Accelerated death benefit
A life insurance feature, often added by rider, that lets a policyholder diagnosed with a terminal, chronic or critical illness receive part of the death benefit while still alive. Any amount paid early reduces the benefit later paid to beneficiaries. Rules, eligible conditions and possible tax effects vary by policy and state.
Actual cash value
A way of valuing property at the time of loss: replacement cost minus depreciation for age, wear and obsolescence. An actual cash value (ACV) policy pays less than the cost of buying a new item, so a ten-year-old roof or television is reimbursed at its depreciated value. Some states define ACV differently in law or court decisions.
Additional insured
A person or organization that is not the named insured but is added to a policy, usually by endorsement, and receives some coverage under it. Contracts often require a contractor or tenant to name the property owner or project owner as an additional insured on their liability policy. Coverage is typically limited to liability arising from the named insured's work or operations.
Additional living expenses
Coverage in homeowners and renters policies that pays the extra cost of living elsewhere when a covered loss makes your home uninhabitable, such as hotel bills, restaurant meals above your normal food costs and temporary rent. It is often part of loss of use coverage and is limited by a dollar amount, a time period or both.
Adjuster
The person who investigates a claim, determines whether it is covered and estimates how much should be paid. A staff adjuster works for the insurer, an independent adjuster is hired by the insurer on contract, and a public adjuster is hired by the policyholder for a fee to represent the policyholder's interests. Most states license adjusters.
Admitted carrier
An insurance company licensed by a state insurance department to sell insurance in that state. Admitted insurers must file rates and policy forms where required and follow state rules, and their policyholders are generally protected by the state guaranty association if the insurer becomes insolvent. Compare with non-admitted carriers in the surplus lines market.
Agent
A person or business licensed by the state to sell insurance on behalf of one or more insurers. A captive or exclusive agent represents a single company, while an independent agent can offer policies from several insurers. Agents generally act for the insurer and are usually paid by commission. In most states agents are licensed as insurance producers.
Agreed value
A policy provision in which the insurer and policyholder agree on the value of an item when the policy is written, so that amount is paid in a total loss without deduction for depreciation. Agreed value is common for classic cars, fine art, boats and some commercial property, and it can also suspend a coinsurance requirement.
AM Best rating
A financial strength rating issued by AM Best, a credit rating agency specializing in insurance. The rating is an opinion of an insurer's ability to meet its ongoing obligations to policyholders and runs from A++ (Superior) downward. Consumers and businesses use it, along with ratings from S&P, Moody's and Fitch, to compare insurers' financial stability.
Annuity
A contract, usually sold by a life insurer, in which you pay a lump sum or series of payments and in return receive income, either immediately or starting at a later date, for a set period or for life. Annuities can be fixed, indexed or variable. They are used mainly for retirement income and tax-deferred growth, and they often carry surrender charges.
Application
The form, paper or online, in which a person or business asks for insurance and provides information the insurer uses to underwrite and price the policy. Answers on the application become part of the basis for the contract, so incomplete or false answers can lead to a claim denial, a rescission or a premium adjustment.
Appraisal clause
A property policy provision for settling disagreements about the amount of a covered loss, not about whether it is covered. Each side chooses an appraiser, the two appraisers select an umpire, and agreement by any two of the three sets the amount. Each party usually pays its own appraiser and shares the umpire's cost.
Bad faith
An insurer's unreasonable failure to honor its obligations under a policy, such as denying a valid claim without a proper investigation, delaying payment without reason or refusing a reasonable settlement within policy limits. Many states allow policyholders to sue for bad faith, and damages can exceed the policy limits. Standards differ by state.
Beneficiary
The person, trust, charity or other entity named to receive the death benefit of a life insurance policy or the remaining value of an annuity or retirement account. A primary beneficiary receives the benefit first, and a contingent beneficiary receives it if the primary beneficiary has died. Policyholders can usually change beneficiaries unless the designation is irrevocable.
Binder
A temporary written or electronic agreement that provides insurance coverage until the formal policy is issued. A binder states the insurer, the coverage, the limits and the effective dates. Lenders often accept a binder as proof of insurance at a home or car closing. It has the same effect as a policy for the period stated.
