10 Must-Know Insurance Terms for Everyone
Insurance is a complicated topic, and it can be challenging to understand all of the terms and concepts that are involved. However, having a basic understanding of insurance terms is essential, whether you're looking to buy insurance or simply want to make sure you're adequately protected. In this blog post, we'll cover 10 insurance terms that everyone needs to know.
The premium is the amount of money you pay to an insurance company for coverage. It is usually paid on a monthly, quarterly, or annual basis, depending on the policy.
The deductible is the amount of money you must pay out of pocket before your insurance policy kicks in. For example, if you have a $1,000 deductible on your car insurance and you get into an accident that causes $3,000 in damage, you would pay $1,000, and your insurance company would pay the remaining $2,000.
The policyholder is the person or entity that owns an insurance policy. They are the ones who pay the premiums and are entitled to the benefits of the policy.
A claim is a request you make to your insurance company for coverage or reimbursement for a loss or damage covered by your policy. For example, if you have homeowner's insurance and your house is damaged in a storm, you would file a claim to get the necessary repairs.
Liability insurance covers damages you are legally responsible for paying to another person or entity. For example, if you cause an accident while driving, your liability insurance would cover the damages you owe to the other driver or their property.
6. Coverage limit
The coverage limit is the maximum amount an insurance company will pay for a covered loss or damage. For example, if you have car insurance with a $50,000 coverage limit for property damage, your insurance company will pay up to $50,000 to repair or replace the other driver's car if you are found to be at fault in an accident.
Underwriting is the process that an insurance company uses to evaluate the risk of insuring a particular person or entity. This process involves assessing the likelihood of a loss occurring and determining the appropriate premium to charge for the policy.
A rider is an add-on to an insurance policy that provides additional coverage for a specific event or circumstance. For example, you can add a rider to your homeowner's insurance policy to cover the cost of replacing expensive jewelry.
An exclusion is a provision in an insurance policy that specifies situations or circumstances that are not covered by the policy. For example, if you have flood insurance, there may be an exclusion for damage caused by a hurricane.
10. Premium Refund
A premium refund is a partial or full refund of your insurance premium. This can happen if you cancel your policy before the end of the coverage period or if your insurance company overcharges you for your premium.
In conclusion, understanding insurance terms is essential for making informed decisions about your coverage. By knowing these 10 terms, you'll be better equipped to navigate the world of insurance and ensure that you're adequately protected.