Introduction
Insurance can be a complex and confusing subject, filled with a myriad of terms and jargon. Understanding insurance terminology is essential to making informed decisions and ensuring the right coverage for your needs. In this terminology series, we’ll decode some of the most commonly used insurance terms, making it easier for you to navigate the world of insurance.
1. Premium
The premium is the payment you submit to the insurance company for coverage.It is usually paid monthly, quarterly, or annually. The premium amount is determined by a variety of factors, including the type of coverage, the level of risk associated with the insured item or person, and the insurance company’s underwriting guidelines.
2. Deductible
A deductible is the sum you need to pay from your funds before insurance coverage takes effect.For example, if you have a $500 deductible on your auto insurance policy and you get into an accident that causes $2,000 in damages, you’ll pay the first $500, And the remaining $1,500 will be covered by your insurance company.
3. Policy
A policy represents an agreement between you and the insurance company.It outlines the terms and conditions of your coverage, including what is included, what is excluded, and any limitations or restrictions. It is important to review your policy carefully to understand your rights and responsibilities as an insured person.
4. Coverage
Coverage refers to specific risks or events that are protected by the insurance policy. This can include things like property damage, liability for injuries or damage caused to you or your property, medical expenses, and more. The extent of coverage will vary depending on the type of insurance policy you have.
5. Claim
A claim is a formal request you make to your insurance company to receive compensation for a covered loss or incident. When you experience a loss or damage covered by your insurance policy, you must file a claim to begin the claim process. The insurance company will assess your claim and ascertain the suitable compensation amount.
6. Underwriting
Underwriting is the process that insurance companies use to assess the risk associated with insuring a person or property. It involves evaluating various factors such as the applicant’s age, health, driving record, and credit history. The underwriting process helps insurance companies determine the premium amount and coverage to offer.
7. Exclusion
An exclusion refers to a clause in an insurance policy that outlines what is not included in the coverage. It outlines the circumstances or events for which the insurance company will not pay compensation. It is important to review the exclusions in your policy to understand any limits or restrictions on your coverage.
8. Rider
A rider is an additional provision that can be added to an insurance policy to provide additional coverage for specific risks or events. For example, if you have a health insurance policy that doesn’t cover dental-related expenses, you may be able to add a dental rider to your policy to increase coverage for dental procedures.
Conclusion
Understanding insurance terminology is important to advance in the world of insurance. By decoding some of the most commonly used insurance terms, this terminology series aims to provide you with the knowledge to make informed decisions when it comes to choosing and managing your insurance coverage. Remember to review your policy carefully and consult an insurance professional if you have any questions or need further clarification on any insurance terms.