Bodily injury liability
Coverage that pays for injuries you cause to other people, including their medical bills, lost wages and pain and suffering, along with your legal defense costs. In auto insurance it is part of the liability coverage most states require, usually shown as per-person and per-accident limits. Minimum limits differ by state.
Broker
A licensed insurance professional who represents the buyer rather than the insurer, compares coverage from several companies and helps place the policy. Brokers are usually paid commission by the insurer, sometimes plus a fee. In many states the license is the same producer license held by agents; the role is defined by whom the producer represents.
Business interruption insurance
Coverage, usually added to a commercial property policy, that replaces lost net income and pays continuing expenses such as payroll and rent when a business must close or slow down because of covered physical damage to its property. It applies for a defined period of restoration and often has a waiting period. Contingent business interruption covers damage at a supplier or customer.
Business owners policy
A package policy for small and medium-sized businesses that combines property insurance, general liability and usually business income coverage in one contract, often at a lower price than buying them separately. Eligibility depends on the insurer's size and industry criteria. A BOP does not include workers' compensation, commercial auto or professional liability.
Cancellation
The termination of an insurance policy before its expiration date, either by the policyholder or by the insurer. State laws limit when and how insurers may cancel, especially after a policy has been in force for a period, and require written notice. Unearned premium is usually refunded, sometimes minus a short-rate penalty when the policyholder cancels.
Captive insurer
An insurance company created and owned by a business or group of businesses mainly to insure their own risks. Captives can lower costs, cover risks that are hard to insure and give access to reinsurance. Popular domiciles include Vermont, Utah, Delaware and other US states as well as Bermuda and the Cayman Islands.
Cash value
The savings component of permanent life insurance, such as whole life and universal life, that grows over time on a tax-deferred basis. Policyholders can borrow against the cash value, use it to pay premiums or receive it by surrendering the policy, minus any surrender charges. Unpaid loans and withdrawals reduce the death benefit.
Certificate of insurance
A document issued by an insurer or producer that summarizes a policy: the insured, the insurer, the policy numbers, the types of coverage, limits and effective dates. Businesses provide certificates to clients, landlords and project owners as proof of coverage. A certificate is informational and does not change the policy's terms.
Claim
A formal request by a policyholder or a third party for payment or services under an insurance policy after a loss. The claim process usually involves reporting the loss promptly, documenting damage or expenses, cooperating with the adjuster and, for property, submitting a proof of loss. State laws set time limits for insurers to acknowledge, investigate and pay claims.
Claims-made policy
A liability policy that covers claims first made against the insured during the policy period, provided the incident occurred after any retroactive date. Professional liability, directors and officers and cyber policies are often claims-made. When such a policy ends, an extended reporting period, or tail, may be needed to cover claims reported later.
CLUE report
A Comprehensive Loss Underwriting Exchange report, a database record maintained by LexisNexis that lists auto and home insurance claims filed on a person or property, typically going back several years. Insurers use it to underwrite and price policies. Under the Fair Credit Reporting Act, consumers can request a free copy and dispute errors.
COBRA
A federal law that allows workers and their families who lose employer group health coverage, for example after job loss or reduced hours, to keep the same coverage for a limited period. The person usually pays the full premium plus an administrative fee. COBRA applies to employers with 20 or more employees; many states have similar mini-COBRA laws for smaller employers.
Coinsurance
In health insurance, your share of the cost of a covered service, expressed as a percentage, that you pay after meeting your deductible. For example, with 20% coinsurance you pay 20% of the allowed amount and the plan pays 80%. Coinsurance payments count toward the out-of-pocket maximum, after which the plan pays in full for covered in-network care.
Coinsurance clause
A commercial property provision requiring you to insure your property for at least a set percentage of its value, often 80%, 90% or 100%. If you carry less than required at the time of loss, the insurer reduces the claim payment in proportion to the shortfall. Agreed value coverage can suspend this penalty.
Collision coverage
Optional auto insurance that pays to repair or replace your vehicle after it hits another vehicle or an object, or overturns, regardless of who is at fault, minus your deductible. Lenders and lessors usually require it. Payment is generally limited to the car's actual cash value, so it may not cover a loan balance; gap insurance can fill that difference.
