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Before you learn about specific policy types and their provisions, you will need to understand some basic concepts and terms associated with the insurance industry. This chapter discusses concepts that make it easier for you to learn the rest of the material in this course, so it is important for you to master these ideas before moving on to the next chapter.
| Term | Definition |
|---|---|
| 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 |
Terms to Know