Glossary

Insurance Terms Explained

Use this jargon translator to quickly understand the phrases you encounter in policies, quotes, and claims paperwork.

How to Use This Glossary

Browse the terms below to get concise, plain-language definitions of the most common insurance vocabulary. Each entry is focused on car insurance but the principles often apply across personal lines. Save this page for future reference whenever a policy document gets too dense.

Actual Cash Value (ACV): The current value of an insured item after subtracting depreciation.
Adjuster: A professional who evaluates loss details and settles insurance claims.
Agent: A licensed person who sells or manages insurance policies on behalf of an insurer.
Agreed Value: A pre-determined payout amount for an insured item, often for classic cars.
Ambulatory Patient Services: Outpatient medical care such as doctor visits or clinics.
Appraisal: An assessment that establishes the value of an insured asset.
Asset: Property or items that can be protected by insurance.
Assured: Another term for the insured person or entity.
At-Fault: The party deemed responsible for causing a loss or accident.
Beneficiary: The individual who receives policy benefits, often on life insurance.
Binder: Temporary proof of coverage issued before the formal policy document.
Bodily Injury: Coverage that pays for injuries to others caused by the insured.
Boiler and Machinery Insurance: Coverage for damage to technical equipment and production machinery.
Carrier: The insurance company that issues the policy and pays claims.
Claim: A request for payment submitted to an insurer after a covered event.
Claimant: The person or entity making a claim for benefits.
Claims and Underwriting Exchange: A shared database used by insurers to combat fraud and check histories.
Claims Adjuster: A specialist who investigates losses and negotiates settlements.
Claims Settlement: The process of resolving a claim and issuing payment or denial.
Collision Coverage: Pays to repair or replace your vehicle after a crash with another car or object.
Comprehensive Coverage: Protects against non-collision losses such as theft, fire, vandalism, or weather.
Conditions: Policy provisions that state requirements for coverage to apply.
Continuity of Coverage: Uninterrupted insurance protection with no lapse.
Contractual Liability: Liability assumed through a contract rather than by law.
Copay: A fixed dollar amount the insured pays for a covered medical service.
Coverage: The protection and benefits provided by an insurance policy.
Coverage Limit: The maximum amount the insurer will pay for a specific coverage.
Covered Event: An incident outlined in the policy that triggers benefits.
Covered Lives: The number of people insured under a single contract.
Credit Life Insurance: Pays off a loan balance if the borrower dies.
Credit-Based Insurance Score: A score that helps insurers assess risk using credit history.
Deductible: The amount the insured pays out of pocket before coverage begins.
Dependent: A family member who receives coverage under the policyholder’s plan.
Depreciation: The decrease in an asset’s value over time due to age or wear.
Direct Loss: Immediate loss caused directly by a covered peril, such as fire damage.
Disability Insurance: Provides income replacement if an illness or injury limits work ability.
Endorsement: An addition or amendment that changes policy terms.
Exclusions: Specific risks or losses that are not covered by the policy.
Ex Gratia Settlement: A goodwill claim payment the insurer is not contractually required to make.
Fidelity Bond: Coverage that protects employers from employee theft or dishonesty.
First Party: The insured person or organization protected by the policy.
Fraud: Intentional deception aimed at obtaining insurance benefits illegally.
Gap Insurance: Covers the difference between a vehicle’s market value and the loan or lease balance.
Garaging Address: The primary location where a vehicle is kept, used in rating premiums.
Grace Period: Extra time after a missed premium payment before the policy cancels.
Guaranteed Insurability: Option to increase coverage later without a new medical exam.
Health Insurance: Coverage that helps pay medical expenses and preventive care.
High-Risk Driver: A motorist considered more likely to file claims due to history or credit.
Homeowners Insurance: Protects residential property and liability exposures for homeowners.
Hospitalization: Coverage for inpatient hospital stays and related services.
Indemnity: Compensation that restores the insured to the financial position held before a loss.
Inflation Protection: A clause that automatically increases policy limits to keep pace with inflation.
Inpatient Medical Care: Medical treatment received while admitted to a hospital.
Insurable Interest: A financial stake that must exist for insurance to be valid.
Insurance Score: A predictive measure combining credit and insurance data to gauge risk.
Insurer: The company that underwrites the policy and pays covered losses.
