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Common Insurance Terms

Below is a list of common insurance terms with their commonly accepted definitions:

Additional Insured: A person or organization that is included as an insured party to the policy —generally an organization(s) that has a monetary interest in property or equipment.  This might include a landlord, convention center, or leaseholder for copiers and other office equipment. Coverage only applies to liability for operations performed by or for the named insured.

Additional Named Insured: A person or organization that is added to the policy. The additional named insured has many of the same rights and responsibilities as the named insured.                                                                              

Additional Premium: Monies due to the insurer as the result of a mid-term endorsement or change in exposure.

Aggregate Limit: The maximum amount an insurer will pay for all covered losses for the policy period.

Consolidated Omnibus Budget Reconciliation Act (COBRA): Federal law that continues health care benefits for employees whose employment has been terminated. Employers are required to notify employees of these benefit continuation options, and, failure to do so can result in penalties and fines for the employer.

Declarations Page: Typically the front page(s) of an insurance policy that declare what coverage is being provided by the insurance policy.  Specific details include the policy number, insurance carrier, named insured; effective date: coverage type; policy limits; deductible amount and premium due.

Deductible: A portion of a covered loss that is not paid by the insurer, for which the insured is obligated to pay by the insurance policy. Generally the higher the deductible, the lower the insurance premium.

Durable Medical Equipment (DME): Items of medical equipment owned or rented which are placed in the home of an insured to facilitate treatment and/or rehabilitation.

Effective Date: The date on which a policy's coverage of a risk goes into effect.

Endorsement: A document issued by the insurer and attached to an insurance policy to modify coverage afforded under a specific insurance policy. An endorsement can be added at policy inception or later during the term of the policy. Endorsements take precedence over any conflicting terms in the policy form.

Employee Retirement Income Security Act (ERISA): Also called the Pension Reform Act, this act regulates the majority of private pension and welfare group benefit plans in the U.S.. It sets forth requirements governing, among many areas, participation, crediting of service, vesting, communication and disclosure, funding, and fiduciary conduct.

Exclusions: Conditions or situations not considered covered under an insurance contract.

Exposure: A condition or a situation that creates the possibility of a loss.

Insurance: A contractual agreement that transfers the risk of a loss, from one entity to another, in exchange for payment.

Insured: The person(s) or entity that is protected under an insurance contract.

Insurer: The company selling insurance to an insured for a covered loss under the insurance policy contract.

Limit of Liability: The maximum amount that an insurer agrees to pay in the event of a loss.

Managed Care: Systems and techniques used to control the use of health care services. This generally includes a review of medical necessity, incentives to use certain providers, and case management.

Medicaid (Title XIX): Government entitlement program for the poor who are blind, aged, disabled or members of families with dependent children (AFDC).  Subject to broad Federal guidelines, states determine the benefits covered, program eligibility, rates of payment for providers, and methods of administering the program.

Medicare (Title XVIII): A federal program for the elderly and disabled, regardless of financial status. It is not necessary, as with Medicaid, for Medicare recipients to be poor.

Named Insured: The person or organization specifically named on the insurance policy declaration page.

Per Occurrence Limit: The maximum amount an insurer will pay for a loss arising out of one occurrence. Depending on policy wording, losses may include multiple losses suffered by the insured.

Policy:  A contract of insurance, describing the term, coverage, premiums and deductibles. The policy includes all forms, coverage parts and endorsements.  In some cases the policy includes the application and warranties made by the insured

Premium: The amount charged by an insurer to provide a level of insurance coverage described under a specific insurance policy.

Risk: The chance or uncertainty of a loss.

Risk Management: The practice of appraising and controlling risk.

Subrogation: Procedure where insurance company recovers from a third party when the cause of loss was the fault of another person and/or organization.

Third Party Administrator (TPA): An independent organization that provides administrative services including claims processing and underwriting for other entities, such as insurance companies.

Underwriting: The Process of selecting, classifying, analyzing and assuming risk according to insurability.

For a more comprehensive list of insurance terms and definitions, we would encourage you to visit the IRMI's online index of insurance terms.

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Please note that this page is meant to serve as nothing more than an informal resource guide and that references made here may prove overly general, innacurate, or out of date. If you would like to request current forms or a professional opinion concerning insurance decisions, please make sure to contact either us, another broker, or an insurance carrier directly.

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