Insurance Definitions

Get a comprehensive understanding of insurance with our list of insurance definitions, including terms like premiums, deductibles, co-insurance, and more. Learn about various types of insurance and key concepts in the industry to help you make informed decisions about your coverage

Insurance: is like a parachute - you hope you never have to use it, but it's nice to know it's there just in case you accidentally jump out of a perfectly good airplane.

Premium: An insurance premium is like a monthly ransom payment to your insurance company. You're essentially telling them, "Please don't let anything bad happen to me, and I'll keep giving you my money.

Deductible: An insurance deductible is like a "You break it, you buy it" policy for your own body. It's like saying, "Hey, if I accidentally run into a tree or trip over my own shoelaces, I'll pay the first few thousand dollars, and you can cover the rest.

Co-pay: A fixed amount an individual must pay out of pocket for a particular medical service or treatment, usually at the time of service.

Co-insurance: A cost-sharing arrangement where the insured and the insurance company each pay a percentage of the total cost of covered losses or damages.

Policyholder: The individual who owns an insurance policy.

Insurer: The insurance company that provides coverage to the policyholder.

Claim: A request made by the policyholder to the insurance company for payment for losses or damages covered under the policy.

Underwriting: The process by which an insurance company determines the risk associated with insuring a particular individual or entity.

Actuary: A professional who uses statistical and financial data to calculate risks and determine insurance rates.

Risk: The likelihood that a particular event or outcome will occur, resulting in financial loss or damage.

Liability: Legal responsibility for losses or damages, often used in the context of auto insurance or property insurance.

Property insurance: Insurance that protects the policyholder against damage to their property, such as a home or car.

Health insurance: Insurance that provides coverage for medical expenses, including doctor visits, hospital stays, and prescription drugs.

Life insurance: Insurance that provides a payout to the policyholder's beneficiaries upon the policyholder's death.

Disability insurance: Insurance that provides income replacement in the event that the policyholder is unable to work due to a disability.

Long-term care insurance: Insurance that provides coverage for long-term care services, such as nursing home care or in-home care.

Umbrella insurance: Insurance that provides additional liability coverage beyond the limits of other insurance policies, such as auto or home insurance.

Insurance policy: The legal document that outlines the terms and conditions of an insurance contract between the policyholder and the insurance company.

Policy limit: The maximum amount that an insurance company will pay for covered losses or damages.

Exclusions: Situations or circumstances that are not covered under an insurance policy.

Riders: Additional coverage options that can be added to an insurance policy for an additional cost.

Endorsement: A formal amendment to an insurance policy that changes the terms or coverage provided.

Renewal: The process by which an insurance policy is extended or continued for another term.

Cancelation: The termination of an insurance policy before the end of its term.

Non-renewal: The decision by an insurance company not to renew an insurance policy at the end of its

Risk management: The practice of identifying and minimizing risks to reduce the likelihood of financial loss or damage.

Reinsurance: The process by which an insurance company transfers some or all of the risk associated with insuring a particular individual or entity to another insurance company.


Self-insurance: The practice of setting aside funds to cover potential losses or damages instead of purchasing insurance.

Certificate of insurance: A document that provides proof of insurance coverage.

Indemnity: Compensation paid to the policyholder for covered losses or damages.

Loss control: The practice of implementing measures to reduce the likelihood of losses or damages.

Salvage: Property that has been damaged or destroyed and is now the property of the insurance company after the policyholder has been compensated.

Subrogation: The right of an insurance company to recover funds from a third party that was responsible for the losses or damages covered under the policy.

Insurance score: A numerical rating that is used by insurance companies to assess the risk associated with insuring a particular individual or entity.

Act of God: An event that is caused by natural forces, such as a hurricane or earthquake, that is beyond the control of humans.

Actual cash value: The value of an item at the time of loss, taking into account its age, condition, and other factors.

Replacement cost: The cost to replace an item with a similar new item, without any deduction for depreciation.

Incontestability: A provision in an insurance policy that prevents the insurance company from contesting the validity of the policy after a certain period of time has passed.

Insurable interest: The legal or financial interest that an individual or entity has in the insured property or person, which provides a legitimate reason for purchasing insurance.