Insurance.
Health, auto, life, home, and disability coverage, explained. What the words on your policy and your bills actually mean, so you know what you are paying for.
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Cash value
Cash value is the savings portion that builds up inside a permanent life insurance policy, money you can borrow against or withdraw while alive.
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Comprehensive vs collision
Two auto coverages: collision pays for crash damage to your car; comprehensive pays for non-crash damage like theft, weather, or hitting an animal.
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Extended warranty vs service contract
Both promise to cover future repairs: a manufacturer extended warranty comes from the maker; a service contract is sold separately, often by a third party.
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Insurance bundling
Insurance bundling is buying two or more policies, like home and auto, from the same insurer for a multi-policy discount.
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Insurance Score
An insurance score is a number based partly on your credit that many insurers use to help set your home or auto premium.
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Long-term care insurance
Long-term care insurance helps pay for ongoing help with daily living, like a nursing home or in-home aide, that Medicare generally does not cover.
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Pet insurance
Pet insurance reimburses part of your veterinary bills for a covered pet in exchange for a monthly premium, after a deductible.
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Surrender charge
A surrender charge is a fee the insurer takes out if you cancel a permanent life policy or annuity in the early years.
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Deductible
The amount you pay out of your own pocket for covered care each year before your…
Premium
The price you pay, usually monthly or annually, to keep an insurance policy active.
Whole life insurance
Permanent life insurance that lasts your whole life and builds cash value, at a price…
In-network vs out-of-network
In-network providers have a price deal with your insurer; out-of-network providers do…
Term life insurance
Life insurance that pays out if you die within a set number of years, and nothing if you…
All insurance terms, A to Z
A 5 terms
ACA marketplace
The ACA marketplace is the government website where you can compare and buy health insurance plans, often with income-based financial help.
Accelerated death benefit
An accelerated death benefit lets you collect part of your life insurance payout early if you are diagnosed with a terminal or serious illness.
Actuary
An actuary is a professional who uses math and statistics to measure risk, setting the prices and reserves that keep an insurer able to pay claims.
AD&D insurance
AD&D insurance pays out only if you die or lose a limb, sight, or hearing in a covered accident, not from illness.
At-Fault vs No-Fault States
At-fault vs no-fault states differ on whether the driver who caused a crash pays for injuries, or each driver's own policy pays first.
B 2 terms
Balance billing
Balance billing is when an out-of-network provider bills you for the gap between their full charge and what your insurer paid.
Benefit period
The benefit period is the longest stretch of time an insurance policy will keep paying out for a single covered event or claim.
C 11 terms
Cash value★
Cash value is the savings portion that builds up inside a permanent life insurance policy, money you can borrow against or withdraw while alive.
CHIP
CHIP is a state-run program that provides low-cost health coverage to children in families that earn too much for Medicaid but still need help.
Claims Adjuster
A claims adjuster is the insurance employee or contractor who investigates your claim and decides how much the insurer will pay.
CLUE Report
A CLUE report is a record of your past insurance claims that insurers check when they price your home or auto policy.
COBRA
A federal law that lets you keep your employer's health insurance for up to 18 months after leaving the job, at your own full cost.
Collision Coverage
Collision coverage is the part of auto insurance that pays to repair your own car after a crash, no matter who was at fault.
Comprehensive Coverage
Comprehensive coverage is the part of auto insurance that pays for damage to your car from things other than a crash.
Comprehensive vs collision★
Two auto coverages: collision pays for crash damage to your car; comprehensive pays for non-crash damage like theft, weather, or hitting an animal.
Contingent beneficiary
A contingent beneficiary is your backup, the person who gets your life insurance payout if your first-choice beneficiary cannot.
Copay
A copay is the flat fee you pay for a covered health service, like 30 dollars for a doctor visit, with your insurer paying the rest.
Copay vs. coinsurance
A copay is a flat fee per visit or prescription. Coinsurance is a percentage of the bill you split with the insurer.
D 5 terms
Declarations page
The declarations page is the summary at the front of a policy that lists who and what is covered, the coverage limits, deductibles, and the premium.
Deductible
The amount you pay out of your own pocket for covered care each year before your insurance starts paying its share.
Diminished Value Claim
A diminished value claim seeks payment for the resale value your car loses after a crash, even once it is fully repaired.
Disability insurance
Insurance that replaces part of your paycheck if illness or injury keeps you from working.
