Taking out insurance can feel like a painfully long-winded process. You can easily feel weighed down with all the jargon and complicated wording, reels of boring documents and tricky policy phrases. However, insurance is a vital necessity, something that you need to protect your home, car, health, even your life. Therefore, it’s extremely advantageous to clue yourself up on some common insurance terms and phrases so that you know what you’re looking at and what you need to know in the event of any claim or issue. In the information to follow we will discuss some common phrases you may see in your insurance policy so you can use what you know to your advantage. We will also take a look at the different aspects of your insurance policy so that you can get to grips with that too.
Common Insurance Terms
There are many helpful resources and glossaries that are available to help people of all backgrounds understand the insurance terms. If you can build your confidence in your understanding of them, it will likely make the difference between getting the cover you need and ending up underinsured. When it comes to insurance, the stakes are higher than most other subjects that require specific understanding and vocabulary knowledge. While your life will not be impacted by your lack of soccer vocabulary, it will be by your lack of insurance vocabulary. The protection of our lives and valuable property is at stake, so it’s a subject that is not to be taken lightly. In fact, it’s essential that you get to grips with the jargon as best you can and have at least a basic understanding of what the different terms refer to.
Premium
As an insured person, the premium is the amount of money you pay to an insurance provider in exchange for their coverage and protection. The method in which you pay this premium often depends on the type of policy you take out. It can be paid in one upfront lump sum, or as smaller monthly payments. Various different factors can determine the amount of premium you pay, from the type of policy to the type of person that is taking it out.
Deductible
You may sometimes hear the term “deductible” and it refers to the amount of money you need to pay before the insurance company steps in and pays the rest. To put this into a real life experience, the deductible on your insurance policy may be $300. Then if you are in a car accident that causes damages of $5000, you would be responsible for paying $300 before the insurance provider would cover the rest of the bill.
Asset
An asset is an economic or financial benefit that is controlled by a person or entity. They are possessions that may have financial value or that have the potential to generate value in the future. Assets could include things like a home, a vehicle, savings or investments. These assets are all considered when it comes to take out an insurance policy.
Electronic Funds Transfer (EFT)
An electronic funds transfer (commonly known as an EFT) is a method of payment where an insurance company will automatically deposit the claim amount in your bank account by electronic means. While an in person inspection could lead to the writing of a cheque on site, a remote claims process will often result in the funds being deposited through an electronic funds transfer.
Loss
While it may sound self-explanatory, in the context of insurance, loss is the damage that is caused to an insured asset or individual. Specifically, what is known as a covered loss is any damage that an insurance policy covers and provides protection for. To show this in a more relatable example, under a home insurance policy hail damage is something commonly considered a covered loss, so the provider would pay out for such damages. However, flood damage is not usually a standard covered loss, so the homeowner would have to pay out in that event.
Named Insured
Named insured is different to simply the insured. Although it is similar in the fact that it refers to the individual or entity that a policy covers, it differs in various circumstances. To illustrate the difference, when a company has general liability insurance, it’s the company that is the named insurer. However, while the employees would be covered under the policy while working for the company, they are not the named insured.
Underwriting
Underwriting is a process that insurance providers use to determine the risks of a potentially insured person or entity to decide whether the insurer will provide cover. This process also helps to determine the rates of the insurance based on different factors that the applicant stipulates.
Features of Your Insurance Policy
If you need to delve into your insurance documents, perhaps in the event of a claim, you need to know simple things like how to find your insurance policy number, or the conditions and definitions of the policy you have taken out. When you speak to your insurance agent, take a look through your policy, or file a claim, having a grasp of the subject will help you to navigate it a lot more confidently and successfully.
Insurance Policy Number
Every insurance policy you take out will have a unique set of numbers assigned to it which is used to make payments, identify your account, and file claims.
Conditions
Conditions are something we often hear about when we make any purchase and in the context of insurance is places limitations on the insurers promise to pay. It will outline conditions that both the insurer and the insured have to live up to.
Declaration Page
The first part of your insurance policy is known as the declaration page. It identifies the insured, the risks or items that are covered, as well as the limits and period of the policy.
You Can Understand Your Insurance Policy!
It’s reassuring to know that you can learn all you need to understand about your insurance policies.
