The amount an insurer uses to replace or repair an item minus an allowance for its age and wear (depreciation).
Also called: Indemnity value
Insurance glossary
The language of insurance, in plain words.
Clear definitions of the words policies assume you already know, including the different names the same idea goes by in different countries.
A
The person who investigates a claim and assesses how much the insurer should pay. May work for the insurer or independently.
Also called: Loss adjuster (UK) · Claims adjuster
B
The person or organisation named to receive the payout from a life policy.
Cover for lost income and ongoing costs when a business cannot trade normally after an insured event, such as a fire.
Also called: Business income cover
C
A formal request to your insurer to pay for a loss that your policy covers.
In health cover, the percentage of costs you pay after the deductible is met. In property cover, the term is sometimes used for a clause requiring you to insure a minimum share of the value.
Also called: Co-payment percentage
In motor insurance, the broadest level of cover: usually including damage to your own vehicle as well as others.
Also called: Comp · Fully comprehensive
A period after buying a policy during which you can usually cancel and receive a refund. Its length depends on the country and product.
Also called: Free-look period (US life)
A fixed amount you pay for a particular service, such as a doctor's visit, with the insurer paying the rest.
Also called: Co-payment
D
The summary page of a policy: who and what is insured, the policy period, limits and the premium.
Also called: Policy schedule · Dec page
The amount you pay towards a claim before the insurer begins to pay.
Also called: Excess (UK/AU/NZ) · Franchise
E
A written change to a policy that adds, removes or alters cover after the base policy is issued.
Also called: Rider · Policy schedule amendment
A clause or item that the policy specifically does not cover.
I
The principle that insurance should restore you to the position you were in before a loss — no better, no worse.
L
Cover that pays if you are legally responsible for injury to another person or damage to their property.
Also called: Third-party cover
The maximum the insurer will pay for a covered loss, either per claim or over the policy period.
Also called: Sum insured · Coverage limit
N
A discount on your premium for each year you have not made a claim.
Also called: No-claims discount · Claims-free discount
O
An independent body that reviews complaints about an insurer, at no cost to the consumer, after the insurer's own complaint process has been used.
Also called: Financial Ombudsman Service (UK) · AFCA (AU)
In health cover, the most you will pay in a policy year for covered care; after it is reached, the insurer pays in full.
Also called: Out-of-pocket limit · OOP max
P
The amount you pay, monthly or yearly, to keep a policy in force.
Cover for claims that your professional advice or services caused a client financial loss.
Also called: Errors and omissions (E&O) · Professional liability
The evidence and statement you provide to show what happened and what the loss is worth.
R
The cost of replacing an item like-for-like with a new equivalent, without deducting for depreciation.
Also called: New-for-old cover
Continuing a policy for another period. Price, cover and terms can change at renewal, so it is worth re-reading.
An optional addition to a policy, often a life or health policy, that changes or extends the cover.
Also called: Endorsement · Add-on
S
A lower limit that applies to a particular kind of item or loss within the overall limit, such as jewellery.
Also called: Inner limit · Specified limit
The insurer's right, after paying your claim, to recover the cost from the party responsible for the loss.
The maximum amount a policy will pay; usually chosen by you when you buy it.
Also called: Sum assured (life) · Face amount (US life) · Coverage limit
T
Life cover for a fixed number of years. It pays out only if the insured person dies within that term.
Also called: Term assurance (UK) · Term insurance
U
The process by which an insurer decides whether to offer cover, on what terms and at what price.
Being insured for less than the true value. Some policies then reduce a payout in proportion.
Also called: Average clause (UK)
W
A period after a policy starts during which certain claims are not paid.
Also called: Qualifying period · Elimination period
Cover that remains in force for the policyholder's entire life, provided premiums are paid.
Also called: Whole life insurance (US) · Permanent life insurance
Confusables
Terms that are easy to mix up
Side-by-side: three cost-sharing words that often appear together but work differently.
Deductible Copay Coinsurance
| Deductible | Copay | Coinsurance | |
|---|---|---|---|
| When it applies | Until you pay this much for the year (annual) | Each time you use a specific service | After the deductible is met |
| Amount | A fixed dollar/pound amount set by the policy | A fixed fee (e.g. $20 per visit) | A percentage of the cost (e.g. 20%) |
| Stops when? | When you reach the deductible amount for the year | Never — applies each visit regardless | When you hit the out-of-pocket maximum |
| Who pays rest? | You pay 100% until met; insurer pays after | Insurer covers the remainder of the allowed amount | Insurer pays their share (e.g. 80%) of covered costs |
Common questions
Glossary: frequently asked questions
- Insurance markets developed independently in different countries, so industry jargon diverged. "Excess" (UK, Australia) and "deductible" (US, Canada) describe the same concept. The OECD Insurance and Private Pensions Committee publishes cross-border insurance statistics that reveal how products are named differently across member countries.
- A deductible is the fixed amount you pay before insurance kicks in. A copay is a fixed fee you pay for a specific service (such as a GP visit) regardless of whether you have met your deductible. The HealthCare.gov copay definition explains the distinction clearly.
- Subrogation is the right of your insurer, after paying your claim, to step into your shoes and pursue the party that caused the loss. For example, if a neighbour's negligence floods your home, your insurer pays you and then claims against the neighbour. The Insurance Information Institute explains subrogation with examples.
- Moral hazard is the risk that having insurance reduces the incentive to avoid losses. Insurers address it through deductibles, coinsurance and no-claims discounts. The IMF Finance & Development article on moral hazard provides a clear overview.