Basic Insurance Terminology

Insurance agents have often been around the industry for a really long time. Like a LONG time.

When an agent has been steeped in the insurance industry for so long, they start to speak the language of the industry. Then they forget that normal people definitely DO NOT speak in insurance lingo.

It’s like speaking to a doctor. Sometimes professionals are too smart for their own good and just wind up confusing the people they’re trying to help.

So we’ve compiled a list of some basic insurance terminology and provided handy definitions. Enjoy!

Account Executive

Usually the same thing as an agent. They consult with you and find insurance policies that best cover your needs. An account executive or agent should work with you as a partner, not just sell you a policy.

Account Manager

Usually the same thing as a customer service representative (CSR). Account managers or CSRs work alongside agents to provide you with quotes for new insurance policies and servicing your needs.

Adjuster

see Claims Adjuster

Agent

Your Agent is just that. Yours. They consult directly with you to find the best insurance solutions to fit your individual needs. Basically, your agent acts as an intermediary between you and the insurance company he or she is licensed to sell insurance for. Your agent gets to know you personally and is your advisor helping you navigate the often murky and confusing waters of the insurance industry. Agents may also be known as account executives, associate agents, or producers.

Types of Agents

“Captive” or “exclusive” agents sell insurance through one company only. They are actually employed by the insurance company. Then there are independent agents who sell insurance from multiple companies. For example, if one insurance company can provide you great coverage at a great rate on your home insurance, but not a great rate for your car insurance, an independent agent can then find a different insurance company to better fit your car insurance needs. Independent agents have a larger pool of resources to work with when helping you find what fits you best.

Bundle

Insurance companies will typically offer you a discount if you purchase multiple types of insurance from them. There are all kinds of bundle discounts depending on the different types of insurance coverages you’re purchasing. For example, if you purchase your home and car insurance from the same company, that’s a bundle and you can probably receive a discount as a result. The more insurance coverages you purchase through the same insurance company, the more you can bundle and save.

Carrier

Your insurance carrier is the company that actually insures you. This isn’t the same thing as your agent. Your agent is licensed to sell insurance for the company or companies/carriers he or she represents. Agents (also known as producers) are just individual people who get to know you and work with you one-on-one. The carrier is a large, national or international company. See the listing for agent for more information about the different types of agents.

Claim

When you claim that you’ve got a problem that you need your insurance policy to help you with. Your insurance policy is an agreement that you’ll receive financial assistance when something goes wrong as long as it falls within the terms and conditions of your policy. That’s why it’s important that your agent goes through your policy with you. For instance, you might think your homeowners insurance policy will pay for repairs if your home floods. Unfortunately, you’re probably wrong about that. Knowledge is power!

Claims Adjuster

A claims adjuster (or just adjuster) is typically an insurance company representative who investigates the situation when you file a claim to determine exactly how much your insurer should pay out. An adjuster will typically interview you about your claim, review any police or official agency reports, speak to any witnesses, assess any damage, and generally gather information in order to make an informed decision.
However, this informed decision is probably going to favor the insurance company’s interests more than yours. Basically, a claims adjuster is probably going to try to talk you into accepting less money than your claim may be worth. They do work for the insurance company after all.

Your agent is there to look out for your best interests during a claim. That’s the beauty of hiring an agent. They are the middleman between you and the insurance company. You can also hire your own independent claims adjuster to further lookout for your interests in a claim.

Collision Coverage

Collision coverage, which isn’t required by law, but is definitely worth having, covers costs if your car is damaged or destroyed in an accident. Can you cover the cost to replace or make significant repairs to your car out-of-pocket? That’s what collision coverage is for.

Comprehensive Coverage

Insurance companies technically refer to comprehensive coverage as “other than collision.” That’s because it covers costs for things like theft, hail damage, flooding, and other non-collision loss or damage. Bad things can happen when you’re not driving your car.

Coverage

Coverage means the same thing as “insurance” or “protection”. You may have several coverages within a single policy.

For example, your auto insurance policy can include comprehensive, collision, and other coverages.

Declarations

Also known as Declarations page(s) or simply Dec Page in insurance lingo. This is the first page or pages of an insurance policy that lays out the specifics of who’s insured, the address, coverage limits, and other key information.

Deductible

The total amount that you pay per claim or per accident. With a high deductible, you’ll pay less monthly or annually for your policy, but you’ll have to pay more out-of-pocket if you need to file a claim.

