Insurance Terminology: A Vocabulary for the Consumers
When one is looking for insurance, either for life, health, or asset, there are several manuals one needs to understand. These are the basic insurance terms that are required when one is heading to the insurance market. The goal of this glossary is to help end customers understand important but common insurance terms, and objections, so that they can approach Providers and policies with an empowered attitude.
Understanding the Terms Biggins With a Basic Knowledge for Insurance
Nobody can deny that Insurance is an umbrella that saves one from certain unavoidable dangers and threatens one’s finances up to a large extent. But this umbrella that prevents the loss cannot be effectively used, if one does not understand the insurance policy and its declarations. There can be many technical insurance terms, and without knowledge of these terms; there would be great confusion, making it hard to seek interpretation. Once you have these terms with you, it becomes easy to know what kinds of insurance you require, what policies are available, and in brief how much will be enough coverage.
General Insurance Terms of Usage
1. Premium
Meaning: The contingent deposit is the simplest meaning of this preparatory word. Its main focus is on the policy one pays while getting the cover. This can be done in several payments or in one up front.
Usage: It is common for policyholders to spend 41.67 every month if their car insurance policy is set at $500 annually.
2. Deductible
Meaning: Out of the above mentioned policyholders, it can also be defined as the deposit that is given in excess of the original avoidable amount which is supplied by an Insurance Company. The client of the insurance company or organization will incur all losses up to that point.
Example: If you have a $1,000 deductible on your home insurance and make a claim, you alone will pay the first $1,000 of damage covered by the claim.
3. Coverage
Definition: The benefits and protection that comes out of an insurance policy.
Example: In addition to regular benefits, health insurance coverage may also encompass hospital admissions, number of surgeries, and certain drugs.
4. Policyholder
Definition: Either a person or an entity that possesses the insurance contract.
Example: If you acquire life insurance, you yourself will become the policyholder, while your beneficiaries will benefit from purchasing such a policy.
5. Insurer
Definition: The organization that issues an insurance policy.
Example: Popular auto insurance companies may include State Farm or Allstate.
6. Beneficiary
Definition: The individual or organization mentioned in the contract and is entitled to the benefits of the insurance policy.
Example: Under a life insurance contract, the spouse of the individual who purchased the policy may be the designation beneficiary.
7. Claim
Definition: The formal request made to the insurance company by a policy owner for payment as provided for under the insurance contract.
Example: Filing a claim in case one gets into a car accident so that one’s insurance company could pay to have the car repaired.
8. Exclusion
Definition: The specific events or situations that never come under the legal cover of the insurance policy.
Example: Typical homeowners06506 insurance policies usually omit damages incurred as a result of flooding on the site.
9. Endorsement
Definition: A change in an insurance policy contract which replaces or augments the original provisions.
For instance: an additional endorsement providing coverage for personal possessions that exceed standard homeowners insurance.
10. Underwriting
Definition: The system of risk evaluation and determination of premium rates that is adopted by most insurance firms.
Example: Underwriters assess your health issues before giving you an approval for a policy which is aimed at protection during the life span of an individual.
Parts Of Life Insurance
1. Term Life Insurance
Definition: Life coverage for a stipulated time frame, which could be 10, 20, or even 30 years.
Example: A lifetime insurance policy for 20 years would provide a death benefit if the insured person dies within the term.
2. Whole Life Insurance
Definition: A lifetime insurance that covers the entire duration of life of the insured AND has a cocooned saving as well
Example: Over the years, whole life insurance policies amass cash value that can be accessed by borrowing against it.
3. Universal Life Insurance
Definition: This is another permanent life insurance policy that has some room for change in premium amounts and benefit amounts.
Example: Policy holders may increase their death benefits or alter premiums to adapt to change in circumstances.
4. Death Benefit
Definition: The claim made to the beneficiaries by the insurer following the death of the insured.
Example: The insured has a demise where he/she had a death benefit of $ 500, 000. The beneficiaries of the policy after the policyholder is positive do not have extreme hardships.
5. Cash Value
Definition: The surrender value of the insurance which increases over the years.
Example: Cash value can be borrowed against or utilized towards paying the premiums.
Health Insurance Terms
1. Copayment (Copay)
Definition: The amount paid for a health care service which is usually paid at the time of receiving the service.
Example: When seeing a doctor, the required copay is 20 dollars.
2. Coinsurance
Definition: A cost sharing feature found in most health insurance plans whereby the insured pays a certain percentage of the medical bills after the patient has paid a specified amount referred to as the deductible.
Example: If the coinsurance of a person is 20% and the cost of a procedure incurs 1000 dollars and the deductible has been satisfied, then the person coinsures two hundred and dollars.
3. Out-Of-Pocket Maximum
Definition: The total amount which the insured must pay from their own account for given services under the plan, in any one year, before the insurance company covers all expenses for the insured.
Example: When the out of pocket maximum reaches 6000 dollars, it can be said the person’s insurance will cover all remaining expenditures.
4. Network
Definition: Refers to the group of physicians, hospitals, and other health care providers who are contracted with your health insurance plan.
Example: By using the network, people usually pay less from their pockets.
5. HMO, PPO, EPO
Definitions:
HMO: (Health Maintenance Organization): It allows using only in-network providers however, one needs to get a referral to visit any specialist.
