Insurance jargon has its lexicon. Not even trying to define each of them, sometimes the words used with an insurance policy will only raise questions about your own policy. And so this is a general guide for all kinds of insurance from life, health and auto to coverage for the homeowner, just something that could come in handy in your understanding about your own insurance policy.
Insurance Terms: What Are They?
Insurance terms refer to the specific language and definitions that describe the elements and processes of an insurance policy. These terms help policyholders understand what is covered, how claims are made, and what the policyholder’s responsibilities are. Knowing these terms is key to ensuring you’re getting the right coverage and not caught off guard by unexpected exclusions or limitations.
Key Insurance Terms to Know
Most common insurance terms a policyholder must be aware of include the following:
Premium
A premium is the money paid by a policyholder at a periodic basis (monthly or yearly) for securing an insurance cover. The premium differs with each type and its covering amount, as well as the risk profile of the policyholder.
Deductible
This is the amount a policyholder pays before his insurance company will pay him for the services or damages that are covered. Generally speaking, a higher deductible tends to correspond with relatively lower premiums, and it thereby implies that the holder of the policy will pay more should any claim arise.
Coverage Limits
Coverage limits- The amount of money for which an insurance company will pay for an insured claim. Your coverage limits are crucial in enabling you to determine whether you have covered yourself sufficiently. In auto insurance, for instance, when you know your liability or property damage coverage limits, you never have to pay cash out-of-pocket if you have an accident.
Policyholder
A policyholder is the one who owns the insurance policy. He pays for the premium and keeps the cover up to date. When the claim happens, he is the one making a claim with the insurer.
Beneficiary
The person or party the owner designates to receive an insurance policy benefit. For a life insurance policy, there often is a first beneficiary whose near and dear family member or dear one to the owner receives the proceeds paid by an insurer following a covered person’s death as death benefits.
Types of Insurance and their Jargon
There are terms to the different kinds of insurance. Some of the important terms include the following for the specific type of policy below:
Health Insurance Terms
- Co-pay: The fixed amount an insured pays at the time of receiving the service.
- Out-of-pocket Maximum: The maximum out-of-pocket payment for the services during the term of the policy. When the maximum limit is attained, the rest is paid by the insurer.
- Network: Doctors, hospitals and other health care providers with an agreement from the insurance company to treat at reduced fee
Auto Insurance Terms
- Liability Coverage: This pays for damages or injuries you caused to third parties in case of an accident. Liability is also required by most states
- Collision Coverage: This pays to repair your vehicle in case it is damaged as a result of collision, irrespective of who may have caused the accident.
This covers any damage done to your car as a result of any non-collision activity, be it theft, vandalism, or even natural happenings.
Terms on Homeowners Insurance
- Dwelling Coverage: This is coverage given to any form of structural framework in your home, roof, walls, and foundation damaged as a result of covered perils.
- Personal Property Coverage: Your personal property would be covered which includes furniture, electronic equipment, clothes, and so on and against fire and theft and the other covered actions in which such property is either damaged or gets lost.
- Liability Coverage: This will ensure any kind of injury to other people, causing damage to some properties, and any kind of destruction of his property by family members.
Insurance Terms Effectiveness Usage
Knowing and using the right terms about insurance will save you from costly errors and make sure you’re well covered. Here are some tips on how to maximize your knowledge of insurance:
Review Your Policy Regularly
There will be a multitude of terms and conditions in your insurance policy. You must read this document regularly to know your coverage and the changes incorporated. When you come across some terms ambiguous, do not hesitate to clarify with your agent.
Ask Questions
Insurance is generally a complicated matter, and insurance agents are always prepared to guide you through it all. So if you find something puzzling, you don’t have to be afraid to ask for it to be explained to you. A proper agent will have more than enough time to spend step by step in explaining every ins and outs of your policy to make you know what is covered.
Shop Around
Shop around for the best policy that suits your needs. Compare who has the lowest premium costs and who can cover for what. A good question also to ask regarding anything unusual or confusing terms or clauses so one does not miss important protection.
Conclusion
Knowledge of the insurance terminology is going to turn one into a very informed consumer and policyholder. From premiums and deductibles to coverage limits and beneficiaries, each term plays a significant role in the functionality of an insurance policy. By familiarizing yourself with these common terms, you’ll be better equipped to make informed decisions about your coverage, whether it’s for your health, home, or car. Always take the time to read through your policy carefully and ask questions when needed. Now you may know the good terms in insurance, so you can ensure to be protected and navigate comfortably in the field of insurance.
