Insurance Glossary
Insurance licensing, carrier appointment and compliance terms explained.
A
Adjuster
After an insurance claim is filed, an insurance or claims adjuster evaluates, manages, and authorizes claims and payments. They evaluate accidents, damages, and settlements, comparing to policy coverages to determine insurer liability and financial responsibility. Adjusters can work for insurance co...
Agent
An insurance agent is a licensed professional qualified to negotiate and sell insurance policies to clients. There are two main types: Captive agents work for one specific insurance company, while independent agents can work for multiple companies.
B
Background Check
To obtain an insurance license, agents, brokers and adjusters must pass legally required background checks that review criminal, licensing, financial, and disciplinary history. These checks may include fingerprinting, questionnaires, FBI-review, and other requirements.
Broker
Insurance brokers intermediate between clients and insurance companies as client representatives, working directly with clients to compare policies and choose the best coverage for their requirements. As independents, they can access a broad range of policy options to offer unbiased advice, unlike a...
C
Carrier
A carrier is a licensed insurance company that provides and issues insurance policies, underwrites risk, collects premiums, pays claims, and assumes financial responsibility. They operate under strict regulations set by states and the National Association of Insurance Commissioners (NAIC).
Carrier Appointment
There are two steps in obtaining a Carrier Appointment – first the agent/agency must be contracted with the carrier. Second, the Carrier then submits an appointment request to the State Department of Insurance (DOI) to inform the state that the carrier has approved this agent/agency to write busine...
Claim
An insurance claim is a formal request to an insurer to pay for the agreed costs of losses, damages or accidents covered by their insurance policy. Examples include car accidents, death benefits, or theft. Filing a claim is how insured clients receive policy benefits, and they are verified by adjust...
Continuing Education
State mandated continuing education (CE) requirements are necessary for license renewal and ensure that producers remain up to date on the latest insurance updates and standards. On average, producers must complete a certain number of CE credit hours every one to two years to stay licensed, but requ...
Customer Service Representative
Customer Service Representatives (CSRs) work in insurance agencies to manage the day-to-day needs of existing clients, assisting with policy changes, document processing, claims applications, and more. While educated in insurance terminology, because their main concerns are customer support, not sel...
E
E&O
Errors and omissions (E&O) insurance is a liability insurance that protects businesses and professionals against mistakes made while providing a professional service, including claims of negligence, malpractice, errors, omissions or failure to perform services. However, while coverage can be s...
F
Fingerprinting
In most states, fingerprinting is required as part of the background checks insurance producers must pass to stay licensed and compliant. Fingerprint-based searches can be used to check an individual’s FBI and state criminal record. Fingerprinting requirements vary by state. Some states waive the ...
I
Insurance
Insurance is a risk management solution in which an individual or organization transfers the financial risk of potential loss to an insurance company in exchange for payment of a premium. The main types of insurance include home, auto, health, life, travel, and business insurance. Insurance is inte...
Insurance Distribution Channel
An insurance distribution channel encompasses the overall path insurance takes to get from the insurance carrier to the client. It includes every aspect of creating, marketing, selling, and enacting policies, and efficient distribution is essential for customer acquisition and retention. Key entitie...
Insurance Policy
An insurance policy is a contract that details the specific risks covered by the policy and the expected financial compensation for losses. Policies can be specific to business and individual needs, such as identity theft. The components of an insurance policy are the premium, policy limit, and ded...
L
License
A license is what a producer obtains that allows them to sell, solicit, or negotiate insurance products in a particular state. Producers must hold valid licenses in all the states where they conduct businesses, and licenses must be renewed on a regular basis. The National Insurance Producer Regist...
License Class
The license class is simply the type of license. These classifications are decided by the state and determine what types of insurance products the licensed producer is allowed to sell.
License Number
A license number is issued by state Departments of Insurance (DOI) and identifies a producer’s authorization to sell insurance in that state. Some states create unique license numbers, while others use NPN. See Also: NPN Another type of identifier is the NPN (National Producer Number), a unique I...
License Renewal
Producers and adjusters must renew their licenses to maintain compliance and continue to sell or service policies. Resident and non-resident licenses can be renewed online through the National Insurance Producer Registry (NIPR). The requirements for renewals vary by state and range from 60-90 days...
Line of Authority
A line of authority (LOA) is a general category or subject area of insurance in which a producer can be licensed to sell (License classes are more specific and fall within LOAs). Major LOAs include: Life Health Accident and Health Property and Casualty (P&C) Variable Life and Variable...
M
MGA
A managing general agent (MGA) is a third-party business entity that intermediates between carriers and producers, representing the carrier. They are authorized by the insurer to transact insurance business on the insurer’s behalf, and are involved with all types of coverage, up to and including sur...
N
NAIC
The National Association of Insurance Commissioners (NAIC) is a national organization that sets industry standards for regulations, expertise, data management and analysis. It is governed by the chief insurance regulators from the 50 states and U.S. territories in order to coordinate multistate regu...
NIPR
The National Insurance Producer Registry (NIPR) is a non-profit subsidiary of NAIC that serves as a central platform for managing licensing and compliance for insurance professionals. Through the Producer Database, it streamlines license application, renewal, and maintenance across all 50 states and...
Non-Resident License
Obtaining a non-resident license enables an insurance agent to sell, discuss or change insurance policies in a state where they aren’t a resident. A valid resident license must be possessed to obtain a non-resident license.
NPN
The NPN (National Producer Number) is a unique ID number issued by the NIPR (National Insurance Producer Registry) used to track agents and their licenses across states. Unlike license numbers, the NPN does not change from state to state, since it serves as a national identifier. It helps facilitate...
P
PDB / PDB Pull
The Insurance Producer Database (PDB) is a centralized platform that streamlines producer licensing data across the US, supporting the verification and tracking of producer-related information. It maintains diverse information like demographics, licensing details, appointment data, and regulatory hi...
Pre-licensing
Pre-licensing courses are state-required training programs that producers must pass before taking the licensing exam to get licensed for the first time.
Producer
A producer is a general term used in the insurance industry to describe someone who is licensed to sell insurance, including both agents and brokers. Producers sell and negotiate insurance policies.
Q
Quote
An insurance quote is a non-binding estimation of the cost a client will pay for an insurance policy that can be used to compare coverage options. It is calculated through the underwriting process, which evaluates a client’s risk profile.
R
Rate
The policy rate, as opposed to the quote, is the baseline price a client will pay for the insurance policy. It is the standard cost for a unit of coverage, being a unit of money per $100 or $1000 of coverage the insured is looking to cover a particular risk. Premiums are customized based on rate fac...
Reinsurance
AKA “insurance for insurance companies,” reinsurance is purchased by the insurer to protect themselves against unforeseen losses. It limits insurer liability for specific risks, helping insurers survive wide fluctuations in profit and loss margins. One common example is insurers purchasing reinsuran...