Insured: The person or entity receiving protection from the policy.
Liability Insurance: Coverage for legal responsibility when the insured harms others.
Life Insurance: Pays a benefit to named beneficiaries when the insured dies.
Loss: Damage or financial harm sustained as a result of a covered event.
Loss of Use: Reimburses transportation costs when a covered vehicle cannot be driven.
Loss Payee: A person or lender entitled to insurance proceeds, often on financed items.
Medical Insurance: A broader term for coverage that pays for health care costs.
Medical Payments (MedPay): Pays medical expenses for you and passengers regardless of fault.
Mental Health Coverage: Benefits that pay for counseling, therapy, or psychiatric treatment.
Minimum Required Coverage: The lowest amount of insurance mandated by a jurisdiction.
Multi-Car Discount: A premium reduction for insuring multiple vehicles on one policy.
Named Peril: A policy that covers losses only from specifically listed causes.
No Claim Bonus: A discount earned for going a policy term without filing claims.
No-Fault Insurance: Each driver’s insurer pays their own medical costs regardless of fault.
Occurrence: An accident or event that triggers coverage under the policy.
Outpatient Care: Medical services provided without an overnight hospital stay.
Paid-Up: A policy for which no additional premium payments are required.
Paid-Up Additions: Extra life insurance coverage purchased using policy dividends.
Peril: A specific cause of loss such as fire, hail, theft, or collision.
Personal Injury Protection (PIP): No-fault coverage that pays medical bills, lost wages, and services.
Policy: The legal contract outlining rights, duties, and coverage details.
Policy Limit: The highest amount an insurer will pay for a covered claim.
Policy Term: The length of time, usually six or twelve months, that coverage remains in force.
Policyholder: The person or business that owns the insurance policy.
Premium: The payment made to keep coverage in force, often monthly or yearly.
Prescription Drugs: Coverage that helps pay for doctor-prescribed medications.
Primary Driver: The individual listed as the main operator of an insured vehicle.
Property Damage Liability: Pays to repair or replace someone else’s property you damage while driving.
Property Insurance: Coverage that protects physical assets from covered causes of loss.
Quote: An estimated premium based on the information you provide to an insurer.
Reinsurance: Insurance purchased by insurers to share or transfer risk.
Renewal: The continuation or extension of a policy for another term.
Replacement Cost: Pays to replace an item with a new one of like kind without depreciation.
Rider: Another name for an endorsement that adds optional coverage.
Rideshare Coverage: An endorsement that closes coverage gaps for drivers using apps like Uber.
Risk: The possibility that a loss will occur.
Risk Profile: The blend of factors insurers analyze to gauge how likely you are to claim.
Salvage Title: A state label showing a vehicle was once a total loss and rebuilt.
SR-22: A state-required filing that proves a driver carries the required liability limits.
Stacked Coverage: Combines uninsured or underinsured motorist limits across multiple vehicles.
Subrogation: The insurer’s right to pursue a responsible party for reimbursement after paying a claim.
Surcharge: An additional premium charged because of tickets, accidents, or other risks.
Surety: A bond or guarantee that one party will fulfill an obligation.
Telematics: Usage-based technology that tracks driving habits for pricing.
Third Party: Someone other than the insured or insurer who may be covered or owed damages.
Third-Party Claim: A request for payment made by someone other than the policyholder against your coverage.
Total Loss: A determination that repairing damage would cost more than the item is worth.
Travel Insurance: Coverage for trip cancellations, medical emergencies, or lost baggage while traveling.
Umbrella Policy: Extra liability coverage that sits on top of home and auto limits.
Underinsured Motorist Coverage: Pays your damages when the at-fault driver’s liability limits are too low.
Underwriter: A professional who evaluates risk data and sets premiums or eligibility.
Underwriting: The overall process of assessing risk, pricing, and approving coverage.
Uninsured Motorist Coverage: Covers injuries or property damage caused by drivers who lack insurance.
Usage-Based Insurance: A policy where premiums adjust according to telematics driving data.
Waiver: A voluntary relinquishment of a known right or claim.
Waiver of Subrogation: An agreement preventing the insurer from seeking repayment from another party.
Waiting Period: The time between buying coverage and the date certain benefits begin.
Wear and Tear: Gradual deterioration from normal use, typically excluded from coverage.
Whole Life Insurance: Permanent life insurance with guaranteed premiums and cash value.
Workers' Compensation: Coverage that pays medical bills and wages for employees hurt on the job.