Insurance Terms Explained
Insurance can feel like a foreign language. Here are common terms explained in plain English.
A
Actual Cash Value
An amount equivalent to the fair market value of stolen or damaged property immediately preceding the loss.
Admitted Company
An insurance company authorized to do business in the state that they are licensed in.
Agent
A licensed person or organization authorized to sell insurance by or on behalf of an insurance company.
B
Beneficiary
The person or entity designated to receive the death benefit from a life insurance policy.
Binder
A temporary agreement that provides insurance coverage until a permanent policy is issued.
C
Claim
A request made by the insured for payment of a loss covered under the insurance policy.
Coinsurance
A percentage of covered expenses that the insured is responsible for paying after the deductible is met.
Copayment (Copay)
A fixed amount paid by the insured for a covered service.
Coverage & Benefits
Premium
The amount you pay each month for your insurance plan, whether you use it or not.
Deductible
The amount you pay out-of-pocket before your insurance starts covering costs. For example, with a $2,000 deductible, you pay the first $2,000 of covered services each year.
Out-of-Pocket Maximum
The most you'll pay for covered services in a year. Once you reach this amount, insurance pays 100%.
Networks & Providers
In-Network
Doctors, hospitals, and providers that have contracts with your insurance plan. You pay less when you use in-network providers.
Out-of-Network
Providers that don't have contracts with your plan. You usually pay more or may not be covered at all.
Primary Care Physician (PCP)
Your main doctor who coordinates your care. Some plans require you to choose a PCP and get referrals for specialists.
Plan Types
HMO (Health Maintenance Organization)
Lower-cost plans that require you to use in-network providers and get referrals from your PCP for specialists.
PPO (Preferred Provider Organization)
More flexible plans that let you see any provider without referrals, though you pay less for in-network care.
EPO (Exclusive Provider Organization)
Plans that only cover in-network care (except emergencies) but don't require referrals.
Special Terms
Formulary
The list of prescription drugs covered by your plan. Drugs are usually grouped into tiers with different costs.
Prior Authorization
Approval from your insurance company required before certain services or medications are covered.
Explanation of Benefits (EOB)
A statement from your insurance showing what was covered, what you owe, and what the provider billed.
Exclusion
Specific conditions or circumstances not covered by an insurance policy.
R
Rider
An addition to an insurance policy that modifies or adds coverage.
Still Confused?
We're here to help explain your options and make sure you understand your coverage. Contact us with your questions.