General Terms:
Deductible – Deductibles reduce the price of insurance because you pay a predetermined amount of the loss or expense BEFORE the insurer pays. You select the deductible and the higher you choose, the lower your premium.
Premium – the premium is the cost of the insurance. It is how much you or your company pays for the coverage.
Property and Casualty – this identifies a part of the insurance industry that handles impairment to property or individuals hurt in an accident. Auto, householders and commercial liability insurance fall into this category.
Life and Health – This is the part of the insurance industry that covers life and health insurance as opposed to property and casualty.
Umbrella Policy – This is broader coverage than the original underlying policy. For example, a homeowner’s policy that also includes a general liability provision of $1 million for personal lawsuits might be considered an umbrella policy.
Collision – Like the name implies, this is the aspect of your car insurance that compensates for fixing damages to your car following the deductible.
Comprehensive – Comprehensive insurance covers the “non-collision” types of losses to your vehicle like fire, flood, vandalism or theft.
Liability – this is the part of your coverage that pays for damage done to a third party such as bodily injury, property damage or pain and suffering. Homeowners policies also typically have liability provisions to protect you against various types of personal injury lawsuits.
No-fault – About 50% of the states have “no fault” laws which require insurance companies to pay for damages to vehicles, property and person no matter who is at fault in the accident.
Medical Insurance:
Ancillary Care/Coverage – Ancillary is a term for “extra” or “additional” or “associated.” It is for insurance policies that not only cover common health benefits but also have additional (ancillary) insurance coverage for prescription medicine or eye care, etc.
Cobra – A Federal law that requires companies to offer health coverage to employees for a period of time after they have left the company. The ex-employee generally pays for this insurance at group rates.
Co-payment – This is a health insurance term for how the portion you pay for a visit or procedure. After your co-payment and deductible the insurance company covers the rest of the bill.
Fee for Service – This is health Insurance that permits you to choose any Doctor and covers some predetermined share of “reasonable and customary” fees. You then pay the remainder.
H.M.O. – HMOs give comprehensive medical coverage for a set fee. But they require you to use their facilities and medical employees thus limiting your choice.
P.P.O. – “Preferred Provider Organizations” are networks of doctors who charge on a fee for service basis but typically at a discount pre-negotiated by the insurance company. Thus insurance companies will usually pay a larger share of your bill if you go to one of their “preferred providers.”
Life Insurance:
Annuity – Annuities are policies that pay while the insured is alive for a specified period of time. They are typically offered by Life insurance companies as a vehicle to supplement retirement or disability.
Term Life – Term life is a form of insurance bought for a specified time (or term). If the insured dies during this time period, the insurance is paid. If not, the insurance coverage expires or must be renewed to keep the benefit.
Universal Life – A Life policy connected to an investment account and market rates. The benefits are not set but change based on the returns achieved.
Whole Life – A policy based on a fixed rate of return and with pre-determined premium that build cash value while the policy is in force. The insurance benefit is fixed as well.
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