Commercial general liability
A business policy that covers claims for bodily injury and property damage to others caused by the company's premises, operations, products or completed work, plus personal and advertising injury such as libel or slander. It pays defense costs and settlements or judgments up to the limits. Most CGL policies are written on standard ISO forms.
Comprehensive coverage
Optional auto insurance that pays for damage to your car from causes other than a collision, such as theft, vandalism, fire, hail, flood, falling objects and hitting an animal, minus your deductible. It is sometimes called other-than-collision coverage. Lenders and lessors usually require it along with collision.
Contestability period
A period after a life insurance policy is issued, usually two years, during which the insurer can investigate and contest a claim if it finds material misstatements on the application. After the period ends, the policy generally becomes incontestable except for nonpayment of premium and, in some states, fraud. A reinstated policy may start a new period.
Coordination of benefits
Rules that decide the order in which two or more health plans pay when a person is covered by more than one, such as a spouse's employer plan and their own. The primary plan pays first and the secondary plan may pay remaining eligible costs. The rules prevent payments that exceed the actual cost of care.
Copayment
A fixed dollar amount you pay for a covered health care service or prescription, such as a set charge for a doctor visit or a generic drug. Copays usually apply in addition to or instead of the deductible, depending on the plan, and generally count toward the out-of-pocket maximum. Amounts are listed in the plan's summary of benefits.
Credit-based insurance score
A score derived from information in a consumer's credit report that insurers in many states use, along with other factors, to predict the likelihood of claims and set auto and home insurance rates. It is different from a lending credit score. Several states limit or ban its use, and insurers must give notice when it leads to a higher rate.
Declarations page
Usually the first page of an insurance policy, summarizing the key details: the named insured, address, policy period, insured property or vehicles, coverages, limits, deductibles, premium and endorsements attached. It is the quickest way to check what you bought. Insurers send an updated declarations page at each renewal or policy change.
Deductible
The amount you pay out of pocket on a covered claim before the insurer pays. In property and auto insurance it is usually a fixed dollar amount or, for hurricanes and earthquakes, a percentage of the insured value. In health insurance it is the amount you pay each year before the plan starts sharing costs. Higher deductibles generally mean lower premiums.
Depreciation
The decrease in the value of property over time because of age, wear and tear or obsolescence. Insurers subtract depreciation when paying actual cash value claims. Under many replacement cost policies the insurer first pays actual cash value and then releases the withheld depreciation, called recoverable depreciation, after the item is repaired or replaced.
Direct writer
An insurance company that sells its policies directly to consumers online, by phone or through its own employed or exclusive agents, rather than through independent agents and brokers. Many large US auto and home insurers use a direct or exclusive-agent model. Consumers compare direct writers by obtaining quotes from each company separately.
Disability income insurance
Insurance that replaces part of your income if illness or injury prevents you from working. Short-term disability pays for a few weeks or months; long-term disability can pay for years or until retirement age. Key terms include the definition of disability (own occupation or any occupation), the elimination period and the benefit period.
Dividend
A return of part of the premium to policyholders of a participating policy, typically whole life insurance from a mutual insurer, when the company's results are better than assumed. Dividends are not guaranteed. They can be taken in cash, used to reduce premiums, left to accumulate interest or used to buy paid-up additional insurance.
Dwelling coverage
The part of a homeowners policy, often called Coverage A, that pays to repair or rebuild the house itself and attached structures such as a garage or deck after a covered loss. The limit should reflect the full cost to rebuild, not the market value of the home. Detached structures, contents and loss of use are covered under separate sections.
Earthquake insurance
Coverage for damage from earth movement caused by an earthquake, which standard homeowners and commercial property policies generally exclude. It is sold as an endorsement or a separate policy and usually has a percentage deductible based on the dwelling limit. In California it is available through the California Earthquake Authority and private insurers.
Elimination period
In disability and long-term care insurance, the number of days that must pass after a disability begins, or after you need care, before benefits start. It works like a time deductible: a longer elimination period lowers the premium but means you must cover more of the early costs yourself.
