Insurance is complex and the world of insurance is complicated, particularly when you consider the number of terms and jargon used in policies and discussion. From your first policy purchase to reassessing what you already have, it is essential you understand some common insurance terms. This article contains an extensive glossary of essential insurance terms every consumer should know when making sure you have the right coverage.
1. Premium
Definition: An insurance policy is the amount of money that an individual or business must pay as premium. This fee is much … usually, it is payable monthly, quarterly, or annually, depending on the bet policy terms.
Importance: You need to understand how much you would need to pay for your premium, as your insurance premium affects your budget as well as how much you can afford for the insurance itself.
2. Deductible
Definition: A deductible is the amount that you pay yourself out of pocket before your insurance covers any costs. Common in health, auto, and homeowners insurance policies , this is a requirement for cost sharing.
Importance: Your premium costs — and how you use your insurance — can be greatly influenced by the size of your deductible. With higher deductibles comes lower premiums, but more out of pocket costs once you submit a claim.
3. Policy Limit
Definition: The amount that an insurance company will pay for a covered loss under a policy, is the policy limit. With different types of insurance, limits can be limited to a period of time (e.g., annually), a loss or for the life of the policy.
Importance: Knowing your policy limits can inform you how much of coverage you have and what amount of coverage will be out of your pocket if a loss is substantial.
4. Coverage
Definition: The range of protection provided under an insurance policy is called coverage. It gives what is covered as events, risks or properties or specifically what is excluded from coverage.
Importance: Knowing what your insurance covers is important to prevent unexpected expenses when you’re making a claim.
5. Claim
Definition: The claim is a formal request by policyholder to an insurance company for coverage or compensation for a loss or policy event, which is covered by the policy.
Importance: It’s nice to know how to file a claim (and what the process looks like) so you can effectively use your insurance when needed.
6. Beneficiary
Definition: The person or entity for whom the benefits of an insurance policy, especially a life insurance policy, are being taken out.
Importance: It is important to give the right beneficiary(ies) as these are the ones who will inherit the policy benefits once the policy holder dies.
7. Underwriting
Definition: Underwriting is the process through which an insurer decides how much of a risk insurance of a home, car, or person’s health or life is, and how much to charge for it.
Importance: The impact of this process is that it alters the coverage options you’ll be offered, and — based on your own risk to the insurer — how much you’ll be charged.
8. Exclusion
Definition: The items or conditions which are not covered by the general insurance contract are called by exclusions.
Importance: What your policy covers is as important to know as what it excludes, as it can help you determine which claims won’t be paid.
9. Rider
Definition: Legalistic definition: A rider is policy add on which offers added benefits for an extra cost.
Importance: Riders allow you to add coverage that standard policy doesn’t cover, and allow riders to customize your insurance policy to your individual needs.
10. Co-insurance
Definition: The percentage of costs of a covered health care service you pay, such as 20%, after you've paid your deductible.
Importance: In health insurance, this term is crucial because it embodies your total out of pocket expenses for medical treatment.
11. Act of God
Definition: In insurance, an act of God is an accident or event not caused by man like hurricanes or earthquakes and which is insured.
Importance: To know whether your policy covers acts of God, can help you get ready for cast natural events.
12. Adjuster
Definition: An adjuster is a person hired by an insurance company to help decide how much to pay on a claim made by someone covered by the company's policies.
Importance: Adjusters are part of the claims process to estimate the damage to property and therefore the insurance company liability.
Conclusion
Key insurance terms are understandable for anyone to navigate through the insurance market. This is the first step in being able to better understand your insurance policies and the rights to which you’re entitled and how best to manage and use your coverage. It’s also important to always read your policy documents thoroughly and seek advice from your provider if you have any issues to do with the specific terms and conditions of the policy. Our proactive method will assist you to deliver the maximum return for your money on the rear of your insurance, while providing sufficient protection for you and your possessions.
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