Busting Insurance Jargon: A Guide for an Insurer to the A-List Buyer of Coverage

Learning insurance terminology can be overwhelming at times, especially if you’re a new buyer of coverage. The industry is loaded with technical insurance jargon that makes you think policies are more complicated than they need to be. This guide will deconstruct important terms so you have a better grasp of your coverage options and make intelligent choices.

Why Learning Insurance Terminology Matters

Insurance is what shields you against sudden financial shocks, but without knowledge of the key terms, you might have no idea what you’re signing. Lack of knowledge of everyday insurance terms will give you the power to acquire the proper protection and be prepared at claim time.

Everyday Insurance Terms Explained

1. Premium

Premium is what you pay at periodic intervals to keep your insurance policy active. It could be monthly, quarterly, or annually. The premium will vary based on a number of factors like your age, coverage type, and risk profile.

2. Deductible

A deductible is the amount you pay before your insurance provider kicks in. If, for example, you have a $500 deductible on your medical insurance, you’ll cover the first $500 of the medical expenses before your coverage takes effect.

3. Coverage Limit

Coverage limit is the amount of money your insurance company will pay for a covered loss. Policies have limits on different coverage types, such as property loss and medical loss.

4. Policyholder

Policyholder is a person, family, or company that holds the insurance policy, depending on the insurance.

5. Beneficiary

The individual or group to whom the insurance benefit will be made in the event of the death of the insured, typically under life insurance policies. 

Types of Insurance Coverage

Health Insurance Definitions

Copayment (Copay)

A fee you pay for a particular medical care or medication. For example, you pay $20 per doctor visit.

Out-of-Pocket Maximum

The maximum cost you have to pay for covered care in a calendar year, including deductibles and copays. Your insurance then pays 100% of the qualifying charges after this.

Auto Insurance Definitions

Liability Coverage

Helps cover damage or injury you cause to others in an accident. It is typically required by law in most states.

Collision Coverage

Repays damage to your car if you get into an accident, whether you are at fault or not.

Comprehensive Coverage

Pays for damages not from a collision, such as theft, vandalism, or natural disasters.

Home Insurance Terms

Dwelling Coverage

Protects the physical building of your home against covered damage like fire or storms.

Personal Property Coverage

Insures the personal belongings in your home, such as furniture and electronics.

Liability Coverage

Pays for attorney fees if a person is hurt on your property.

Other Insurance Terms You Should Know

1. Underwriting

The process insurers use to determine risk and the cost you pay.

2. Exclusions

Specific events or circumstances that your policy does not cover. Read them carefully at all times.

3. Riders

Optional riders that provide you with additional coverage on your underlying insurance policy.

4. Claim

A written request to your insurance company for payment of a covered loss.

How to Select the Best Coverage

Knowing these insurance terminologies will allow you to choose coverage that suits you. These are some tips:

• Compare policies offered by different providers.
• Check the coverage limits and exclusions.
• Do not be afraid to ask if you do not know any term.
• Check your finances and how much you would like covered.

Conclusion

Reading insurance jargon is such an easier task after learning how to do it. Having a clear understanding of familiar terms, you can be confident in selecting the proper coverage and protecting yourself from unexpected expenses. Always take the time to read your policy over and ask your insurance provider if you are unsure.