Endorsement
A written change added to an insurance policy that adds, removes or modifies coverage, limits, insured property or insured persons. Endorsements can be added when the policy is issued or during its term, sometimes for additional premium. In life and health insurance a similar addition is often called a rider.
Errors and omissions insurance
Professional liability coverage that protects businesses and professionals against claims that a mistake, oversight, negligence or failure to perform a professional service caused a client financial loss. It pays defense costs and settlements. Common buyers include consultants, technology firms, real estate agents, insurance producers and architects. It is usually written on a claims-made basis.
Exclusion
A provision in an insurance policy that eliminates coverage for certain perils, property, people, activities or situations. Common exclusions include flood and earthquake in homeowners policies, intentional acts, wear and tear, and war. Some exclusions can be removed or bought back by endorsement or separate policy. Exclusions are read together with definitions and conditions.
Explanation of benefits
A statement a health insurer sends after processing a claim, showing what the provider billed, the allowed amount, what the plan paid and what you may owe as deductible, copay or coinsurance. An EOB is not a bill. Comparing it with the provider's bill helps catch errors and denied services that can be appealed.
Face amount
The death benefit stated on a life insurance policy, the amount the insurer agrees to pay beneficiaries when the insured person dies. The actual payment can be higher if paid-up additions or riders apply, or lower if there are outstanding policy loans, withdrawals or unpaid premiums.
Flood insurance
Coverage for direct physical loss caused by flooding, which standard homeowners and commercial property policies exclude. In the US most residential flood policies are issued through the National Flood Insurance Program, managed by FEMA, and private flood insurance is also available. NFIP policies generally have a waiting period before coverage begins, and lenders require flood cover in high-risk zones.
Formulary
The list of prescription drugs covered by a health plan or Medicare drug plan, usually organized into tiers with different cost sharing. Drugs on lower tiers, often generics, cost less. A formulary may require prior authorization or step therapy for some drugs, and you can request an exception if a needed drug is not covered.
Free look period
A short period after a life insurance policy or annuity is delivered during which the buyer can review it and cancel for a refund. The length and refund rules are set by state law and can be longer for seniors or replacement policies. The free look period is listed on the policy's cover page.
Gap insurance
Guaranteed asset protection coverage that pays the difference between what you owe on a car loan or lease and the vehicle's actual cash value if the car is totaled or stolen. Collision or comprehensive pays only the car's value, which can be less than the loan balance early in the loan. Gap is sold by auto insurers, lenders and dealers.
Grace period
A period after a premium due date during which the policy stays in force even though payment has not been received. If you pay within the grace period, coverage continues without interruption. Life and health policies have grace periods set by contract and state or federal rules; if payment is not made by the end, the policy can lapse.
Guaranteed renewable
A policy provision under which the insurer must renew coverage each term as long as premiums are paid, and cannot cancel because of changes in health. The insurer may raise premiums, but only for an entire class of policyholders, not for one person. It is common in disability, long-term care and some life insurance.
Guaranty association
A state-created organization that pays covered claims of policyholders when an insurer licensed in that state becomes insolvent and is liquidated. Every state has property and casualty and life and health guaranty associations, funded by assessments on solvent insurers. Protection is subject to limits that differ by state and generally does not extend to surplus lines insurers.
Hazard
A condition that increases the chance or severity of a loss from a peril. Physical hazards include faulty wiring or icy steps; moral hazard is dishonesty or a tendency to cause loss deliberately; morale hazard is carelessness because a person knows they are insured. Underwriters evaluate hazards when deciding whether to accept a risk and at what price.
Health maintenance organization
A type of health plan, known as an HMO, that provides care through a network of contracted doctors and hospitals. Members usually choose a primary care physician and need referrals to see specialists, and care outside the network is generally not covered except in emergencies. HMOs typically have lower premiums and out-of-pocket costs than less restrictive plans.
Health savings account
A tax-advantaged savings account, known as an HSA, available to people enrolled in an IRS-qualified high-deductible health plan. Contributions are tax-deductible or pre-tax, growth is tax-free, and withdrawals for qualified medical expenses are tax-free. Unused funds roll over each year and stay with you if you change jobs. The IRS sets annual contribution limits.
