of life insurance that provides coverage for the entirely of the insureds lifespan.