Chapter 1. Terms to Know

Adverse selection

insuring of risks that are more prone to losses than the average risk

Agent/Producer

a legal representative of an insurance company; the classification of producer usually includes agents and brokers; agents are the agents of the insurer

Applicant or proposed insured

a person applying for insurance

Beneficiary

a person who receives the benefits of an insurance policy

Broker

an insurance producer not appointed by an insurer and is deemed to represent the client

Indemnity

main principle of insurance, meaning that the insured cannot recover more than their loss; the purpose of insurance is to restore the insured to the same position as before the loss

Insurance policy

a contract between a policyowner (and/or insured) and an insurance company which agrees to pay the insured or the beneficiary for loss caused by specific events

Insured

the person covered by the insurance policy. This person may or may not be the policyowner

Insurer (principal)

the company who issues an insurance policy

Person

the term, as it applies to insurance contracts, includes an individual or an insurer, association, organization, society, partnership, business trust, corporation, or another entity

Policyowner

the person entitled to exercise the rights and privileges in the policy

Premium

the money paid to the insurance company for the insurance policy