Here’s a breakdown of common insurance terms:
1. Premium
The amount you pay for an insurance policy, typically on a monthly, quarterly, or annual basis.
2. Deductible
The amount you must pay out-of-pocket before your insurance coverage kicks in. For example, if you have a $500 deductible on your car insurance and you make a claim for $1,500, you’ll pay the first $500, and your insurer will cover the remaining $1,000.
3. Coverage
The amount of protection provided by an insurance policy. It defines what is included or excluded from the policy.
4. Claim
A formal request made to an insurance company for payment of benefits under the terms of an insurance policy.
5. Beneficiary
The person or entity designated to receive the payout from an insurance policy, such as a life insurance policy.
6. Underwriting
The process by which an insurer evaluates the risk of insuring someone and decides the premium they should charge. It involves assessing factors like health, driving record, or credit score.
7. Exclusion
A provision in the insurance policy that excludes certain risks, circumstances, or types of damages from being covered. For example, a policy might exclude coverage for natural disasters or pre-existing health conditions.
8. Policyholder
The person who owns the insurance policy, usually the one paying the premiums.
9. Reimbursement
The process of getting money back after an expense covered by your insurance, such as medical costs or repair costs for damaged property.
10. Co-payment (Co-pay)
A fixed amount you pay for a covered healthcare service, usually at the time of receiving the service. The rest of the cost is covered by the insurance.
11. Riders
Add-ons or endorsements to an insurance policy that provide additional coverage or change the terms of the original policy. For example, adding dental coverage to a health insurance plan.
12. Whole Life Insurance
A type of life insurance that provides coverage for the policyholder’s entire life, as long as premiums are paid, and often builds a cash value that can be borrowed against.
14. Term Life Insurance
Life insurance that provides coverage for a specific period (e.g., 10, 20, or 30 years), with no cash value or investment component.
15. Grace Period
The period of time after a premium due date in which a policyholder can make a payment without losing coverage, often 30 days.
16. Subrogation
The process by which an insurer seeks to recover the amount of a claim paid to the policyholder from the at-fault party or their insurer.