High-deductible health plan
A health plan with a higher deductible than traditional plans that meets IRS minimum deductible and maximum out-of-pocket rules, making the enrollee eligible to open a health savings account. Premiums are usually lower, and preventive care is typically covered before the deductible. The IRS updates the dollar thresholds each year.
Homeowners insurance
A package policy for owner-occupied homes that covers the dwelling, other structures, personal property and additional living expenses after covered losses, and personal liability for injuries or damage you cause to others. The most common US form, HO-3, covers the house on an open-perils basis and contents on a named-perils basis. Flood and earthquake are usually excluded.
Indemnity
The principle that insurance should restore a policyholder to the same financial position as before a loss, no better and no worse. It is why property claims are limited to the actual loss and why you generally cannot collect more than the loss by insuring the same property with several insurers. Life insurance is not an indemnity contract.
Independent agent
A licensed insurance agent who contracts with several insurance companies and can compare and sell policies from each of them. Independent agents can help consumers shop the market and move a policy to another carrier at renewal. They are usually paid by commission from the insurer whose policy they place.
Inland marine insurance
Coverage for property that moves or is used away from a fixed location, such as goods in transit over land, contractors' equipment, tools, builder's risk projects and valuable items like jewelry and fine art. It also covers instruments of transportation such as bridges and pipelines. Inland marine forms are often more flexible than standard property forms.
Insurable interest
A financial or emotional interest in the person or property being insured, such that you would suffer a loss if it were damaged or the person died. Insurable interest is required for a valid insurance contract and prevents gambling on others' losses. For property it must exist at the time of loss; for life insurance, when the policy is issued.
Lapse
The termination of an insurance policy because the premium was not paid by the end of the grace period. Once a policy lapses, coverage stops. Some life insurance policies can be reinstated within a set time if the policyholder pays overdue premiums and may need to show evidence of insurability. Permanent policies may have nonforfeiture options.
Liability insurance
Insurance that pays for damages you are legally responsible for because of injury to other people or damage to their property, along with legal defense costs. It is part of auto, homeowners and renters policies and is sold to businesses as general, professional, product and other forms of liability cover. It does not pay for your own injuries or property.
Limit of liability
The maximum amount an insurer will pay under a policy or a particular coverage. Limits may apply per person, per occurrence or accident, or in the aggregate for the policy period. For example, auto liability limits are often written as three numbers for bodily injury per person, bodily injury per accident and property damage. Losses above the limit fall on the insured.
Long-term care insurance
Insurance that helps pay for services when you can no longer perform basic activities of daily living, such as bathing and dressing, or have a cognitive impairment. It can cover nursing home care, assisted living and home care that health insurance and Medicare generally do not cover. Policies have a daily or monthly benefit, an elimination period and a benefit period.
Loss of use
Homeowners and renters coverage that pays for additional living expenses and, if you rent out part of your home, lost rental income when a covered loss makes the home uninhabitable. It also applies when civil authorities bar access because of nearby damage. It is often called Coverage D and has its own limit.
Medicaid
A joint federal and state program that provides health coverage to eligible low-income adults, children, pregnant women, older adults and people with disabilities. Each state runs its own Medicaid program within federal rules, so eligibility, benefits and names differ. Medicaid also pays for most long-term nursing home care in the US for those who qualify.
Medical payments coverage
Coverage that pays reasonable medical expenses for people injured in an accident regardless of fault, up to a relatively small limit. In auto insurance it covers you and your passengers; in homeowners and general liability policies it covers guests or members of the public injured on your property. It helps resolve minor injuries without a lawsuit.
Medicare
The federal health insurance program for people aged 65 and older and for some younger people with disabilities or end-stage renal disease. Part A covers hospital care, Part B covers doctor and outpatient services, Part D covers prescription drugs, and Part C, Medicare Advantage, lets private plans provide Parts A and B benefits. It is administered by CMS.
Medicare Advantage
Also called Medicare Part C, a type of Medicare health plan offered by private insurers approved by Medicare. It provides all Part A and Part B benefits and usually Part D drug coverage, often through HMO or PPO networks and with an annual out-of-pocket limit. Plans may add extras such as dental and vision. Members cannot also use a Medigap policy.
