Deductible or Premium? Insurance Terms Everyone Should Know

Whether you're trying to choose a policy or make a claim, insurance can be confusing. However, it's an important component of protecting your health, property and family.

Read More Home Insurance Articles

Understanding these common terms used in the industry can help simplify your insurance decisions and any interactions you have with your insurance provider. 

Premium

This is the amount you pay for your insurance. It's often a monthly cost, but some insurance companies offer different payment structures, such as a yearly premium. It's an element of every insurance policy. 

Deductible

This is the amount of money you pay on a claim, with the insurance company paying the rest. A higher deductible often lowers the cost of your premium. This term is commonly found in property and health policies. 

Policy

This is the formal written contract you have with the insurance company. It lists what's covered, any deductibles or co-pays, premium costs and other details.

Policyholder

This is the person who holds and purchases the policy. 

Lapse

This is when the policy ends because you haven't paid the premium. 

Beneficiary

The beneficiary is the person who's nominated to receive the money from a life insurance policy. 

Agents

These are experts who are licensed to sell insurance. In most states, they must pass exams or be licensed by the Department of Insurance. They must also follow certain regulations to ensure they're providing you with fair advice.

Coverage

This is the protection that's offered by an insurance policy. With health insurance, the coverage signifies what the policy will pay for. With other types of insurance, it lists what belongings or incidents are protected by the policy. 

Claim

This is the request you make to the insurance company to pay you after a loss. In health insurance, a claim is made to cover the cost of a specific procedure or appointment. 

Claimant

The claimant is the person making a claim or requesting payment from an insurer. 

Adjuster

This is the employee of the insurance company who investigates a claim. They decide if a claim is covered and how much you'll be paid. You're likely to hear this term when you hear if a claim has been approved or denied. 

Appraisal

This is used in property insurance, such as for a home, antiques or jewelry. An assessment is conducted to determine the value of the property so you can purchase enough insurance. Appraisals can also be done after a claim to determine the amount of damage. 

Act of God

This is a natural event that the policyholder couldn't have prevented, such as a tornado, flood or hurricane. These events are normally covered by homeowners insurance. However, in areas that are prone to certain natural disasters, you may need a separate endorsement to be covered. 

Endorsement

An endorsement is an add-on to a policy that changes the coverage. With homeowners insurance, it can add coverage for certain natural disasters, such as flood insurance in a flood-prone area. It can also add extra coverage to health insurance, such as prenatal care and labor if you plan to get pregnant. Endorsements are also known as riders, amendments or insurance policy provisions. 

At-Fault

When the insured person caused the damage, such as in a car accident, it's called being at fault. Companies may pay less for an at-fault accident. In most states, the driver who's at fault has to provide compensation for the injuries of others involved in the accident. 

Co-Pay 

A co-pay is a fixed cost you must pay for a service covered by your policy. This is used in health insurance. 

Coinsurance

This is a percentage of the cost of service that you're required to pay for services covered by your policy. It's also a health insurance term. Most policies have either a co-pay or coinsurance. 

Loss

The damage or injury you've sustained that your insurance company has agreed to cover is referred to as a loss. The term can be found in most types of insurance policies, but other terms are usually used in the health insurance industry. 

Negligence

When reasonable care hasn't been exercised by the policyholder, leading to a loss, it's called negligence. If a policyholder is negligent, the insurer may not pay for losses or may pay a reduced amount. For example, if you know you have faulty wiring and this causes a fire, the insurer may not pay out for the damages.

Nonrenewal

This is when the insurance company chooses not to renew a policy when it expires. This could be because of a change in your circumstances or something outside your control. For example, people with homes that have become more prone to flooding or wildfires may find their policy isn't renewed. 

Surcharge

A surcharge is an increase to your premium due to a factor that increases your risk of loss. For example, if you have a poor driving record or live a long way from a fire department, a surcharge is added to reflect the increased risk. 

Life Insurance

This is a policy that pays a specific sum to beneficiaries if the insured person dies. 

Health Insurance

This is a policy that pays for medical expenses and treatments. 

Homeowners Insurance

This is a policy that covers the risks of owning a home. It can cover both the building and the contents of the building from losses due to fire, burglary, vandalism and other events. 

Car Insurance

This is a policy that covers both your car and any damage caused by your car. In most states, liability insurance for your car is compulsory. If you cause an accident, this will pay for any property damage or another person's medical bills.