Insurance Basics & Other

The amount you pay an insurance company to keep your coverage active, typically billed monthly, quarterly, semi-annually, or annually. It’s the ongoing cost of being insured, set by the insurer based on factors like the coverage type, your risk profile, and the policy limits. If premiums go unpaid, coverage can lapse, and it’s separate from a deductible, which is what you pay out of pocket when you file a claim.

The person or entity that owns an insurance policy and holds the rights and responsibilities under it. They’re responsible for paying premiums to keep coverage active and can make changes such as updating beneficiaries or adjusting the policy. The policyholder isn’t always the insured person, since someone can own a policy that covers another individual.

The process by which your insurance company, after paying your claim, pursues the at-fault party or their insurer to recover the money it paid out. It lets your insurer step into your shoes to seek reimbursement, which helps keep premiums down and can result in your deductible being refunded if the recovery is successful. A common example is auto insurance, where your insurer pays your repairs after an accident caused by another driver, then recoups the cost from that driver’s insurer.

A one-page document that serves as proof an individual or business holds an active insurance policy, summarizing key details like the coverage types, policy limits, effective dates, and insurer. It’s commonly requested by clients, landlords, or partners before signing a contract to verify that coverage exists. Importantly, it’s only a summary for verification and doesn’t itself grant coverage or change the terms of the actual policy.

A contract provision in which one party’s insurer gives up its right to pursue (subrogate against) the other party to recover money it paid on a claim, even if that party was at fault. It’s commonly required in business agreements like leases and construction contracts to prevent insurers from suing the other contracting party. Because it raises the insurer’s risk, adding one often comes with an additional premium.

In auditing, the risk of a material misstatement in financial statements before considering any internal controls, arising from the nature of the business, transaction, or account itself. It’s higher for areas involving complex calculations, significant judgment or estimates, or a susceptibility to fraud, such as valuing financial instruments. Auditors assess it as part of the audit risk model to decide where to focus their testing.

The risk that remains after controls and mitigation measures have been put in place to reduce the original, or inherent, risk. Because no set of controls can eliminate risk entirely, some level always lingers, and the goal is to reduce it to a level the organization is willing to accept (its risk appetite). It’s often expressed conceptually as inherent risk minus the effect of controls.