Medigap
Medicare Supplement Insurance, sold by private insurers, that helps pay costs Original Medicare leaves to you, such as deductibles, coinsurance and copayments. In most states Medigap plans are standardized and identified by letters, so a given lettered plan has the same basic benefits from every insurer, though prices differ. It cannot be used with Medicare Advantage.
Mutual insurance company
An insurer owned by its policyholders rather than by stockholders. Profits can be returned to policyholders as dividends or reduced premiums, and policyholders may have voting rights. Several of the largest US auto, home and life insurers are mutuals or are owned by mutual holding companies. Stock insurers, by contrast, are owned by shareholders.
NAIC
The National Association of Insurance Commissioners, the US standard-setting and regulatory support organization created and governed by the chief insurance regulators of the states, the District of Columbia and the US territories. It develops model laws and regulations, coordinates financial oversight and maintains consumer resources, but each state legislature and regulator decides what to adopt.
Named insured
The person or organization specifically named on the declarations page as the policyholder. The named insured has rights and obligations other insureds may not, such as paying premium, receiving cancellation notices, making policy changes and receiving return premiums. In personal policies the named insured's spouse who lives in the household is usually also covered.
Named perils
A form of coverage that protects only against the causes of loss specifically listed in the policy, such as fire, lightning, windstorm, hail, explosion, theft and vandalism. If a peril is not listed, it is not covered. Named-perils policies are usually narrower and cheaper than open-perils coverage, and the policyholder must show a listed peril caused the loss.
No-fault insurance
An auto insurance system used in some states under which each driver's own insurer pays medical expenses and lost wages for injuries after an accident, regardless of who caused it, through personal injury protection coverage. No-fault laws usually restrict the right to sue the other driver unless injuries or costs exceed a threshold set by state law.
Occurrence policy
A liability policy that covers injury or damage that happens during the policy period, no matter when the claim is made, even years after the policy expires. Most general liability and homeowners liability coverage is written on an occurrence basis. Compare with a claims-made policy, which is triggered by when the claim is reported.
Open enrollment period
The annual window when people can enroll in or change health coverage. On the Affordable Care Act marketplace, including HealthCare.gov and state exchanges, it usually runs from late fall into winter; Medicare and employer plans have their own periods. Outside open enrollment you generally need a qualifying life event for a special enrollment period.
Open perils
Also called all-risk or special form coverage, protection against every cause of physical loss except those specifically excluded in the policy. The insurer must prove an exclusion applies to deny the claim. Most US homeowners policies cover the dwelling on an open-perils basis, while personal property may be covered only for named perils.
Out-of-network
Describes doctors, hospitals and other providers that do not have a contract with your health plan. Care out of network usually costs you more, may not count toward your deductible and out-of-pocket maximum, or may not be covered at all under an HMO. Federal law limits surprise billing for many emergency and certain other services.
Out-of-pocket maximum
The most you will pay for covered in-network health services in a plan year, including deductibles, copays and coinsurance but not premiums. After you reach it, the plan pays 100% of covered in-network costs for the rest of the year. Marketplace and most other plans must have one, and the federal government sets the highest allowed limit annually.
Peril
A specific cause of loss, such as fire, windstorm, hail, theft, flood, earthquake, collision or liability lawsuits. Policies are written either on a named-perils basis, covering only listed causes, or an open-perils basis, covering all causes not excluded. Do not confuse a peril with a hazard, which is a condition that makes a peril more likely or more severe.
Personal injury protection
Auto coverage, known as PIP, that pays medical expenses and often lost wages, essential services and funeral costs for you and your passengers after an accident, regardless of who was at fault. PIP is required in no-fault states and optional or unavailable in many others. Limits and what PIP covers vary significantly by state.
Policy
The written contract between an insurer and a policyholder that sets out what is covered, the limits, deductibles, exclusions, conditions and premium. A typical policy contains a declarations page, insuring agreement, definitions, exclusions, conditions and endorsements. Reading all parts together is necessary to understand what is covered.
Policyholder
The person or organization that owns an insurance policy, pays the premium and can make changes to it. The policyholder is often, but not always, the insured. For example, a parent can own a life insurance policy on a child, or a business can own key person insurance on an executive.
