What are some common terms used in insurance jargon?

Common insurance terms are divided into core concepts, property/auto terms, and life/health terms.

Core General Terms

• Premium: The regular amount of money you pay to an insurance company to keep your policy active.
• Deductible: The specific amount of money you must pay out-of-pocket for a claim before your insurance coverage begins to pay.
• Claim: A formal request you make to your insurance company for payment or compensation after a covered loss or accident.
• Exclusions: Specific conditions, events, or types of damage that your insurance policy does not cover.
• Endorsement (or Rider): An official addition or amendment that changes the terms, limits, or coverage of an existing policy.
• Declarations Page (Dec Page): The summary page of your policy that lists who is covered, the property or risk insured, policy limits, and the cost.

Property & Auto Terms

• Actual Cash Value (ACV): The fair market value of an item or property calculated as its replacement cost minus depreciation (wear and tear).
• Replacement Cost (RC): The amount of money it costs to repair or replace damaged property with new items of similar kind and quality, with no deduction for depreciation.
• Collision Coverage: Auto insurance that pays for damage to your own vehicle if you hit another car or object.
• Comprehensive Coverage: Auto insurance that covers non-collision damage to your car, such as theft, fire, vandalism, or falling branches.
• Subrogation: The legal process where your insurance company pays for your damage first, and then tries to recover the money from the at-fault party's insurer.

Life & Health Terms

• Beneficiary: The person or entity designated to receive the death benefit or payout when the insured person dies.
• Death Benefit (or Face Amount): The guaranteed amount of money paid out to your beneficiaries when you pass away.
• Coinsurance: A form of cost-sharing where you pay a set percentage (for example, 20%) of covered medical costs after meeting your deductible.
• Formulary: A list of prescription drugs covered by a health insurance plan.

Common phrases and terms used in insurance include key cost, coverage, and claim definitions.

Core Insurance Terms

• Premium: The regular payment you make to the insurance company to keep your policy active.
• Deductible: The specific amount of money you must pay out-of-pocket for a loss before your insurance starts paying.
• Claim: A formal request you send to your insurance provider asking for payment after a covered accident or loss.
• Coverage Limit: The maximum amount of money your insurance company will pay for a covered claim.
• Exclusion: A specific item, event, or condition that your insurance policy does not cover.

Property and Payout Phrases

• Actual Cash Value (ACV): The market value of an item or property minus depreciation (wear, tear, and age) at the time of the loss.
• Replacement Cost: The dollar amount needed to repair or replace damaged property with new items of similar kind and quality, without subtracting for depreciation.
• Endorsement or Rider: An official addition or amendment that changes, adds to, or removes coverage from your standard policy.
• Subrogation: The legal right of your insurance company to chase a third party who caused your loss to recover the payout money they gave you.

Five common terms used in insurance are premium, deductible, claim, policy, and exclusion.

• Premium: The amount of money you pay to the insurance company on a regular schedule (like monthly or yearly) to keep your coverage active.
• Deductible: The specific out-of-pocket money you must pay for a loss or medical service before your insurance starts paying.
• Claim: A formal request you make to your insurance company for payment or coverage after you experience a loss or damage.
• Policy: The official written legal contract between you (the insured) and the insurance company (the insurer) that details the rules of your coverage.
• Exclusion: A specific item, condition, or event that is not covered by your insurance policy.

You can learn more by checking out the Alfa Insurance Glossary.

The 7 pillars (or core principles) of insurance are the legal and ethical rules that govern every insurance contract.

The Seven Core Principles

• Utmost Good Faith: Both the buyer and the insurance company must be completely honest and share all important facts. Hiding information can cancel the policy.
• Insurable Interest: You must suffer a direct financial loss if the insured item or person is damaged or lost. You cannot insure things you do not own or have a stake in.
• Proximate Cause: A claim is only valid if the main, closest cause of the damage is a covered risk listed in the policy.
• Indemnity: Insurance pays to return you to your exact financial state before the loss happened. It does not let you make a profit from a claim.
• Subrogation: After an insurer pays your claim, they get the legal right to chase a responsible third party to recover the money.
• Contribution: If you have more than one policy on the same item, each insurer shares the payout cost proportionally instead of you getting paid twice.
• Loss Minimisation: The policyholder must act sensibly to reduce or prevent further damage, as if they had no insurance at all.

You can learn more about how contracts work via Skillcast's Insurance Principles.

Insurance terminology covers fundamental contract, pricing, and claim concepts used across different types of coverage. You can review complete official breakdowns through the National Association of Insurance Commissioners.

Core Insurance Words

• Premium: The regular payment you make to the California Department of Insurance to keep your policy active.
• Deductible: The specific amount of money you pay out-of-pocket for a loss before your insurance starts paying.
• Claim: A formal request you submit to your insurer to ask for payment after a covered accident or loss.
• Policy: The legal written contract between you and the insurance company.
• Coverage: The specific risks, items, or events protected under your insurance plan.
• Exclusion: Specific conditions, items, or events that a policy does not cover.
• Adjuster: A professional licensed to investigate and settle insurance claims.
• Underwriting: The process an insurer uses to evaluate risk and decide whether to offer coverage.