Article
Terminology
Words used in the Insurance and Investment World
Some of these words may sound scary or complicated. With a basic understating of what they mean, it will help us understand a lot of the concepts behind insurance.
Dictionary
- Claim - When a policyholder experiences a loss that is covered by their insurance policy, they can file a claim with the insurance company
- Compound Interest - the process where interest is calculated on the initial principal, which also includes all of the accumulated interest from previous periods
- Deductible - The amount that the policyholder must pay out of pocket before the insurance company pays for the remaining covered losses
- Fiduciary - A person or organization that is legally or ethically obligated to act in the best interest of another party. Also maintain confidentiality regarding discussions and transactions
- Future Value (FV) - A financial concept used to determine the value of a current asset or amount of money at a specified date in the future, based on an assumed rate of growth or interest
- Inflation - The rate at which the general level of prices for goods and services rises, leading to a decrease in purchasing power
- Non-Qualified Funds - Investeted money that has been taxed (post tax)
- Premium - The the payments made by policyholders to maintain their insurance coverage
- Qualified Funds - Money that has not had taxes paid on it, usually tax differed. (pre-tax) i.e., 401(k), IRA.
- Real Future Value - The future value adjusted for expected inflation, giving a more realistic picture of an investment or savings' worth
- Risk – Any uncertainty that has the potential to negatively impact your financial welfare
- Risk Tolerance – The ability to take on (assume) more of the risk of loss
Types of Insurance
- Property and Casualty (P&C) -
- Health and Disability – This will be discussed in more detail in a future article.
- Life – This will be discussed in more details in a future article.
Page Last Updated: 15 June 2025
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