Glossary of Insurance Terms

Want to feel more comfortable with insurance terms? We've compiled a glossary for you and put it in such an order so it is easy to understand.

The Insured

This is the person or entity (business, organization, etc.) that is covered by an insurance policy.

Policyholder

This is the person or entity that owns the insurance policy. Usually, this is also who pays the premium and whom the insurance company would pay benefits to.

Premium

The amount of money paid by the policyholder to the insurance company for insurance coverage. Policyholders pay their premiums monthly, quarterly, every six months, or once a year.

Deductible

A deductible is the amount that is paid by the policyholder before the insurance company begins to cover costs. A person can expect that a higher deductible can result in a lower premium. The opposite is also true.

Claim

This is the request a policyholder makes to an insurance company for compensation in a situation when a loss or an event that they are insured for has actually occurred.

Coverage

This is the specific protection that an insurance policy provides. It is specific and describes the risks and dangers against the policyholder is insured. Some examples include damage to property, personal injury, or liability.

Asset

Owned by the insured and can be a home, a vehicle, a storefront, a farm, tools, etc.

Liability

The financial responsibility or obligation of the insured related to their actions that may cause harm or damage to another person or entity.

Underwriting

This is the process that an insurance company utilizes to assess the risks associated with insuring a client, whether that is a person or an asset. Underwriting is used to determine the insured's premium.

Risk Management

This is the process of identifying risks, how to assess them, and then how to control them to minimize the impact of a negative event or situation. Insurance companies use this process to determine the potential risk of insuring a person, an entity, or an asset.

Actuary

A professional who works with statistical models to evaluate and then determine the probability of future events, particularly in terms of assessing risk and insurance premiums.

Indemnity

Insurance companies have indemnity as a principle for their work. It is the standard whereas the insurance aims to restore the policyholder to the same financial position they were in before the occurrence of the insured event. It also prevents the policyholder from profiting from an insurance claim and serves to provide financial compensation only for and specifically related to the actual loss suffered.

If you have any questions or want to review your insurance, please reach out to Jared Martin, Agency Owner at jared@jjmprotects.com or click here to set up an appointment.