Demand for insurance is on the rise globally, with insurance premiums expected to surpass $7 trillion in 2022. Part of the reason for the industry’s growth is the increasing risk awareness in the wake of the coronavirus pandemic.
If you’ve been thinking of purchasing insurance but are new to the whole subject of insurance, a good place to start is by learning some of the insurance terms you’re likely to encounter when dealing with insurance. Keep reading for 10 of the top terms used in insurance today.
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Insurance Policy
An insurance policy refers to a standard form contract between an insurance agency and the insured party which describes the claims the insurer is legally bound to pay. In exchange, the insurer pays an initial payment known as the premium. The insurer then promises to cover the loss resulting from perils covered under the insurance policy.
Insurance policies are generally designed to meet certain needs. Thus, these contracts have many features that other types of contracts do not have.
Policyholder
Another insurance jargon you’ll encounter frequently is the term “policyholder.” The term refers to the person who owns the insurance policy. If you purchase insurance in your name to cover your health or possessions, you become the holder of the policy.
As the owner of the policy, you get the benefits described within it. You’re also allowed to make changes to the insurance policy or cancel it if you wish to. Policyholders can also add more beneficiaries to the policy.
Premium
The premium is the amount of money that the insured person pays to the insurer in exchange for coverage. How you pay your insurance premium depends on your specific policy. Common payment methods include monthly and a single upfront payment.
The insurance premium amount can vary widely based on the policy type, the insured person or entity, the deductibles, and the limits.
Deductible
A deductible is the amount of money you’ll be required to pay before your insurer takes over. For instance, if the deductible on your car insurance policy is $1,000 and your car was in an accident that resulted in $8,000 in damages, you’d have to pay $1,000 while the policy would cover the remaining $7,000. That’s assuming the limit of the policy hasn’t been reached.
Limits
A limit in insurance is the maximum amount of money an insurance agency agrees to pay in the event of a claim. Typically, you and the insurance provider agree on this amount before they issue the policy. The details are found on the policy declaration page.
For instance, you may have an auto insurance policy that has a limit of $60,000 per accident. This simply means that the insurance company will pay up to that amount. If there are any other costs accrued beyond $60,000, you, as the policyholder, are responsible for paying them.
Declaration Page
A declaration page refers to a coverage summary, usually one page in length, that lists such crucial details as:
- The policyholder’s name and address
- Insurance policy number
- Policy’s effective dates
- Actual policy coverage
- How and where to file a claim
Just about all types of insurance have a declaration page. Take the time to review this information, checking for any incorrect details. Check for name misspellings and whether the address included is correct.
Claim
An insurance claim refers to a request for payment made by the policyholder to the insurance agent. The claim must be within the bounds of the insurance policy. For instance, if you’ve purchased a homeowners insurance policy and your roof happens to suffer hail damage, you may file a claim request with your insurer to investigate the matter and issue a payment to cover the cost of repair.
For those planning to purchase homeowners insurance in Massachusetts, some of the details in https://www.lopriore.com/homeowners-insurance/ may prove beneficial in shedding light on what claims you can make.
Liability
Another commonly used insurance term is “liability.” This term means the legal responsibility or obligation a person or entity has for causing injury, damage, or loss to someone else or their property.
For instance, if you’re driving and happen to hit another car, injuring the occupants and damaging their vehicle, you’ll be held liable for the injuries and damaged property. In this case, your auto insurance policy’s liability coverage portion will cover the expenses up to the policy’s limit.
Agent
An insurance agent refers to a professional whose work is to sell insurance policies for an insurance carrier or agency. Some agents have an exclusive agency, where they sell insurance products for a single carrier. Other agents have a non-exclusive relationship with carriers, meaning they can sell insurance policies for multiple carriers.
An insurance agent can prove highly beneficial to consumers who wish to purchase insurance. They can help you choose the right insurance for your needs and guide you through the purchasing process.
Adjuster
The last insurance term on our list refers to a professional who works on behalf of an insurer to examine the claim made by a policyholder. They also evaluate the damage and settle the insurance claim on behalf of the insurance agency.
As part of their work, an adjuster determines what caused the loss, as well as whether the policy covers the loss. They also determine the total value of the loss and how much is payable by the insurance policy. The adjuster is also responsible for negotiating to settle the case.
Understand How To Use Common Insurance Terms
Insurance is a broad and complex topic, but you can understand it if you’re determined. The best way to do so is to start by understanding some of the key insurance terms and what they mean.
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