Dwelling coverage
Dwelling coverage is the part of a homeowners policy that pays to repair or rebuild the physical structure of your house.
E 6 terms
Earthquake Insurance
Earthquake insurance covers damage to your home from earthquakes, which standard home policies exclude.
Elimination period
An elimination period is the waiting time after a covered event before your insurance starts paying, similar to a deductible measured in days.
EPO
An EPO is a health plan that covers only in-network care like an HMO, but usually lets you see specialists without a referral.
Errors and Omissions Insurance
Errors and omissions insurance covers the financial damage when a client says your professional work, advice, or service made a costly mistake.
Explanation of benefits
An explanation of benefits (EOB) is a statement from your insurer showing what a provider charged, what the plan paid, and what you may owe.
Extended warranty vs service contract★
Both promise to cover future repairs: a manufacturer extended warranty comes from the maker; a service contract is sold separately, often by a third party.
F 3 terms
Flood Insurance
Flood insurance covers water damage from flooding, which a normal home or renters policy does not pay for.
Formulary
A formulary is the list of prescription drugs your health or Medicare plan agrees to help pay for, usually sorted into cost tiers.
Full Coverage
Full coverage is a casual term for an auto policy that bundles liability with collision and comprehensive coverage, not a single official product.
G 4 terms
Gap insurance
Coverage that pays the difference between what you owe on a car loan and what the car is worth when it's totaled.
General Liability Insurance
General liability insurance covers your business when someone gets hurt or their property is damaged because of your work or premises.
Group vs individual coverage
Group coverage is bought through an employer or organization for many people at once; individual coverage is a policy you buy and own yourself.
Guaranteed issue
Guaranteed issue means an insurer must accept you without health questions or a medical exam, so no one is turned down for their health.
H 2 terms
HMO
An HMO is a health plan that covers care only inside its provider network and usually makes you pick a primary doctor and get referrals.
Hybrid long-term care policies
Hybrid long-term care policies combine life insurance or an annuity with long-term care coverage, so the money is paid out either way.
I 5 terms
In-network vs out-of-network
In-network providers have a price deal with your insurer; out-of-network providers do not, so they cost you much more or are not covered.
Indemnity
Indemnity is the core insurance principle of restoring you to your financial position before a loss, no better and no worse, not letting you profit.
Insurable interest
Insurable interest means you would suffer a real financial loss if the insured person or property were harmed, which is required to buy a policy.
Insurance bundling★
Insurance bundling is buying two or more policies, like home and auto, from the same insurer for a multi-policy discount.
Insurance Score★
An insurance score is a number based partly on your credit that many insurers use to help set your home or auto premium.
L 4 terms
Liability Coverage
Liability coverage is the part of auto insurance that pays for the injuries and damage you cause to others in an at-fault crash.
Life insurance riders
Life insurance riders are optional add-ons you attach to a policy to expand or customize its coverage, usually for an extra cost.
Long-term care insurance★
Long-term care insurance helps pay for ongoing help with daily living, like a nursing home or in-home aide, that Medicare generally does not cover.
Loss of Use Coverage
Loss of use coverage pays your extra living costs, like a hotel and meals, when a covered disaster makes your home unlivable.
M 8 terms
Medicaid
Medicaid is a joint federal and state program that provides free or very low-cost health coverage to people with low income.
Medical loss ratio
The share of your health insurance premium that pays for medical care instead of staying with the insurer. A lower ratio means it kept more.
Medicare enrollment periods
Medicare enrollment periods are the specific windows when you can sign up for or change Medicare coverage, and missing one can cost you a lifelong penalty.
Medicare Part A
Medicare Part A is the part of Medicare that covers inpatient hospital stays, skilled nursing, hospice, and some home health care.
Medicare Part B
Medicare Part B is the part of Medicare that covers doctor visits, outpatient care, and preventive services, paid for with a monthly premium.
Medicare Part C
Medicare Part C, also called Medicare Advantage, is a private plan that bundles your Medicare coverage into one plan, often with extras like dental.
Medicare Part D
Medicare Part D is the part of Medicare that covers prescription drugs, sold as a separate plan by private insurers.
Medigap
Medigap is private insurance that helps pay the out-of-pocket costs Original Medicare leaves you, like deductibles and the 20 percent coinsurance.
N 3 terms
Named Peril vs Open Peril
Named peril covers only the specific dangers listed in your policy, while open peril covers any cause of loss except the ones excluded.
