Top 10 Insurance Jargon Words to Know

Understanding insurance can be challenging, especially with the vocabulary that the everyday person may need to be more familiar with. Here’s a quick guide to the top 10 insurance terms you need to know.

1. Premium

Your insurance premium is the amount you pay for your insurance policy, typically monthly, quarterly, or annually.

2. Deductible

A deductible is the amount you must pay out of pocket before your insurance company starts covering costs. Higher deductibles usually mean lower premiums. Example: If you have a $500 deductible on your car insurance and get into an accident costing $2,000, you’ll pay the first $500, and your insurance will cover the remaining $1,500.

3. Policyholder

A policyholder is the person or entity that owns the insurance policy. This person pays the premiums and has the right to make changes to the policy.

4. Claim

An insurance claim is a request to an insurance company for payment based on the terms of the policy. It is usually made after an incident or loss occurs.

5. Beneficiary

A beneficiary is the person or entity designated to receive the benefits from an insurance policy, particularly in life insurance. Tip: Regularly update your beneficiaries, especially after significant life events like marriage, divorce, or the birth of a child.

6. Exclusions

Specific conditions or circumstances for which the insurance policy does not provide coverage are called “exclusions.” It’s essential to read these to understand what is not covered by your policy. Example: Flood damage is often excluded from standard homeowners insurance policies, so you might need separate flood insurance.

7. Rider

Insurance riders are add-ons to a basic insurance policy that provides additional benefits or coverage. Riders can be tailored to meet individual needs.

8. Underwriting

Underwriting is the process by which an insurance company assesses the risk of insuring a person or asset and determines the premium the policyholder should pay. Tip: Be honest and accurate when providing information during underwriting to ensure your coverage is valid.

9. Grace Period

A grace period is a set amount of time after the premium due date, during which the policyholder can pay their premium without coverage lapsing. Grace periods can vary depending on the carrier, policyholder, and policy type.

10. Actuary

Actuaries are professionals who analyze financial risk using mathematics, statistics, and economic theory, often to help design and price insurance policies.

Conclusion

Familiarizing yourself with these terms can help you navigate the insurance world more effectively. Whether you’re buying a new policy or reviewing an existing one, understanding these key concepts is crucial to navigating the insurance world. If you have any questions or need personalized advice, don’t hesitate to reach out to us here at CoVerica.

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