Insurance is an essential aspect of our lives, and it helps us mitigate risks and protect ourselves against unforeseen events. However, understanding insurance jargon can be challenging, and one of the most difficult aspects is dealing with the various terms used in insurance policies. In this article, we will explore the most common, yet difficult insurance terms and explain what they mean.
Co-Payment: A co-payment, also known as co-pay, is a fixed amount that the insured is required to pay out of pocket for a particular service, usually at the time of service.
Deductible: The deductible is the amount of money that the insured must pay out of pocket before the insurance coverage begins to pay.
Premium: The premium is the amount of money that the insured pays to the insurance company to purchase and maintain insurance coverage.
Underwriting: Underwriting is the process by which an insurance company assesses the risk of insuring a particular person or entity and determines the appropriate premium.
Subrogation: Subrogation is the right of an insurance company to pursue legal action against a third party that caused a loss to the insured, in order to recover the amount paid out to the insured.
Liability: Liability refers to legal responsibility for the damages caused to another party, for which an individual or entity may be held responsible.
Exclusions: Exclusions are provisions in an insurance policy that specify what is not covered by the policy.
Indemnity: Indemnity is the principle of insurance that states that the insured should be restored to the same financial position that he or she was in before the loss occurred.
Insurable Interest: Insurable interest is the interest that an insured party has in the subject matter of the insurance policy, such as a property or a life.
Riders: Riders are additional provisions that can be added to an insurance policy to provide additional coverage or to modify the terms of the policy.
Co-Payment
A co-payment is a common term used in health insurance policies. It is a fixed amount that the insured is required to pay out of pocket for a particular service, usually at the time of service. The purpose of a co-payment is to share the cost of medical services between the insurance company and the insured. Co-payments are usually applied to medical services, such as doctor visits, prescription drugs, and medical procedures.
Deductible
The deductible is a common term used in property and casualty insurance policies. It is the amount of money that the insured must pay out of pocket before the insurance coverage begins to pay. The purpose of a deductible is to share the cost of a loss between the insurance company and the insured. Deductibles are usually applied to property insurance, such as home insurance, auto insurance, and business insurance.
Premium
The premium is a common term used in all types of insurance policies. It is the amount of money that the insured pays to the insurance company to purchase and maintain insurance coverage. The purpose of a premium is to transfer the risk of loss from the insured to the insurance company. Insurance premiums are usually paid on a monthly, quarterly, or yearly basis, depending on the insurance plan.
Underwriting
Underwriting is a common term used in all types of insurance policies. It is the process by which an insurance company assesses the risk of insuring a particular person or entity and determines the appropriate premium. The underwriting process involves analyzing factors such as age, health status, credit score, and driving record.
Subrogation
Subrogation is a common term used in property and casualty insurance policies. It is the right of an insurance company to pursue legal action against a third party that caused a loss to the insured, in order to recover the amount paid out to the insured. Subrogation is a way for the insurance company to minimize its losses and to recover the cost of the claim from the party responsible for the loss.
Liability
Liability is a common term used in all types of insurance policies. It refers to legal responsibility for the damages caused to another party, for which an individual or entity may be held responsible. Liability insurance provides coverage for damages that an insured may be legally liable for, such as bodily injury, property damage, and legal defense costs.
Exclusions
Exclusions are common terms used in all types of insurance policies. They are provisions in an insurance policy that specify what is not covered by the policy. Exclusions are usually added to insurance policies to limit the risk of the insurer and to prevent fraudulent claims. Common exclusions include intentional acts, war, nuclear hazard, and pre-existing conditions.
Indemnity
Indemnity is a common term used in all types of insurance policies. It is the principle of insurance that states that the insured should be restored to the same financial position that he or she was in before the loss occurred. The purpose of indemnity is to compensate the insured for the loss suffered, rather than to provide a windfall or a profit.
Insurable Interest
Insurable interest is a common term used in all types of insurance policies. It refers to the interest that an insured party has in the subject matter of the insurance policy, such as a property or a life. The purpose of insurable interest is to ensure that the insured party has a financial stake in the subject matter of the insurance policy, and that he or she will not benefit from the loss of the insured property or life.
Riders
Riders are common terms used in all types of insurance policies. They are additional provisions that can be added to an insurance policy to provide additional coverage or to modify the terms of the policy. Riders can be added to insurance policies for a variety of reasons, such as to cover specific risks, to increase the level of coverage, or to add additional insured parties.
Conclusion
Insurance jargon can be confusing and difficult to understand, but it is essential to have a basic understanding of the terms used in insurance policies to make informed decisions about coverage. Understanding these terms can help you to choose the right coverage, to avoid surprises at the time of a claim, and to make sure that you are getting the most out of your insurance policy. If you have any questions about insurance jargon or your insurance policy, be sure to speak with your insurance agent or broker for clarification.