PPO: (Preferred Provider Organization): It allows using more providers but requires no referrals to see the provider.
EPO (Exclusive Provider Organization): It’s like a PPO, but it does not generally provide benefits for out of network services.
Example: An example would be if an HMO plan asks you to see your own doctor first, and then provides a switch with the specialist afterwards.
Automobile Insurance Terminology
1. Liability Insurance
Meaning: Protects you from paying for the damages to others’ and their resources if you cause an accident.
Example: Liability for bodily injury and for property damage can save money of someone who is responsible for the car crash.
2. Collision coverage
Meaning: Insures your vehicle against collisions with another vehicle or physical object.
Example: You hit a tree; the colliding object was a tree, collision coverage helps you pay off parts of the car that got damaged.
3. Comprehensive Insurance
Meaning: Insurance that compensates for the loss of your car caused directly or indirectly by something other than collision with another vehicle.
Example: The sound of hails on a car, comprehensive coverage would make needed repairs or compensate for hailing noise caused damage.
4. No Fault Insurance
Meaning: Insurance coverage brought by policyholders’ entirely from their own policy no matter who is responsible.
Example: Your car gets into an accident in a no-fault state, after the accident all your medical bills are claimed from your insurance.
Property Insurance Terminology
1. Actual cash value (ACV)
Meaning: The amount of loss with respect to property damaged endowed with depreciation.
Example: For a roof that has five years of age, the ACV would easily recognize that indeed it has depreciated in value over time.
2. Replacement Cost
Definition: The amount needed to replace the damaged property with a new property of the same type or kind and that is similar in quality, but without any deduction for such depreciation.
Example: The replacement cost coverage would simply replace the damaged appliance with those that can easily be classified as the same type as the one which was damaged.
3. Peril
Definition: A specific risk or cause of loss which is included in the insured perils covered by a certain policy.
Example: A peril of fire, theft, and windstorm are some of the perils included in the policy of homeowner’s insurance.
4. Hazard
Definition: The likelihood of the occurrence of a peril.
Example: Houses that are situated in areas prone to flooding is a hazard that is likely to affect your property insurance.
Business Insurance Terms
1. General Liability Insurance
Definition: Covers businesses against claims made against them for bodily injury or property injury and even personal injury.
Example: If a customer were injured and fell in your shop, general liability insurance will pay for the legal fees and settlements.
2. Professional Liability Insurance (Errors & Omissions Insurance)
Definition: Insures professionals for negligence or failure to perform work satisfactorily.
Example: If a consultant has advised a client and then that client claims such advice has made him incur losses, that consultant can have protection.
3. Workers’ Compensation
Definition: The income benefits presented to employees that get injuries as a result of their occupation or illness that is related to their occupation.
Example: Takes care of expenses that are medically related and loss of income for an employee involved in an accident in the business premises.
Additional Insurance Terms
1. Rider
Definition: This is known as an endorsement, basically it modifies the terms of an existing insurance policy.
Example: Selling a taxable rider for high-value items such as jewelry or art which are not covered in policy limits.
2. Grace Period
Definition: This is the period after the maturity date of a paid premium after which the policy will become inactive in appreciation though the amount payable has not been settled.
Example: If you are late on paying your premium but don’t want to lose coverage, you can do so to up to 30-days.
3. Reinsurance
Definition: This is defined as a type of insurance which is availed to the insurance companies that act as protection against risks.
Example: It is advisable for an insurance company to buy a reinsurance to minimize the risk of higher claims because of natural disasters.
4. Subrogation
Definition: This insurance term can be defined as a process where the insurance firm seeks for recovery form the liable party after spending over a claim.
Example: Subrogation relieves an insurer from the trouble of covering costs of damage caused by a careless driver because it is a relation between the insurance who caused the loss.
Tips for Understanding Insurance Policies
1. Read the Fine Print
Before you file a claim, make sure you understand everything under your policy, including exclusions, limitations and endorsements- all these can save you surprises at the time of settlement.
2. Make clarifying inquiries
Never hesitate to have your insurance agent or company representative explain any terms or conditions you don’t understand. It’s always better to clear things out beforehand rather than being troubled later on.
3. Look for Better Policies
Check and try out various policies and providers. Try focusing on factors other than premiums which are the coverage limits, deductibles and other important terms and conditions that may suit your needs better.
4. Evaluate Your Personal or Business Risks
Analyze your particular or business risks and obtain coverage that specifically addresses those needs. Customizing your insurance would enable you not to be over insured or under insured.
5. Keep Your Insurance Papers in One Place
Keep your insurance papers, including any letters written or received, endorsements and claims in an orderly manner. This can help make things easier in the event that these pages or documents are required for reference or for claims.
Conclusion
Familiarity with the terms used in insurance helps a person in making wise choices and in obtaining the most suitable insurance for his situation. Knowing the important concepts and definitions enables the insured make confident decisions regarding insurance policies such that they are not caught off guard by ill-fated moments in life. So, learn more, do not hesitate to inquire and have the different options in order to enable you settle for the best for your insurance, either individual or institutional. With the context of the insurance coverage clearly understood, a seemingly encumbering factor becomes a child’s play when trying to plan for your finances.