Insurance Insights
Auto Insurance Terms
Bodily Injury Coverage
Also known as bodily injury liability, this pays for the medical expenses a third party incurs due to an accident cause by the policyholder. This policy also covers legal costs in the event the insured is sued for damages.
Medical Payments Coverage (Auto)
Also called Med Pay, this is an optional coverage that helps pay for medical expenses that the policyholder and their passengers incur due to a car accident, even if the driver was at-fault.
Collision Coverage
This part of an auto insurance policy covers the cost of damages resulting from a collision with another vehicle or object, or the car flipping over.
Comprehensive Coverage
This is the portion of a car insurance policy that pays out damages not caused by a collision such as fire, vandalism, and natural disasters. It also covers incidents of vehicle theft.
General Insurance Terms
Conditions (Policy Conditions)
This is the section of a policy document that explains the duties and responsibilities of the insured (policyholder) and the insurance company. It also states the requirements that need to be met for the coverage to be valid.
Declarations Page
This section of the policy document, also called the dec page, summarizes the details of the policy. It contains the coverages, limits, deductibles, and effective date. This page is often located on the front page of the policy.
Deductible
A deductible is the amount the policyholder agrees to pay out-of-pocket before the insurance company shoulders the cost. Typically, the higher the deductible, the lower the premiums as the insurers bear less financial risk.
Lapse
This refers to a period when one goes without insurance coverage. If a person, for example, fails to renew their auto insurance policy, then they now have a lapse in coverage.
Loss
A loss is the basis for filing an insurance claim. This includes direct and accidental damage the insured or their property sustains.
Named Insured
The named insured is the person or business named in the policy, also referred to as the policyholder. An insurance policy can have more than one named insured. The named insureds are listed on the declarations page of the policy document.
Named Perils
These are the specific type of losses or damages listed in the policy document. A named perils coverage provides protection against these.
Special Risk
All-risk coverage, also referred to as open perils, insures against all types of losses, except for those that are specifically excluded from the policy. This applies to several property and casualty (P&C) categories, including homeowners, auto, and commercial insurance.
Health Insurance Terms
Ambulatory Services
These are health services provided to policyholders who are not confined to a healthcare institution. Ambulatory services are also referred to as outpatient services.
Calendar Year Deductible
This is the amount that the policyholder must pay during a calendar year before the health insurance company covers the costs.
Coinsurance
Coinsurance is the portion of coverage that the policyholder must pay for covered services after the deductible has been paid. Coinsurance rates are often indicated as a percentage. For example, if the insurer pays 80% of the claim, the policyholder will shoulder the remaining 20%.
Copayment
This is usually a flat fee that the policyholder pays for certain medical services, with the rest covered by the insurance provider.
Out-of-Network Provider
This refers to health services providers who are not part of a health plan’s network. Policyholders have the option to access out-of-network providers, but they generally pay more for their services.
Out-of-Pocket Maximum
This is the highest amount the policyholder pays during a year for coverage. This includes coinsurance, copayments, and deductibles, but is on top of the regular premiums. Once the out-of-pocket maximum has been reached, the health insurer will cover all expenses for the rest of the year.
Home Insurance Terms
Additional Living Expenses Coverage
This covers the cost incurred if the home becomes uninhabitable due to a covered loss. Coverage is standard in most homeowners’, condo, and renters’ insurance policies, and includes meals and hotel stays. This type of policy is also referred to as loss of use coverage.
Replacement Cost Coverage
This covers the cost to repair or replace damaged property without factoring in depreciation. This type of coverage applies to the house, also called dwelling, and personal belongings.
Scheduled Personal Property Coverage
This type of rider allows the homeowner to raise the amount of their policy limits to cover for high-value items such as jewelry, artwork, musical instruments, and other collectibles.
Life Insurance Terms
Beneficiary
A beneficiary is the person or entity that the policyholder designates to receive the death benefit. This can be the insured’s spouse, immediate family, other relatives, friends, business partners, or even a charitable organization. Policyholders can name several beneficiaries for their life insurance plans and assign how much benefit each person or group will receive.
Convertible Term Life Insurance
This type of policy can be converted into permanent insurance without the need for medical assessment. The insurance company is required to renew the policy regardless of the insured’s health status, subject to policy conditions.
Death Benefit
This refers to the amount that the insurer pays the beneficiary after the policyholder’s death.
Term Life Insurance
This type of policy pays out a death benefit if the insured dies within a specified period. This means the insured can only access the payment in the years when the plan is active.
Whole Life Insurance
Whole life insurance is a type of permanent policy where the savings can grow at a guaranteed rate.