As an example, if you need to file a claim on your car insurance for a total of $200 and your deductible is $100, you will pay $100 of your own money. The insurance company pays the other $100.

Discount

There are lots of things you can do in order to pay a little less for your insurance. Almost every insurer offers a range of discounts. Some examples are paying your premium in full instead of monthly, purchasing more than one policy from the same insurer like both your home and car insurance, or using telematics devices in your car so that an insurance company can lower your cost if you’re a good driver.

Endorsement

An amendment to an insurance policy. Endorsements alter the scope, terms, or conditions of the policy they’re attached to. An endorsement might expand the scope of a policy to cover more risks or even restrict some. Sometimes called a rider.

For instance, you may consider adding a scheduled personal property endorsement to your homeowners policy to cover the replacement cost of high-value items like jewelry or computers.

Exclusion

A provision in an insurance policy that eliminates coverage for certain risks, people, property classes, or locations. You can often find exclusions on a homeowners policy. Floods and earthquakes are typically exclusions on a homeowners policy. You’ll need a separate flood or earthquake policy to cover those events.

Liability Insurance

This covers you the policyholder in the event that someone else is injured or their property is damaged. You probably have liability coverage on your auto policy as well as your homeowners or renters policy. If you’re a business owner, you definitely need general liability insurance or even more specialized liability coverage depending on the industry you’re in.

Limit

The maximum amount your insurance will pay out in case of a loss. It’s the limit of payment.

Remember though, that your insurance can only pay out on a covered loss. If your policy doesn’t specifically cover an event or if a particular event is excluded, your insurance can’t pay and then limits really don’t apply, do they?

Loss

A loss is a reason to file an insurance claim. Wrecking your car is a loss. Hail damage to your roof is a loss. Someone being injured on your property is a loss.

Premium

The amount you pay for insurance coverage. Some insurers offer a discount for paying your full-term premium at once instead of monthly.

Producer

Insurance producer and insurance agent are pretty much interchangeable. In some states, insurance producer is actually the official term for someone who sells insurance. Producer is mostly an industry insider term, but since insurance people often forget that not everybody knows or understands insurance terminology, you may hear it thrown around sometimes.

Policy

The contract between you and an insurance company/carrier which states the details of what’s covered and what’s not. Your policy or contract is not between you and your agent. Your agent is a middleman and should guide you through the insurance process. They should advocate for you, their customer, in case you need to file a claim.

Rate

The cost of insurance set by an insurance company. Rates are complex calculations based on a ton of different factors and historical data. They are also regulated by state departments of insurance.

For example, the rate of homeowners insurance on the Mississippi gulf coast is usually much higher than homes located further inland. The closer to the coast you get, the higher rates can get. The reason for this is that losses due to evens like hurricanes are much more likely closer to the coastline. Insurance companies of course know this, so have to collect more premium from homeowners policies to cover the huge amounts of money they may have to pay out if a catastrophic event occurs.

Telematics

Telematics is a marriage between two concepts. Telecommunications and infomatics (information).

You will typically encounter this with auto insurance. Insurance companies have learned that if they can gather information on driving habits, they can better predict how likely it is for losses to occur. Losses like wrecks and traffic violations.

Many people don’t like the idea of companies tracking their driving information and view it as an invasion of privacy. However, telematics and tracking driving habits really benefits the majority because insurance companies don’t have to set higher rates for everyone. Safe drivers are rewarded with lower rates and poor or unsafe drivers wind up with higher rates because they’re a bigger risk.

Term

The length of time that an insurance policy is in force. All insurance policies have an effective date (when the term begins) and an expiration date. (You’ll often hear insurance agents refer to that as an ex-date.)

Umbrella

This is extra coverage over and above your homeowners and/or auto insurance. Just like a rain umbrella can cover you on top of a rain jacket.

An umbrella policy usually covers losses that are broader or greater dollar amounts than your underlying insurance policy’s limits.

Underwriter

An underwriter or underwriting department is part of an insurance company that individually assesses risks like homes, businesses, etc. to determine whether or not it fits the company’s guidelines and set the proper rate for premium.

Your agent can really help when an underwriter makes a determination on a risk based on faulty information. Underwriters don’t usually live in your area and don’t know you personally, so they don’t always have all the details they need to make an accurate assessment. Your agent can help fill in. the gaps for underwriting so that often a risk they initially rejected is reassessed and accepted giving you the coverage you need.