When you speak to someone about an insurance policy or insurance, there may be some words, and terms used that you may not be familiar with. It is always best when looking over any insurance policy or speaking with an insurance professional, if you do not understand what is being said to you or what you are reading, to ask about it or seek out advice from someone to explain this to you.
Here are a few of the more common terms used in the insurance industry and their definition.
Accident – An unexpected or unplanned event or incident, which can cause damage or injury. An example would be a car accident or slipping and falling.
Accidental Death – A death caused by an unexpected or unplanned event or incident.
Accidental Death Benefit – A rider or side benefit of some life insurance policies that will pay an additional payment, over and above the original death benefit, if the policyholder dies as a result of an accident.
Act of God – An event that is not the fault of any individual, usually a natural disaster such as a flood, hurricane, etc.
Actuary – A professional person who is qualified to calculate the risks and probabilities related to insurance and pensions.
Additional Premium – A additional amount paid on top of an agreed premium as a result of a change to an existing insurance policy.
Annual Percentage Rate or APR – This is the percentage of interest you will be charged hen you borrow money. This is over an annual or 12 month period.
Beneficiary – The person or persons nominated to receive the proceeds from an insurance policy or an annuity or pension, upon the death of the insured or annuitant.
Benefit - Money paid by an insurer when a claim is accepted.
Cash in Value – The amount of money you will receive if you cash in an investment.
Claim – When the insured, beneficiary or customer asks the insurance company to pay to sort out a problem caused by an event such as a car accident or flood. In the instance of life insurance, when the insured dies, a claim is made to have the policy pay out the death benefit.
Contents Policy – An insurance policy that covers the contents of your home or other building against various risks, such as fire, flooding, burglary, etc.
Contract – An agreement between two or more people to do, or not to do, something. Contracts or agreements, can be verbal or in writing an can be enforced by the law.
Cooling Off Period – A period of time a customer has to cancel a policy or change their minds without a penalty.
Coverage – What an insurance policy will or will not cover/protect if you need to make a claim.
Decreasing Term Insurance – A term insurance policy where the amount of money paid out for a claim decreases over a period of time until the end of the term. The premium may remain the same, but the benefit amount reduces.
Dependent – Someone who is reliant on you, such as a child, family member, spouse or partner.
Endowment – An amount or sum of money left to a beneficiary after you die. The money can be either as an income or a lump sum.
Escalation Benefit – Where premiums and benefits rise each year by an agreed amount.
Exclusion(s) – A risk or item that is specifically not covered by an insurance policy. Can also include a person such as in car insurance.
Family Income Benefit – A type of insurance that pays out a regular amount of money to the beneficiary or family of the insured over a specific period of time after the insured dies.
Fixed Interest Rate – This is the rate of interest to be paid on a debt or asset and does not change during a set time period.
General Insurance – Usually non-life insurance coverage. It can be insurance for things such as car, travel, pet, health, home, etc.
Guaranteed Premiums – Premiums or payments that will stay the same over a set period of time.
Holiday Insurance - Basically travel insurance. An insurance policy that covers certain risks when you go on holiday, like lost luggage, hospital treatments, accidents, etc.
Increasing Term - A term insurance policy where the coverage goes up each year by a fixed amount. These policies can be to protect someone whose income rises each year.
Inflation – The percentage of change in the cost of living over time. This is measured through the Consumer Price Index (CPI) or Retail Price Index (RPI). As prices rise, the value of money decreases.
Insolvency - The lack of finances to pay back debts. Your liabilities exceed your assets.
Insurable Interest – The interest a person has in something such as a property or another individual that if there was a loss in the insured property or person, the original person would experience a loss.
Insurance - A financial product used to protect assets, property or persons against risk or loss.
Insurance Company – A company that creates and holds insurance products to take on risks. In return for payment of a premium, the insurance company states they will pay out a certain amount or protect various items.
