Reference
Insurance glossary
Short, plain-English definitions of the terms you meet in car, home, life and health insurance. Your own policy wording always decides what is covered, so use these as background.
A
- Actual cash value (ACV)
- A way of valuing a loss that pays what the damaged item was worth just before the loss. It is usually the replacement cost minus depreciation, which is the loss of value from age and wear.
Read the guide: Replacement cost vs. actual cash value
B
- Beneficiary
- The person or organization you name to receive the death benefit of a life insurance policy.
Read the guide: Beneficiaries explained - Bodily injury liability
- Car insurance coverage that pays for injuries you cause to other people in an accident, up to your policy limit. Your policy may also provide a legal defense.
Read the guide: Liability coverage explained
C
- Cash value
- The savings part of a permanent life insurance policy. It grows over time, and you may be able to borrow against it or withdraw from it, subject to the policy terms and possible taxes.
Read the guide: Term life vs. whole life insurance - Claim
- A formal request to your insurer to pay for a loss that you believe your policy covers.
Read the guide: How to file a home insurance claim - Coinsurance
- In health insurance, the percentage of a covered cost you pay after you meet your deductible. With 20% coinsurance, you pay 20% of the allowed amount and the plan pays the rest.
Read the guide: Premium, deductible, copay and coinsurance explained - Collision coverage
- Optional car coverage that pays to repair or replace your own vehicle after a collision with another vehicle or an object, minus your deductible, no matter who is at fault.
Read the guide: Collision vs. comprehensive coverage - Comprehensive coverage
- Optional car coverage for damage to your own vehicle from causes other than a collision, such as theft, fire, hail, vandalism or hitting an animal, minus your deductible.
Read the guide: Collision vs. comprehensive coverage - Copay (copayment)
- A fixed dollar amount you pay for a specific health service, such as a doctor visit or a prescription, when you receive it.
Read the guide: Premium, deductible, copay and coinsurance explained
D
- Declarations page
- The summary page of a policy. It lists who is insured, what is insured, the coverages, the limits, the deductibles and the premium.
- Deductible
- The amount you pay yourself before your insurance pays toward a covered loss. In health insurance, it is what you pay for covered care before the plan starts sharing costs, although some services may be covered earlier.
Read the guide: Premium, deductible, copay and coinsurance explained - Dwelling coverage
- The part of a homeowners policy that pays to repair or rebuild the structure of your home after a covered loss.
Read the guide: What homeowners insurance covers and excludes
E
- Endorsement (rider)
- An addition to a policy that adds, removes or changes coverage. In life insurance, an add-on is usually called a rider.
- Exclusion
- A cause of loss or a situation that a policy specifically does not cover. Flood and earthquake damage are common exclusions in standard homeowners policies.
Read the guide: Flood and earthquake: why they need separate coverage - Exclusive provider organization (EPO)
- A health plan that generally covers care only from providers in its network, except in emergencies, and usually does not require referrals.
Read the guide: HMO, PPO, EPO and POS plans
F
- Flood insurance
- Separate coverage for damage caused by flooding, which standard homeowners policies typically exclude. In the United States it is offered through the National Flood Insurance Program and by private insurers.
Read the guide: Flood and earthquake: why they need separate coverage
G
- GAP insurance
- An optional product intended to cover the difference between what you owe on your auto loan and what your insurer pays if your car is stolen or totaled.
Read the guide: What Is GAP Insurance and Do You Need It? - Grace period
- A set time after a premium due date during which a policy stays in force even though the payment is late. Whether one applies, and for how long, depends on the type of insurance and on the policy terms.
H
- Health maintenance organization (HMO)
- A health plan that generally covers care only from doctors and hospitals in its network and usually requires a referral from a primary care doctor to see a specialist, with exceptions such as emergencies.
Read the guide: HMO, PPO, EPO and POS plans
L
- Liability coverage
- Coverage that pays for harm you cause to others, such as their injuries or damage to their property, up to your policy limit. It does not pay for your own injuries or your own property.
Read the guide: Liability coverage explained - Limit
- The most an insurer will pay for a covered loss under a given coverage. You pay anything above it.
Read the guide: Liability coverage explained
M
- Medicaid
- A joint federal and state program that gives health coverage to some people with limited income and resources. Each state runs its own program under federal rules, so eligibility and benefits differ.
Read the guide: Medicare vs. Medicaid: What Is the Difference? - Medical payments coverage
- Coverage, where offered, that pays medical expenses for you and your passengers after a car accident, regardless of fault, up to a stated limit.
Read the guide: Minimum car insurance requirements by state - Medicare
- The federal health insurance program for people 65 or older, some younger people with certain disabilities, and people with End-Stage Renal Disease.