Pre-existing condition
A health problem that existed before the start date of new coverage. Under the Affordable Care Act, major medical health plans cannot refuse coverage or charge more because of pre-existing conditions. Other products, such as short-term health plans, travel insurance, Medigap outside guaranteed-issue periods and some life and disability policies, may still exclude or limit them.
Preferred provider organization
A health plan, known as a PPO, with a network of contracted providers that members can see without referrals. Members pay less when they use in-network providers but still have some coverage out of network at higher cost. PPOs offer more flexibility than HMOs, usually in exchange for higher premiums.
Premium
The amount a policyholder pays for insurance coverage, usually stated for a policy term and paid annually, semi-annually, monthly or through payroll deduction. Premiums are based on the insurer's estimate of risk and costs, including factors such as location, coverage limits, deductibles, claim history and, for life insurance, age and health.
Premium tax credit
A federal tax credit that lowers monthly premiums for eligible people who buy health insurance through the Affordable Care Act marketplace. The amount depends on household income and the cost of a benchmark plan in your area. It can be paid in advance to the insurer and is reconciled on your federal tax return.
Prior authorization
A requirement that your doctor obtain approval from your health plan before you receive certain services, procedures, devices or drugs for them to be covered. Without approval, the plan may deny payment except in emergencies. Prior authorization is common for imaging, specialty drugs and planned surgeries; denials can be appealed.
Producer
The general legal term used in state insurance laws for a person licensed to sell, solicit or negotiate insurance. It includes both agents and brokers. Producers must hold a license from each state where they do business for each line of authority, such as property and casualty or life and health, and complete continuing education.
Proof of loss
A formal, often sworn, statement a policyholder submits to an insurer after a property loss, describing the loss, its cause, the property involved and the amount claimed. Policies usually set a deadline for filing it after the insurer requests it. Failing to file on time can jeopardize the claim, so check the policy and any state rules.
Property damage liability
Coverage that pays for damage you cause to other people's property, such as another car, a fence or a building, when you are legally responsible. In auto insurance it is part of the liability coverage required in most states, with minimum limits set by state law. It does not cover damage to your own property.
Renters insurance
Insurance for tenants that covers personal belongings against covered perils such as fire, theft and water damage from burst pipes, plus personal liability and additional living expenses. The landlord's policy covers the building, not the tenant's contents or liability. Renters insurance, often written on the HO-4 form, is usually inexpensive relative to the protection.
Replacement cost
A valuation method that pays the cost to repair or replace damaged property with new property of like kind and quality, without deducting depreciation. Many insurers pay actual cash value first and the remaining amount after you repair or replace the item. Extended or guaranteed replacement cost endorsements add extra protection for rising rebuilding costs.
Reservation of rights
A letter in which an insurer agrees to investigate or defend a claim while reserving the right to deny coverage later if it finds the loss is not covered. It protects the insurer from waiving policy defenses. Policyholders who receive one should read it carefully and may want independent advice; in some states it entitles the insured to independent counsel.
Rider
An addition to a life, health or disability insurance policy that adds, removes or changes benefits. Common riders include waiver of premium, accidental death, accelerated death benefit, child term and guaranteed insurability. Riders usually cost extra premium. In property and casualty insurance a similar change is usually called an endorsement.
Scheduled personal property
An endorsement or floater that lists specific valuable items, such as jewelry, watches, fine art, collectibles or musical instruments, with an agreed or appraised value. Scheduling provides higher limits than the standard special limits for those categories in homeowners policies, often broader perils including loss, and frequently no deductible.
Self-insured retention
An amount of loss a business must pay itself, including defense costs, before a liability policy responds. Unlike a deductible, which the insurer pays first and recovers from the insured, a self-insured retention is paid directly by the insured, who often controls claims within the retention. It is common in large commercial and umbrella programs.
Special enrollment period
A time outside the annual open enrollment period when you can sign up for or change health coverage because of a qualifying life event, such as losing other coverage, moving, getting married, having a baby or adopting a child. Marketplace special enrollment generally lasts a limited number of days after the event, so act promptly.
