Here’s a beginner-friendly glossary of common insurance terms to help you decode the jargon and feel more confident reading policies, comparing quotes, and making claims:
🧾 Basic Insurance Terms
| Term | What It Means |
|---|---|
| Premium | The amount you pay (monthly, yearly, or per term) to keep your insurance active. Think of it as a subscription fee. |
| Deductible | The amount you pay out of pocket before insurance starts covering costs. |
| Claim | A formal request to your insurer asking them to pay for a loss or service covered by your policy. |
| Coverage | What the policy protects you against (e.g., theft, accidents, illness). |
| Exclusion | Specific things the policy does not cover. |
| Policyholder | The person who owns the insurance policy—you. |
| Insured | The person(s) covered by the insurance (can be you and/or others). |
| Beneficiary | The person who gets the money from the policy (common in life insurance). |
| Rider / Endorsement | An optional add-on to customize your coverage for specific needs. |
💰 Payment & Cost Terms
| Term | What It Means |
|---|---|
| Co-pay | A fixed fee you pay for a covered service (common in health insurance, e.g., $20 for a doctor visit). |
| Co-insurance | The percentage of costs you share with the insurer after meeting your deductible (e.g., 80/20 split). |
| Out-of-pocket maximum | The most you’ll pay in a year before the insurer covers 100% of your care. |
| Limit / Coverage Limit | The maximum amount the insurer will pay for a covered loss. |
🔍 Claims & Coverage Terms
| Term | What It Means |
|---|---|
| Underwriting | The process insurers use to assess risk and decide your coverage terms and pricing. |
| Adjuster | A person who investigates your claim and decides how much the insurer will pay. |
| Loss | The damage or event that leads to an insurance claim (e.g., theft, car crash). |
| Liability | Your legal responsibility if you cause damage or injury to others. |
| Replacement Cost | The amount to replace an item with a new one of similar kind and quality. |
| Actual Cash Value (ACV) | The item’s value after depreciation (what it’s worth now, not new). |
🌎 Types of Insurance Terms
| Term | What It Means |
|---|---|
| Term Life Insurance | Life insurance that lasts for a set period (e.g., 10, 20 years). |
| Whole Life Insurance | Permanent life insurance that covers you for life and builds cash value. |
| Third-party coverage | Insurance that covers damage/injury to others, not you. Common in auto policies. |
| Comprehensive coverage | Covers non-collision-related damage (theft, fire, floods, etc.). |
| Indemnity | A promise to restore you financially after a covered loss. |
📌 Pro Tip:
Always check the “Definitions” section in your policy. It tells you exactly how the insurer defines each term—which can vary from company to company.
Would you like a printable or downloadable version of this glossary for easy reference?
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