Read the guide: Medicare vs. Medicaid: What Is the Difference?
N
- Network
- The doctors, hospitals and other providers that a health plan has contracted with. Using in-network providers generally costs you less.
Read the guide: HMO, PPO, EPO and POS plans - No-fault insurance
- A car insurance system in which your own policy pays certain medical expenses after an accident, regardless of who caused it. States that use it set their own rules about when you can sue.
Read the guide: No-Fault vs. At-Fault Car Insurance: Which States Use Which
O
- Open enrollment
- The yearly period when you can sign up for or change a health plan through the marketplace. Outside it, you usually need a qualifying life event to enroll.
Read the guide: How the ACA Marketplace works - Out-of-pocket maximum
- The most you pay in a plan year for covered, in-network health care. After you reach it, the plan pays covered costs for the rest of the year. Premiums do not count toward it.
Read the guide: Premium, deductible, copay and coinsurance explained
P
- Peril
- A specific cause of loss, such as fire, theft, wind or hail, that a property policy may cover or exclude.
Read the guide: What homeowners insurance covers and excludes - Personal injury protection (PIP)
- Coverage, required in some states, that pays your own medical expenses and certain other costs, such as lost income, after a car accident regardless of fault.
Read the guide: No-Fault vs. At-Fault Car Insurance: Which States Use Which - Point-of-service (POS) plan
- A hybrid health plan that usually requires a referral from a primary care doctor for specialists and offers some coverage outside the network at a higher cost.
Read the guide: HMO, PPO, EPO and POS plans - Policy
- The contract between you and your insurer. It explains what is covered, the limits, the exclusions and what you must do after a loss.
- Preferred provider organization (PPO)
- A health plan that lets you see providers inside or outside its network without a referral, usually at a lower cost inside the network.
Read the guide: HMO, PPO, EPO and POS plans - The amount you pay to keep an insurance policy in force, usually monthly, every six months or every year.
Read the guide: Premium, deductible, copay and coinsurance explained - A federal tax credit that can lower the monthly premium of a marketplace health plan if you qualify. Eligibility rules change, so check HealthCare.gov for the current rules.
Read the guide: How the ACA Marketplace works - Property damage liability
- Car insurance coverage that pays for damage you cause to other people's property, such as their vehicle, fence or building, up to your limit.
Read the guide: Liability coverage explained
R
- Renters insurance
- A policy that protects a renter's belongings and personal liability, and may pay living expenses after an insured loss. It does not cover the building, which is the landlord's responsibility.
Read the guide: Renters Insurance: What It Covers and Who Needs It - Replacement cost
- A way of valuing a loss that pays what it costs to repair or replace the item with a similar new one, without subtracting for age or wear, up to your policy limit.
Read the guide: Replacement cost vs. actual cash value
S
- Special enrollment period
- A time outside the yearly open enrollment period when you can sign up for health insurance after a qualifying life event, such as losing coverage, moving, getting married or having a baby. It is usually 60 days.
Read the guide: Special Enrollment Periods for Health Insurance - SR-22
- A certificate that your insurer files with the state to prove you carry the minimum required liability coverage. States generally require it after certain violations. It is a filing, not a type of insurance.
Read the guide: What Is an SR-22 and Who Needs One? - Subrogation
- The right of your insurer, after paying your claim, to seek reimbursement from the person or company that caused the loss.
T
- Term life insurance
- Life insurance that covers you for a set period, such as 10, 20 or 30 years. It pays a death benefit if you die during that period and generally has no cash value.
Read the guide: Term life vs. whole life insurance
U
- Umbrella policy
- Extra liability coverage that applies above the limits of your auto, home or other liability policies and can help with large claims.
Read the guide: Umbrella Insurance: Extra Liability Protection Explained - Underinsured motorist coverage
- Coverage that applies when the at-fault driver has insurance, but not enough to cover your losses.
Read the guide: Which States Require Uninsured Motorist Coverage? - Underwriting
- The process an insurer uses to decide whether to offer you coverage and at what price, based on factors such as your risk, your history and the type of coverage.
Read the guide: What affects your car insurance rate - Uninsured motorist coverage
- Coverage that pays for your injuries, and in some states your property damage, when the driver at fault has no insurance or cannot be identified. Rules and requirements vary by state.
Read the guide: Which States Require Uninsured Motorist Coverage?
W
- Whole life insurance
- A type of permanent life insurance that stays in force for your whole life as long as premiums are paid, and builds cash value.
Read the guide: Term life vs. whole life insurance
Informational only. These definitions are general, and terms can mean slightly different things in different policies and states.