SR-22
A certificate of financial responsibility that an auto insurer files with a state motor vehicle agency to prove a driver carries at least the state's minimum liability insurance. States commonly require it after serious violations such as driving uninsured or a DUI. It is not insurance itself, and if the policy lapses the insurer notifies the state. Some states use a form called FR-44.
State insurance department
The state agency that regulates insurance in each US state, the District of Columbia and the territories, led by an insurance commissioner or superintendent. It licenses insurers and producers, reviews rates and policy forms where required, monitors insurer solvency, investigates complaints and enforces insurance laws. Consumers can file complaints with it free of charge.
Subrogation
The insurer's right, after paying a claim, to step into the policyholder's shoes and recover the amount paid from the party responsible for the loss. For example, your auto insurer pays for your repairs and then seeks reimbursement from the at-fault driver's insurer. If successful, your deductible is often refunded in proportion to the recovery.
Surplus lines insurance
Coverage placed with a non-admitted insurer, one not licensed in the insured's state, for risks that admitted insurers will not write, such as unusual, high-hazard or very large exposures. Surplus lines insurers have more freedom on rates and forms but must be eligible under state law, and placements are made by a specially licensed surplus lines broker. Guaranty associations generally do not cover them.
Term life insurance
Life insurance that provides a death benefit for a set period, such as 10, 20 or 30 years, and pays only if the insured dies during that term. It has no cash value and is usually the least expensive way to buy a large amount of coverage. Many policies can be renewed at higher cost or converted to permanent insurance without new medical underwriting.
Total loss
A loss in which insured property is completely destroyed or damaged so badly that repair would cost more than its value, or close to it, under the insurer's or state's threshold. For cars, the insurer pays the actual cash value minus the deductible and takes the vehicle as salvage. State rules on total-loss thresholds and titles vary.
Umbrella insurance
Extra liability insurance that pays above the limits of your auto, homeowners, renters or business liability policies, and may cover some claims those policies exclude, such as certain personal injury claims. It is sold in large limits at relatively low cost. Insurers usually require you to carry minimum underlying liability limits.
Underinsured motorist coverage
Auto coverage that pays for your injuries, and in some states property damage, when an at-fault driver has liability insurance but not enough to cover your losses. It pays the difference up to your coverage limit. Some states require it, others make it optional, and rules on how it stacks or offsets vary by state.
Underwriting
The process an insurer uses to evaluate a risk, decide whether to accept it and set the premium, terms and conditions. Underwriters review applications, inspections, claim histories, credit-based insurance scores where allowed, medical information for life and health products and other data. Underwriting guidelines must comply with state anti-discrimination laws.
Uninsured motorist coverage
Auto coverage that pays for your injuries, and in some states damage to your car, caused by a driver who has no liability insurance, or by a hit-and-run driver. Many states require uninsured motorist coverage, and others require insurers to offer it. Limits and coverage details vary by state, so check your declarations page.
Universal life insurance
A type of permanent life insurance with flexible premiums and an adjustable death benefit. Premiums above the cost of insurance and fees build cash value, which earns interest set by the insurer, while indexed and variable versions link growth to market indexes or investment accounts. If cash value runs too low, the policy can lapse unless premiums are increased.
Waiting period
A period at the start of coverage, or after a loss, during which certain benefits are not paid. Examples include the delay before a new flood insurance policy takes effect, the elimination period in disability insurance and waiting periods for some dental, pet and employer health benefits. Read the policy to see which benefits have one.
Waiver of premium
A rider or provision in life or disability insurance under which the insurer stops requiring premium payments if the policyholder becomes totally disabled, as defined, while keeping the policy in force. There is usually a waiting period before the waiver starts, and the rider may expire at a set age.
Whole life insurance
Permanent life insurance that lasts for the insured's entire life as long as premiums are paid, with level premiums, a guaranteed death benefit and guaranteed cash value growth. Participating policies from mutual insurers may also pay dividends. Whole life costs considerably more than term coverage for the same death benefit.
Workers' compensation
Insurance that pays medical care and part of lost wages for employees injured or made ill on the job, regardless of fault, and in return generally bars employees from suing the employer. Most employers are required by state law to carry it, and benefits and rules are set by each state. Some states run monopoly state funds instead of private insurers.
No terms found. Change your query.