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Insurance Terminology Basics

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Premium

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The amount of money charged by the insurance company for the coverage provided by the policy.

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Deductible

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The amount that the policyholder must pay out of pocket before the insurance company pays a claim.

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Policy Limit

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The maximum amount an insurance company will pay out for a given claim or over the life of the policy.

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Underwriting

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The process of evaluating the risk of insuring a home, car, or individual, in order to decide the price of the policy.

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Claim

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A formal request by a policyholder to an insurance company for coverage or compensation for a covered loss or policy event.

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Beneficiary

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The person or entity designated to receive the death benefits from a life insurance policy.

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Coverage

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The range of protection provided under an insurance policy.

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Exclusion

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Provisions within an insurance policy that eliminate coverage for certain risks, people, property classes, or events.

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Rider

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An optional add-on to an insurance policy that provides additional benefits at an additional cost.

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Actuary

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A business professional who deals with the financial impact of risk and uncertainty.

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Adjuster

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An insurance company representative who investigates and settles insurance claims to determine the extent of the insuring company's liability.

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Reinsurance

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Insurance that an insurance company purchases to insure itself against the risk of a large loss.

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Annuity

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An insurance product that provides a series of payments at regular intervals, usually for a person's lifetime, in exchange for an initial premium.

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Indemnity

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A principle based on restoring an individual or entity to the financial position they held prior to a loss.

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Liability Insurance

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A type of insurance that provides protection against claims resulting from injuries and damage to people or property.

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Term Life Insurance

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A type of life insurance policy that provides coverage at a fixed payment rate for a limited period of time.

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Whole Life Insurance

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A life insurance policy that remains in force for the insured's whole life and includes a saving component that builds cash value.

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Coinsurance

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A form of cost-sharing between the insurance company and the insured, where the policyholder pays a set percentage of the cost of medical services after the deductible has been paid.

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Subrogation

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The legal process by which an insurance company, after paying a loss, seeks to recover the amount of the loss from the party legally responsible for it.

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Actuarial Table

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A statistical chart used by actuaries to calculate the probability of certain events like mortality, sickness, injury, disability, or retirement.

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