Insurance Terms & Definitions

The following table defines the basic terms people need to understand when discussing insurance. These terms are common to most types of insurance policies. They are likely to be used in discussions with a sales agent or an insurance company representative.

Insurance Term Definition
Policy The printed document that states the terms and conditions of the insurance contract
Premium The money a policyholder pays to the insurance company to activate an insurance policy and keep it in force
Benefits The amount of money that the insurance company pays to the policyholder or to his/her beneficiary
Beneficiary The person who receives the insurance money when an insured event occurs
Claim A request for payment for a loss that is covered by the policy
Exclusions Specific conditions or circumstances listed in the policy that are not covered and for which the policy will not pay any benefits
Eligibility The criteria that determine who can purchase an insurance policy (e.g. age limits on who can buy an insurance policy; often one must be at least 18 years old)
Deductible The amount of money that a policyholder agrees to pay, per claim or per accident, toward the total amount of an insured loss. Insurers use this mechanism to share risk with policyholders and reduce false claims.
Waiting period The time a policyholder must wait before his or her coverage becomes effective. For example, life insurance policies typically have a delay between the time when policyholders begin paying premiums and when the coverage is active, reducing the risk that someone who is about to die will purchase a policy.

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