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Please note that while these terms are generally used as described below, in the insurance industry, any given company may define these terms differently, in which case that company's contract would control.

Actual Cash Value: The value of property based on the cost of repairing or replacing it with property of the same kind and quality. Typically, actual cash value equals the current replacement cost minus depreciation (age, condition, length of time in use, and obsolescence).

Agent: In insurance, the person authorized to represent the insurer in negotiating, servicing, or effecting insurance policies.

Annuity: A contract that provides for a series of periodic payments to be made or received at regular intervals.

Applicant: The party applying for an insurance policy.

Application: A printed form developed by an insurer that includes questions about the prospective insured and the desired insurance coverage and limits.

Assigned Risk: A risk insured through a pool of insurers and assigned to a specific insurer. These risks are generally considered undesirable by underwriters, but due to state law or otherwise, they must be insured.

Auto Collision Coverage: Optional auto insurance which pays for damage to your car caused by collision with another car or object, or by rolling the car over. Frequently required if you have a car loan.

Auto Comprehensive Physical Damage Coverage: Optional auto insurance which pays for damage to your auto caused by things other than collision or rolling the car over, such as fire, theft, vandalism, flood or hail. Frequently required if you have a car loan.

Automatic Premium Loan: A provision in some life insurance policies that authorizes a policy loan using the cash value accumulated by the insurance policy to pay for past due premiums at the end of the grace period. This prevents a lapse of coverage.

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Beneficiary: Any person, persons, or other entity designated to receive the policy benefits upon the death of the policyholder.

Binding Receipt: A premium receipt acknowledging temporary insurance coverage immediately until the insurance company rejects the application or approves it and issues a policy.

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Cash Value (cash surrender value): The cash amount payable to a life insurance policyowner in the event of termination or cancellation of the policy before its maturity or the insured event.

Claim: A person's request for payment from an insurer for a loss covered by the insurance policy.

Conditions: The part of your insurance policy that states the obligations of the person insured and those of the insurance company.

Contingent Beneficiary: In a life insurance policy, the person designated to receive the policy benefits if the primary beneficiary dies before the insured.

Contract: A legally enforceable agreement between two or more parties.

Conversion Privilege: The right to convert or change insurance coverage from an individual term insurance policy to an individual whole life insurance policy.

Convertible Term Life Insurance: A type of term life insurance that offers the policyowner the option to exchange the term policy for a form of permanent insurance.

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Deductibles: The portion of the loss that the policyholder agrees to pay out of pocket, before the insurance company pays the amount they are obligated to cover. For example, if the covered claim is $1000 and your deductible is $250, you pay $250 and your company will pay $750. Deductibles help to keep insurance rates reasonable. Raising the amount of the deductible lowers the cost of insurance.

Depreciation: Reduction in the value of property due to age and use.

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Endorsement: Attachment or addendum to an insurance policy; an endorsement changes the contract's original terms.

Extended Term Life Insurance: A nonforfeiture benefit under which the net cash value of the policy is used to purchase term insurance for the amount of coverage available under the original policy.

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Face Amount: The amount stated in the life insurance policy as the death benefit.

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Grace Period: The specified length of time, after a Life or Health premium payment is due in which the insured may make the payment and keep the policy in force. (Usually 30 days.)

Group Health Insurance: An insurance plan designed for a group, such as employees of a single employer. Insurance is provided to them under a single policy.

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Incontestable Clause: A life insurance policy wording that provides a time limit (e.g. two years) on the insurer's right to dispute a policy's validity based on material mistatements in the application.

Insurable Interest: Any interest a person has in property that is the subject of insurance, so that damage to this property would cause the insured a financial loss.

Insurance Company: An organization that has been chartered by a governmental entity to transact the business of insurance.

Insured: The person whose insurable interest is protected under an insurance policy.

Insurer: See Insurance Company.

