Insurance
40 Insurance terms, defined in plain English — part of the 1345-term Finicade finance glossary. Each one has its own page, and links to the free game that teaches it.
- Actuary
- An actuary applies statistics and finance to price and reserve for uncertain future events — deaths, claims, pension liabilities.
- Auto Insurance
- Auto insurance bundles several covers: liability for damage you cause others, collision and comprehensive for your own car, plus medical components.
- Captive Insurance
- A captive is an insurance company owned by the business it insures, so the parent keeps the underwriting profit and investment income.
- Cash Value
- Cash value is the savings component inside a permanent life policy, which you can borrow against or surrender for.
- Catastrophe Bond
- A catastrophe bond transfers disaster risk to capital markets: investors earn a high coupon and lose principal if a defined event occurs.
- Coinsurance
- Coinsurance is the percentage of a bill you pay after meeting the deductible — 20% coinsurance means the insurer covers 80%.
- Combined Ratio
- The combined ratio adds the loss ratio and the expense ratio: below 100% is an underwriting profit, above 100% means the insurer relies on investments.
- Comprehensive vs Collision Coverage
- Collision covers damage from hitting something; comprehensive covers almost everything else — theft, hail, fire, a deer.
- Copay
- A copay is a fixed fee you pay for a specific service — $30 for a doctor visit, $10 for a prescription — regardless of the total cost.
- Deductible
- A deductible is what you pay before the insurer pays anything.
- Disability Insurance
- Disability insurance replaces part of your income if illness or injury stops you working — more likely during a career than death, and far less insured.
- Exclusion
- An exclusion is a loss the policy explicitly does not cover, and the exclusions page is the part of an insurance contract actually worth reading.
- Health Insurance
- Health insurance covers medical costs through a structure of premium, deductible, copays, coinsurance and an out-of-pocket maximum.
- Homeowners Insurance
- Homeowners insurance covers the structure, your possessions, and your liability to others.
- Indemnity
- Indemnity is the principle that insurance restores you to your position before the loss — no better.
- Insurance
- Insurance is paying a small certain cost to avoid a large uncertain one, by pooling risk across many people.
- Insurance Claim
- A claim is a formal request for the insurer to pay for a covered loss.
- Insurance Float
- Float is the money an insurer holds between collecting premiums and paying claims, which it invests in the meantime.
- Insurance Premium
- An insurance premium is what you pay for cover, priced from your expected losses plus the insurer's costs and profit.
- Liability Coverage
- Liability coverage pays what you become legally responsible for when you injure someone or damage their property, including the legal defence.
- Life Expectancy
- Life expectancy is the average remaining years of life at a given age — and planning to it means roughly half of people run out of money.
- Life Insurance
- Life insurance pays a lump sum to your beneficiaries when you die, replacing the income or care they lose.
- Long-Term Care Insurance
- Long-term care insurance covers help with daily living — a care home, an aide at home — which health insurance and Medicare largely do not.
- Loss Ratio
- The loss ratio is claims paid divided by premiums earned — the share of your premium that returns to policyholders as benefits.
- Mortality Table
- A mortality table gives the probability of death within a year at each age, and it's the foundation of pricing for life insurance, annuities and pensions.
- Out-of-Pocket Maximum
- The out-of-pocket maximum is the most you can pay in a plan year before the insurer covers everything else in full.
- Policy Limit
- A policy limit is the most an insurer will pay, per claim or per year.
- Private Mortgage Insurance (PMI)
- PMI insures the lender, not you, against your default, and it's required on US conventional mortgages with less than 20% down.
- Reinsurance
- Reinsurance is insurance for insurers, letting a company cede part of a risk it has written so a single catastrophe can't destroy it.
- Renters Insurance
- Renters insurance covers your possessions and your liability in a home you don't own — the landlord's policy covers the building, not your belongings.
- Replacement Cost vs Actual Cash Value
- Replacement cost pays what it takes to buy a new equivalent; actual cash value pays that minus depreciation.
- Rider
- A rider is an add-on that changes a policy standard terms — scheduling a valuable item, adding accidental death cover, waiving premiums if disabled.
- Self-Insurance
- Self-insurance is deliberately keeping a risk rather than transferring it, funding losses from your own reserves.
- Subrogation
- Subrogation is the insurer's right to step into your shoes and pursue whoever caused the loss after paying your claim.
- Surrender Charge
- A surrender charge is a fee for cancelling an insurance policy or annuity early, typically starting near 7–10% and declining to zero over seven to ten years.
- Term Life Insurance
- Term life insurance covers you for a fixed period — 10, 20 or 30 years — and pays only if you die within it.
- Umbrella Policy
- An umbrella policy adds liability cover on top of your auto and home policies, in million-dollar increments and at a strikingly low price.
- Underwriting
- Underwriting is assessing a risk and deciding whether and at what price to accept it.
- Universal Life Insurance
- Universal life is permanent insurance with flexible premiums and a cash value that earns a credited rate.
- Whole Life Insurance
- Whole life insurance combines lifetime cover with a savings component that builds cash value, at five to fifteen times the cost of comparable term cover.