How much do you know about insurance? It’s a world filled with words that sound difficult to understand. But if you were to start protecting what’s important to you, it’s time to brush up on your knowledge of insurance terms.
Yes, there’s a handful of common insurance terms and definitions that should give you a good headstart on various types of policies out there, terminology specific to the industry, and other words that could help you shop for coverage.
Is it an insurer or an insured? What’s the difference? Let’s find out.Shop for the best insurance policy here.
Common Insurance Terms From A to Z
We are listing down insurance terms that are commonly used or heard of and whose definitions can get you started.
Agent. He/she can be independent or connected with an insurer. Sometimes called financial advisors, insurance agents sell one or more policies and help you out in choosing the plan that’s right for you.
Beneficiary. In life insurance, this is the person or persons who will receive payment upon death of the insured (see definition below).
Claim. It is a request for reimbursement for losses incurred due to an event covered by the insurance.
Deductible. As a policyholder, you pay this dollar amount before the insurer covers the loss claimed. Within a policy, there might be a separate deductible for every loss.
Earthquake. According to the Insurance Information Institute, a standard homeowners policy does not cover earthquakes. You have to buy a separate policy for earthquake damage.
Flood. Basic homeowners insurance doesn’t cover flood. It is obtained separately through the National Flood Insurance Program (if your area participates in the program).
Gap insurance. In auto insurance, it bridges the gap between the actual cash value of the car and the unpaid balance of the loan/lease. Gap insurance figures more in newer cars that depreciate quickly.
Health insurance. This policy covers costs and expenses arising from certain physical illness and bodily injury. More health insurance-specific terms here.
Insured. The individual, party or entity covered by an insurance policy that is issued by an insurer. In the case of named insured, this is the person who is specifically named as insured in the policy and is the policyholder.
Justified complaint. A complaint based on an expressed violation of an insurance contract provision or a relevant law or statute.
Kidnap/ransom insurance. This covers ransom and related expenses as a result of kidnapping covered high net worth individuals or key business executives and employees.
Lapse. When you are unable to pay your premiums even after a grace period, the policy is in lapse or terminated.More valuable information coming your way.
Motorcycle Insurance. This provides coverage to you and your motorbike.
Named driver policy. The auto policy will only cover individuals named in the contract.
Owner occupied. In homeowners insurance, it is a home that is occupied as a primary residence. Renters can still buy insurance to protect their belongings called renters insurance.
Premium. It is how much you’ll be paying to maintain your insurance coverage on a monthly, quarterly, or annual basis.
Qualifying Event. More applicable to group health insurance, this is an event that triggers coverage or special enrollment.
Replacement Cost. The cost of rebuilding a home after being damaged; not to be mistaken for the home’s market value that can fall below current construction costs.
Standard Auto. This refers to car insurance coverage for drivers deemed as standard risk, i.e. someone who can be insured at standard rates.
Term. It is the life of your policy.
Underwriting. It is the process of evaluating an individual or entity’s risk of being insured to calculate rates.
Variable Life Insurance. Its cash value is linked to investments that change over time.
Whole Life Insurance. This policy offers permanent coverage throughout the life of the insured, or until his/her death where a payout is given to the designated beneficiary.
That’s just for starters. Ask your insurance agent or an insurance specialist for a better understanding of insurance terms.Click here to see the latest rates.