Irrevocable Beneficiary: A named beneficiary whose rights to life insurance policy proceeds cannot be cancelled or changed by the policyowner unless the beneficiary consents.

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Lapse: Termination of a policy due to nonpayment of premiums.

Liability: A legal obligation to compensate a person harmed by one's acts or omissions.

Liability Coverage: Insurance that provides compensation for a harm or wrong to a third party for which an insured is legally obligated to pay.

Life Insurance: Insurance that pays a specified sum of money to designated beneficiaries if the insured person dies during the policy term.

Loss: A claim either paid or payable due to the insurer's policy obligations.

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Medical Payments Coverage: Medical and funeral expense coverage for bodily injuries sustained from or while occupying an insured vehicle, regardless of the insured's negligence.

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Negligence: Failure to use a generally acceptable level of care and caution.

No-fault Insurance: A system of compensation enacted by law in many states under which indemnification is made by the insured's own insurance company regardless of who is at fault. Details of this system vary significantly from state to state.

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Paid-up Policy: An in-force life insurance policy for which no further premium payments are required.

Peril: The cause of loss or damage.

Permanent Insurance: A general term for ordinary life and whole life insurance policies that remain in effect as long as their premiums are paid.

Personal Property Insurance: Protects against the loss of, or damage to property other than real property (real estate) caused by specific perils.

Policy: The written forms that make up the insurance contract between an insured and insurer. A policy includes the terms and conditions of the coverage, the perils insured or excluded, etc.

Policy Declarations: The part of the insurance contract that lists basic underwriting information, including the insured's name, address and description of insured locations as well as policy limits.

Policy Limits: The maximum amount an insured may collect or for which an insured is protected, under the terms of the policy.

Policy Loan: A loan from a life insurer to the owner of a policy that has a cash value.

Policyholder: The person who buys insurance.

Policyowner: An individual with an ownership interest in an insurance policy.

Policy Period: The amount of time an insurance contract or policy lasts.

Pre-existing Condition: A physical illness or disability that existed before the health or life insurance policy effective date and generally, which was not disclosed on the application.

Premium: The price for insurance coverage as described in the insurance policy for a specific period of time.

Primary Beneficiary: The person designated as the first to receive the proceeds of a life insurance policy upon the death of the insured.

Proof of Loss: A sworn statement that usually must be furnished by the insured to an insurer before any loss under a policy may be paid.

Protection Amount: The face amount of a life insurance policy, or amount of money that will be paid to a beneficiary upon the death of an insured. This amount will be reduced by the amount of any outstanding policy loan.

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Reimbursement: The payment of an amount of money by an insurance policy for a covered loss.

Reinstatement: The process by which a life insurance company puts back in force a policy that has lapsed or has been canceled for nonpayment of premium.

Renewable Term Life Insurance: A renewable life policy permits the owner of the policy to automatically renew the policy beyond its original term by acceptance of a premium for a new policy term without evidence of insurability.

Revocable Beneficiary: A life insurance policy whose designation as beneficiary can be revoked or changed by the policyowner at any time prior to the insured's death.

Riders: An addition to an insurance policy that becomes a part of the contract.

Risk: The possibility or chance of loss or injury.

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Settlement: An agreement between a claimant or beneficiary to an insurance policy and the insurance company regarding the amount and method of a claim or benefit payment.

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Term Insurance: Life insurance under which the benefit is payable only if the insured dies during a specified period. If the insured survives beyond that period, coverage ceases. This type of policy does not build up any cash or nonforfeiture values.

Theft Limit (or Inside Policy Limits): The highest amount an insurance company will pay on certain items of personal property. For instance, some policies have a $5,000 limit for computers. If an item would cost more than the limit to replace.

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Underwriting: The process of reviewing applications for coverage. Applications that are accepted are then classified by the underwriter according to the type and degree of risk.

Uninsured Motorist Coverage: Coverage that pays for covered damage for bodily injury that an uninsured motorist is legally liable but unable to pay.