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Insurance Terminology Basics
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Premium
The amount of money charged by the insurance company for the coverage provided by the policy.
Deductible
The amount that the policyholder must pay out of pocket before the insurance company pays a claim.
Policy Limit
The maximum amount an insurance company will pay out for a given claim or over the life of the policy.
Underwriting
The process of evaluating the risk of insuring a home, car, or individual, in order to decide the price of the policy.
Claim
A formal request by a policyholder to an insurance company for coverage or compensation for a covered loss or policy event.
Beneficiary
The person or entity designated to receive the death benefits from a life insurance policy.
Coverage
The range of protection provided under an insurance policy.
Exclusion
Provisions within an insurance policy that eliminate coverage for certain risks, people, property classes, or events.
Rider
An optional add-on to an insurance policy that provides additional benefits at an additional cost.
Actuary
A business professional who deals with the financial impact of risk and uncertainty.
Adjuster
An insurance company representative who investigates and settles insurance claims to determine the extent of the insuring company's liability.
Reinsurance
Insurance that an insurance company purchases to insure itself against the risk of a large loss.
Annuity
An insurance product that provides a series of payments at regular intervals, usually for a person's lifetime, in exchange for an initial premium.
Indemnity
A principle based on restoring an individual or entity to the financial position they held prior to a loss.
Liability Insurance
A type of insurance that provides protection against claims resulting from injuries and damage to people or property.
Term Life Insurance
A type of life insurance policy that provides coverage at a fixed payment rate for a limited period of time.
Whole Life Insurance
A life insurance policy that remains in force for the insured's whole life and includes a saving component that builds cash value.
Coinsurance
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.
Subrogation
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.
Actuarial Table
A statistical chart used by actuaries to calculate the probability of certain events like mortality, sickness, injury, disability, or retirement.
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