Insurance Terminology You Should Know
Each industry has its own terminology unique to them, and insurance is no different. Below are 20 common insurance terms and definitions you may encounter when researching coverage for yourself, your family, or your personal assets.
1. Deductibles
A deductible is an amount you (the policyholder) agree to pay the insurance company before they cover any losses. Along with your standard deductible, you’ll come across other types of deductibles for various losses, such as:
- Earthquake
- Flood
- Wind
- Hurricane
- Hail
- Collision
- Comprehensive
- All-peril
2. Co-pays
A co-pay is a form of coinsurance that is typically a flat fee you pay before you receive access to any medical treatment. You might have a $50 co-payment clause for each visit to a doctor or $20 each time you pick up a prescription. Co-pays were introduced to decrease the ethical dilemma of individuals claiming minor illnesses like the common cold on their insurance.
3. Premium
A premium is an amount you pay in order for your insurer to cover you. Depending upon the type of insurance and the cost of coverage, your premium could be a monthly, semi-annual, or annual payment.
4. Exclusions
Exclusions are parts of your policy contract that specify the item or condition not covered by your policy.
5. Peril
A peril is a specific cause of a loss (for example, a windstorm, fire, or break-in).
6. Claim
A claim is a request by either a third party or you (the policyholder) from the insurance company for compensation of insurance-covered losses.
7. Rider/Endorsement
A rider or endorsement is a statement added to your policy that changes, adds, or deletes coverage, provisions, or terms of your policy.
8. Insured
The individual(s) or parties protected or insured by an insurance policy.
9. Insurer
The company providing the services and insurance coverage on a policy is known as the insurer.
10. Lapse
A time period when you go without insurance coverage.
11. Limit
A limit is the maximum amount of insurance coverage or money the insurance provider will pay for a covered claim. Your standard insurance policy is really multiple coverages, and each has its own limit. Therefore, you could have several limits on one policy.
12. Actual Cash Value
The value of property damaged or lost during the time of the loss.
13. Third Party
A “third party” is the individuals covered by the insurance policy that isn’t the policyholder. For example, if you have third party coverage and your car crashes with another person’s vehicle, then your insurance will cover the repairs for the individual whose vehicle you damaged.
14. Warranty
A warranty can refer to a couple of things:
- A certain time period that you have to send a defective product back to its seller/manufacturer for reimbursement.
- A type of contract condition
Here, we’re referring to a contract condition to the insurance agreement. If there’s a breach of some type to the condition, then it can lead to coverage suspension.
15. Additional Insured
Any party or person other than the policyholder who’s added to the policy and covered through the policy.
16. Appraisal
The extent of property damage or an estimate of property value given by an authorized individual. An appraisal is performed to decide what the property’s value is at the time of a loss.
17. Lease
A lease is a contract that grants occupation or use of the property during a specific period in exchange for a set amount of rent.
18. Leaseholder
A person who has use of or possesses property through a lease.
19. Lessee
The person a lease is granted to is known as the lessee.
20. Liability Coverage
Coverage for property damage or bodily injury to other people for which you’re held liable (as given by state law and your policy).
We’re Here to Help!
There are many types of insurance coverage available today, including auto, homeowner’s, renter’s, life, and health. While each provides protection, it’s essential to understand the coverage before buying a policy.
If you have questions on insurance policies, then make sure you ask the insurer or your insurance agent to thoroughly explain the contract before you sign. Our team is here to help answer all your questions on coverage offered through the credit union, such as Member Credit Protection. Please stop by any of our convenient branch locations or call us at 1-800-531-8456.
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Each individual’s financial situation is unique. We encourage you to contact United Texas Credit Union when seeking financial advice on the products and services discussed. This article is for educational purposes only; the authors assume no legal responsibility for the completeness or accuracy of the contents.