Insured - The person who the insurance policy covers. Can be the policyholder, but doesn’t always have to be.
Investment – A asset or item that is purchased that may increase in value or generate income or appreciate in the future.
Joint Life – A policy that covers two (2) people and pays out when the first person dies.
Key Person Insurance – An insurance policy that pays out in the event of the death of a key employee on whom a business may depend on for its continued profitability or existence.
Lapse – When a customer stops paying premiums or a policy that is not renewed.
Liability Insurance - This is a type of insurance that covers businesses and business owners against the cost of compensation claims that may be brought about by negligence and can be brought against them by employees, clients, customers, shareholders, investors or members of the public.
Life Expectancy – The length of time you are likely to live. This is taking into account various factors such as your age, health, gender, etc.
Liquidation – The process of closing down a company and selling its assets in order to pay its debts and distribute any money the company may have.
Loss – Injury or damage to an insured property or person as a result of an accident or death.
Market Value – The value or price you could expect to get if you sold your property or goods.
Maturity – When a life insurance policy or pension reaches its agreed time limit, it comes to an end and its value is paid out.
Mortality Rate – A measure of the number of deaths, in general or due to a specific cause, in a population during a given period of time.
Negligence - A failure to take proper or reasonable care in something that results in damage or injury to someone or something.
Non-disclosure – When someone, possibly a customer, does not divulge or tell their insurer something that might affect the insurer’s decision to provide insurance coverage or the cost of the insurance coverage.
Overinsured – When someone buys insurance coverage for more than the value of the item(s) insured.
Personal Accident – An insurance policy that covers you for accidental death or a specific injury.
Policy - The insurance coverage that has been agreed upon between the insurance company and the customer.
Policyholder – The person or persons that is taking out an insurance policy and paying the premium. They may or may not be the insured.
Pre-existing Medial Condition – Any health condition that a person may have now or has in the past. This can include any health condition a person may be waiting diagnosis for or are currently being treated for or may be treated for in the immediate future. This is health conditions prior to the start of any health, life or other insurance policy is in effect.
Premium – The payment or amount of money to be paid by a customer for an insurance policy.
Property – Usually refers to buildings, but can include surrounding grounds such as driveways, patios, and outbuildings.
Rate - The price or premium for insurance.
Reimbursement – Repayment of money to a customer for the cost that is covered by the insurance policy. If a client pays out £100, they can be reimbursed for the full £10 depending on the terms of the policy.
Renewal Notice – The notice sent to a customer advising them or inviting them to renew their policy.
Rider – An additional amount of coverage to an existing policy.
Risk - An event or outcome that is insured against, such as a fire, theft, death, etc.
State Pension – The pension the government pays to everyone who has paid the minimum National Insurance Contributions.
Statement of Fact – A form outlining all the information given to an insurer that is signed by the customer.
Surety – Someone who takes responsibility for another person’s debts and guarantees they will be paid. Similar to a guarantor.
Tangible Asset – A physical item or belonging such as a property, land, machinery, that may have value.
Third Party - A term used heavily in auto insurance relating to a person who is involved in a claim but its neither the insured not the policyholder.
Total Permanent Disability – There are some life insurance policies that will pay out if the policyholder becomes permanently disabled. The policy will then cease at that point.
Underinsured – When the amount of insurance in place is not enough to cover the value or maximum loss or damage.
Uninsurable Risk - A risk an insurer will not take on or refuses to insure. Someone with a terminal illness would be uninsurable.
Valuables – These can be antiques or jewellery, anything of value a customer may own.
Void – Meaning cancelled, null and void, no longer in place.
Wear and Tear – The fall in value of an item over time due to usage or damage that may occur.
Write Off – When an insured item, such as a car, is damaged beyond repair, or the cost to repair exceeds the value of the car or item. It is said to be written off, also know as a total loss.
So just a few of the more common terms and words used in insurance. But again it is always best to get professional help and advice if there is anything in a policy you do not fully understand.