Insurance Glossary
Insurance is full of confusing terms. Here's what they actually mean, in plain English.
General Terms
Premium
The amount you pay for your insurance policy, usually monthly or annually. Think of it as your membership fee to have coverage.
Deductible
The amount you pay out of pocket before your insurance starts covering costs. For example, with a $1,000 deductible, you pay the first $1,000 of covered expenses.
Copay (Copayment)
A fixed amount you pay for a covered service. For example, $25 for a doctor visit or $15 for a prescription.
Coinsurance
Your share of costs after meeting your deductible, expressed as a percentage. If you have 20% coinsurance, you pay 20% and insurance pays 80%.
Out-of-Pocket Maximum
The most you'll pay for covered services in a year. After reaching this limit, insurance pays 100% of covered costs.
Claim
A request you or your provider submits to your insurance company asking them to pay for covered services.
Coverage
The services, treatments, or events that your insurance policy will pay for.
Exclusion
Services or situations that your insurance policy does not cover.
Rider
An add-on to your policy that provides extra coverage, usually for an additional cost.
Underwriting
The process insurance companies use to evaluate your risk and determine your premium.
Health Insurance
Network
The group of doctors, hospitals, and other healthcare providers that have agreed to provide services at negotiated rates for your insurance plan.
In-Network vs Out-of-Network
In-network providers have agreements with your insurer and cost less. Out-of-network providers don't, so you'll pay more or coverage may not apply.
HMO (Health Maintenance Organization)
A plan that typically requires you to choose a primary care doctor and get referrals for specialists. Usually lower cost but less flexibility.
PPO (Preferred Provider Organization)
A plan that lets you see any provider without referrals, but costs less if you use in-network providers. More flexibility but often higher premiums.
EPO (Exclusive Provider Organization)
Similar to an HMO but usually without referral requirements. You must use network providers except in emergencies.
Primary Care Physician (PCP)
Your main doctor who provides general care and coordinates your healthcare. Some plans require you to choose one.
Preventive Care
Services like annual checkups, vaccinations, and screenings that are meant to prevent illness. Often covered at 100% by insurance.
Formulary
A list of prescription drugs covered by your plan. Drugs are usually grouped into tiers with different costs.
Prior Authorization
Approval you need from your insurance company before getting certain services or medications for them to be covered.
Auto Insurance
Liability Coverage
Pays for damage you cause to others in an accident. Includes bodily injury (their medical bills) and property damage (their car/property).
Collision Coverage
Pays to repair or replace your car if you hit another vehicle or object, regardless of who's at fault.
Comprehensive Coverage
Pays for damage to your car from non-collision events like theft, vandalism, weather, or hitting an animal.
Uninsured/Underinsured Motorist
Protects you if you're hit by a driver who has no insurance or not enough insurance to cover your damages.
Personal Injury Protection (PIP)
Covers medical expenses for you and your passengers regardless of who caused the accident. Required in some states.
Medical Payments Coverage
Pays for medical expenses for you and your passengers after an accident, regardless of fault. Similar to PIP but usually with lower limits.
Home Insurance
Dwelling Coverage
Pays to repair or rebuild your home's structure if it's damaged by covered events like fire, wind, or vandalism.
Personal Property Coverage
Covers your belongings (furniture, electronics, clothing) if they're stolen or damaged.
Liability Protection
Covers you if someone is injured on your property or if you accidentally damage someone else's property.
Additional Living Expenses (ALE)
Pays for temporary housing, food, and other costs if you can't live in your home due to covered damage.
Replacement Cost vs Actual Cash Value
Replacement cost pays to replace items at today's prices. Actual cash value deducts for depreciation, so you get less.
Flood Insurance
Separate policy covering flood damage. Standard home insurance doesn't cover floods.
Life Insurance
Face Value (Death Benefit)
The amount your beneficiaries receive when you die. This is the main payout of the policy.
Term Life Insurance
Coverage for a specific period (like 20 years). If you die during the term, your beneficiaries get the payout. Usually the most affordable option.
Whole Life Insurance
Permanent coverage that lasts your entire life and includes a savings component (cash value). More expensive than term.
Beneficiary
The person or people who receive your life insurance payout when you die.
Cash Value
A savings component in permanent life insurance that grows over time. You can borrow against it or surrender the policy for this amount.
Contestability Period
Usually the first 2 years of a policy when the insurer can investigate and deny claims for misrepresentation on your application.
Still confused about something in your policy? Upload it and we'll explain it.
Analyze Your Insurance