Insurance Exam Glossary
Master the terminology you need to pass your state insurance licensing exam. Simple definitions for complex concepts.
A policy provision that allows the insured to receive a portion of the death benefit early if diagnosed with a terminal illness.
A policy or rider that pays a benefit if the insured dies or loses a limb/eyesight due to an accident.
The replacement cost of damaged property minus physical depreciation at the time of loss.
A professional who analyzes statistical data to calculate insurance risks and premiums.
A contract where one party (the insurer) sets the terms, and the other party (the insured) must take it or leave it.
A person who investigates insurance claims and recommends a settlement amount.
The tendency of individuals with higher risk of loss to purchase insurance more often than those with lower risk.
A licensed representative who sells insurance policies on behalf of an insurer.
A contract where the exchange of value is unequal and depends on an uncertain event.
An insurance company incorporated under the laws of a country other than the United States.
A claim-handling expense that can be assigned to a specific insurance claim, such as defense attorney fees, expert-witness fees, or investigation costs.
A financial product designed to provide a guaranteed income stream, typically for retirees.
The transfer of legal rights or ownership of a policy from one party to another.
Coverage protecting a driver against financial loss if they legally cause bodily injury or property damage to others in a crash.
The person or entity designated to receive the death benefit from a life insurance policy.
A temporary agreement providing insurance coverage until the formal policy is issued.
A single property insurance policy that covers multiple items, locations, or buildings under a single lump-sum limit.
Liability coverage for physical injury, sickness, disease, or death caused to another person by an insured's negligence.
A licensed independent professional who represents the insured/buyer, not the insurance company.
The savings element of a permanent life insurance policy that builds up over time.
A professional designation for advanced education in life insurance, estate planning, taxation, and related financial-planning topics.
A formal request by a policyholder to an insurance company for coverage or compensation for a covered loss.
A cost-sharing provision where the insured and insurer share the cost of a covered claim after the deductible has been met.
Auto insurance that pays for damage to the insured vehicle caused by impact with another vehicle or object, or a rollover.
A commercial insurance policy combining two or more coverage parts (such as Commercial Property and Commercial General Liability) into a single contract.
The payment an agent receives from the insurance company for selling a policy, usually a percentage of the premium.
Auto insurance covering physical damage to an insured vehicle caused by non-collision perils like theft, vandalism, fire, hail, or animal strikes.
The intentional withholding of material facts by an applicant that could affect the validity of the policy.
A receipt given to an applicant when they pay the initial premium with the application.
A time period (usually 2 years) during which the insurer can challenge a claim due to material misrepresentations.
A fixed amount the insured pays for a specific service, such as a doctor's visit or prescription.
The amount paid to a beneficiary upon the death of the insured.
The amount the insured must pay out-of-pocket before the insurance company begins to pay for a covered loss.
Direct loss is immediate physical damage to property (e.g. fire destroying a roof). Indirect loss is consequential financial loss resulting from direct damage (e.g. loss of rental income).
A return of excess premiums to policyholders of mutual insurance companies.
An insurance company incorporated in the state where it is doing business.
A property policy covering residential structures not eligible for standard homeowners insurance, such as tenant-occupied rental houses.
The waiting period in a disability income policy before benefits begin.
A written document attached to a property & casualty insurance policy that modifies coverage.
The maturity of a life insurance policy while the insured is still living, causing the policy's stated benefit to become payable to the policyowner.
A legal principle preventing a party from denying a fact because of their previous words or conduct.
Specific conditions or circumstances for which the policy will not provide benefits.
A person in a position of special trust and confidence, such as an agent handling premiums.
An inland marine policy covering movable personal or business property wherever it travels.
An insurance company incorporated in a US state other than the one where it is doing business.
A period during which a new policyowner can review the policy and return it for a full refund.
Anything that increases the likelihood or severity of a loss.
A managed care plan providing care through a network of doctors and requiring a primary care physician.
A multiline property and liability insurance package for owner-occupied residential homes.
A provision preventing an insurer from disputing a policy's validity after 2 years in force.
The principle of restoring the insured to the same financial position they were in before the loss.
A financial or emotional interest in the life or property insured.
The person or entity covered by the insurance policy.
Termination of a policy due to non-payment of premiums.
Statistical principle stating that as exposure units increase, actual losses approach expected losses.
Coverage protecting the insured against legal claims for bodily injury or property damage to third parties.
A false statement by an applicant that would have affected underwriting acceptance or pricing.
A joint federal and state healthcare assistance program for low-income individuals.
A federal health insurance program for seniors 65+ and eligible disabled individuals.
A risk factor arising from the dishonesty or fraudulent intent of the insured.
Carelessness or indifference to loss because insurance exists.
An insurance company owned by its policyholders.
The specific event causing a financial loss (e.g. fire, windstorm, collision).
Liability coverage for non-physical injury to reputation or privacy, such as libel, slander, false arrest, or wrongful eviction.
First-party auto coverage for damage to an insured vehicle, usually provided through collision and comprehensive coverage.
The legal contract between the insurer and the insured.
The person holding legal rights in the policy.
A health plan network offering lower costs in-network with out-of-network options.
The payment required to keep an insurance policy in force.
The insurance principle that restores an insured to approximately the same financial position held before a covered loss, without allowing a profit from the loss.
Coverage protecting the insured if they legally cause physical destruction or loss of use of third-party property.
The primary, uninterrupted event that sets a chain of events in motion leading to a loss.
Restoring a lapsed policy to active status.
Insurance for insurance companies to transfer catastrophic risk.
The cost to replace damaged property with new property of like kind and quality without deducting depreciation.
An amendment added to a life/health policy to customize coverage.
Uncertainty regarding financial loss.
High-limit excess liability insurance providing coverage above primary auto, homeowners, or general liability limits.
The process of evaluating risk and determining policy terms and premiums.
A contract where only one party makes legally enforceable promises.
Rider waiving premiums during total disability.
A statement or promise that becomes part of an insurance contract and is expected to be strictly true or performed as stated.
Permanent life insurance with fixed premiums and cash value.
Statutory insurance covering medical care and lost wages for employees injured on the job.