Insurance Glossary
Plain-English definitions for 59+ insurance terms. No jargon to explain jargon — just clear answers so you can understand your policy with confidence.
A
Accelerated Death Benefit
A feature that allows you to receive a portion of your life insurance death benefit early if you are diagnosed with a terminal illness.
Actual Cash Value
A method of valuing damaged or destroyed property that accounts for depreciation.
Actuary
A professional who uses mathematics, statistics, and financial theory to measure and manage risk for insurance companies.
Additional Living Expenses
Coverage that pays for the extra costs of living away from your home while it is being repaired after a covered event.
Assigned Risk
A state-run program that provides auto insurance to high-risk drivers who cannot get coverage on the open market.
B
Beneficiary
The person or entity you designate to receive your insurance payout when you die.
Binder
A temporary agreement that provides insurance coverage while your full policy is being prepared.
Business Owner's Policy (BOP)
A bundled insurance policy that combines general liability and commercial property coverage into a single, cost-effective package.
C
Cash Value
A savings component inside permanent life insurance policies that grows over time on a tax-deferred basis.
Certificate of Insurance
A document issued by an insurer that proves you have an active insurance policy.
Claim
A formal request you submit to your insurance company asking them to pay for a covered loss or event.
Coinsurance
The percentage of costs you share with your insurer after you have met your deductible.
Collision Insurance
Auto coverage that pays to repair or replace your own vehicle after an accident, regardless of who was at fault.
Commercial Auto Insurance
Insurance that covers vehicles owned or used by a business.
Comprehensive Insurance
Auto coverage that pays for damage to your vehicle caused by events other than a collision, such as theft, vandalism, hail, floods, or hitting an animal.
Contestability Period
The first two years of a life insurance policy during which the insurer can investigate and deny a claim if they find misrepresentations on your application.
Copay
A fixed dollar amount you pay for a specific medical service at the time you receive it.
Coverage Limit
The maximum amount an insurance company will pay for a covered claim.
Cyber Liability Insurance
Coverage that helps businesses recover from data breaches, cyberattacks, and other technology-related security incidents.
D
Death Benefit
The amount of money paid to your beneficiaries when you die.
Declaration Page
The summary page of your insurance policy that lists key details like your name, coverage amounts, deductibles, premium, and policy period.
Deductible
The amount you pay out of your own pocket before your insurance kicks in.
Directors and Officers Insurance (D&O)
Insurance that protects the personal assets of corporate directors and officers if they are sued for alleged wrongful acts while managing a company.
Dwelling Coverage
The portion of your homeowners policy that pays to repair or rebuild the physical structure of your home after a covered event.
E
F
G
Gap Insurance
Coverage that pays the difference between what you owe on your car loan and the vehicle's actual cash value if the car is totaled or stolen.
General Liability Insurance
Coverage that protects your business from claims of bodily injury, property damage, and advertising injury caused by your operations or products.
Grace Period
A window of time after your premium due date during which your policy remains active even if you have not paid.
H
Health Maintenance Organization (HMO)
A type of health insurance plan that requires you to choose a primary care physician and get referrals to see specialists.
Health Savings Account (HSA)
A tax-advantaged savings account available to people enrolled in a high-deductible health plan (HDHP).
HO-3 Policy
The most common type of homeowners insurance policy in the United States.
HO-5 Policy
A premium homeowners insurance policy that provides open-peril coverage for both your home's structure and your personal property.
I
L
N
O
P
Paid-Up Additions
Small chunks of additional whole life insurance purchased with dividends or extra premium payments.
Personal Injury Protection (PIP)
Auto insurance coverage that pays for your own medical expenses and sometimes lost wages after an accident, regardless of who caused it.
Personal Property Coverage
The portion of your homeowners or renters policy that covers your belongings — furniture, electronics, clothing, and more — if they are damaged, destroyed, or stolen.
Policy
A written contract between you and an insurance company that spells out what is covered, what is excluded, and under what conditions the insurer will pay a claim.
Preferred Provider Organization (PPO)
A type of health insurance plan that gives you the freedom to see any doctor or specialist without a referral.
Premium
The amount you pay your insurance company to keep your policy active.
Professional Liability Insurance (E&O)
Coverage that protects professionals and businesses from claims of negligence, errors, or failure to perform professional duties.
R
Reinstatement
The process of restoring a lapsed insurance policy to active status.
Replacement Cost
A method of valuing damaged or destroyed property based on the cost to replace it with a new item of similar kind and quality, without deducting for depreciation.
Rider
An add-on to your insurance policy that provides extra coverage or modifies existing terms.
S
SR-22
A certificate filed by your insurance company with your state proving that you carry the minimum required auto insurance.
Suicide Clause
A provision in most life insurance policies stating that the death benefit will not be paid if the insured dies by suicide within the first one or two years of the policy.
T
U
Umbrella Policy
A supplemental liability insurance policy that provides coverage above and beyond the limits of your homeowners, auto, or boat insurance.
Underwriting
The process an insurance company uses to evaluate the risk of insuring you and to set your premium.
Uninsured/Underinsured Motorist Coverage
Coverage that protects you if you are hit by a driver who has no insurance or not enough insurance to cover your losses.
Universal Life Insurance
A type of permanent life insurance that offers flexible premiums and an adjustable death benefit.
W
Waiting Period
A set amount of time after your policy starts during which certain benefits are not available.
Whole Life Insurance
A type of permanent life insurance that covers you for your entire life and includes a cash value component that grows over time.
Workers' Compensation
Insurance that provides wage replacement and medical benefits to employees who are injured or become ill on the job.