No Surprises Act protections
No Surprises Act protections are federal rules that block surprise out-of-network bills for most emergencies and certain in-facility care.
No-fault insurance
No-fault insurance has your own auto policy pay your medical costs after a crash regardless of who caused it, rather than the other driver's insurer.
O 2 terms
Out-of-pocket maximum
The most you can pay for covered, in-network care in a plan year. After you hit it, the insurance pays 100%.
Own-occupation vs any-occupation disability
Own-occupation pays if you cannot do your specific job; any-occupation pays only if you cannot do any job you are reasonably suited for.
P 9 terms
Pet insurance★
Pet insurance reimburses part of your veterinary bills for a covered pet in exchange for a monthly premium, after a deductible.
Policy lapse
A policy lapse is when coverage ends because a premium went unpaid, leaving you uninsured until you reinstate or replace the policy.
Policy loan
A policy loan lets you borrow money from your life insurance company using your policy's cash value as collateral.
POS plan
A POS plan is a health plan that uses a primary doctor and referrals like an HMO but still pays something toward out-of-network care like a PPO.
PPO
A PPO is a health plan that lets you see any doctor without a referral and still covers out-of-network care, though it costs more.
Premium
The price you pay, usually monthly or annually, to keep an insurance policy active.
Premium tax credit
The premium tax credit is income-based financial help that lowers your monthly cost for a health plan bought on the ACA marketplace.
Prescription drug tiers
Prescription drug tiers are the cost levels a plan sorts covered drugs into, where lower tiers cost you less and higher tiers cost you more.
Prior authorization
Prior authorization is your insurer's advance approval that a treatment, drug, or test is covered before you get it.
R 3 terms
Renters insurance
Inexpensive insurance covering a renter's belongings, liability, and displacement costs. The landlord's policy covers none of those.
Replacement cost vs. actual cash value
Two ways a policy pays claims: replacement cost buys you a new equivalent item; actual cash value pays the depreciated worth of your old one.
Residual disability benefit
A residual disability benefit pays a partial benefit when a disability lets you keep working but at reduced hours or lower income.
S 6 terms
Scheduled Personal Property
Scheduled personal property is extra coverage you add to insure a specific high-value item, like a ring, for its full appraised worth.
Short-term disability
Short-term disability insurance replaces part of your paycheck for a few weeks to several months when illness or injury keeps you from working.
Special enrollment period
A special enrollment period is a window to sign up for or change health coverage outside open enrollment, opened by a qualifying life event.
SR-22
An SR-22 is a certificate your insurer files with the state to prove you carry the minimum required auto insurance, often after a serious violation.
Subrogation
Subrogation is when your insurer, after paying your claim, pursues the at-fault party or their insurer to recover what it paid out.
Surrender charge★
A surrender charge is a fee the insurer takes out if you cancel a permanent life policy or annuity in the early years.
T 4 terms
Term life insurance
Life insurance that pays out if you die within a set number of years, and nothing if you outlive it.
Term life vs. whole life★
Term life is cheap coverage for a set number of years. Whole life is permanent, costs far more, and builds a cash value you can borrow against.
Total Loss
A total loss is when your insurer decides your car is not worth repairing, usually because repairs cost near or more than its value.
Travel insurance★
Travel insurance reimburses certain trip losses, like cancellations, medical emergencies abroad, or lost baggage, for a premium based on the trip's cost.
U 5 terms
Umbrella insurance
Extra liability coverage that sits on top of your auto and home policies, for the lawsuit-sized disasters those policies can't fully cover.
Underwriting
Underwriting is how an insurer reviews your risk to decide whether to cover you, what to charge, and on what terms.
Uninsured/Underinsured Motorist Coverage
Uninsured/underinsured motorist coverage pays for your injuries (and sometimes your car) when an at-fault driver has no insurance or too little.
Universal life insurance
Universal life insurance is permanent life insurance with flexible premiums and a cash value that earns interest set by the insurer.
Usage-Based Insurance
Usage-based insurance sets your auto premium partly on how and how much you actually drive, tracked by an app or device.
W 2 terms
Whole life insurance
Permanent life insurance that lasts your whole life and builds cash value, at a price many times higher than term coverage.
Workers Compensation Insurance
Workers compensation insurance pays an employee's medical bills and lost wages when they get hurt or sick because of their job.