Whether you are purchasing your first policy or just updating your coverage, you can find yourself stuck with a term.
While you don’t have to know every insurance term (leave that for your insurance advisor), a basic understanding of the most important insurance terms is necessary. With a grasp of these insurance terms, you can make the best decisions for yourself, your loved ones, and your business.
Understanding the basic insurance terms makes the difference between two policyholders, one with the right coverage and the other having to pay thousands of dollars despite having insurance.
Below is a list of the 15 important insurance terms for all policyholders;
An individual investigating a claim and ascertains if the policy covers a loss. Then calculates the damages, and writes a check to the insured. They may also be called claim examiners.
In the event of an auto accident, someone will have to be liable for the damages, the At-Fault. Put simply, the person that caused the accident or has legal responsibility for the damages.
This can be loss, destruction, or harm to an insured person or property. Let’s say that a rainstorm damages your home window; this is a damage.
Not to be confused with damage. This represents the value of money an individual, group, or entity is to pay another.
The value of money that an insured pays before the insurer takes over a claim. For example, if you have a $250 deductible, and the damage to your property is worth $3400, you’ll pay $250 while the insurer pays $3150.
6. Sum Assured
The value of guaranteed amount a nominee will receive in the event of death of the life assured. It is calculated based on the financial loss expected due to the demise of the assured. This value will be paid to the nominee.
7. Grace Period
This is an extension after the due day of the premium payment on a policy by the policyholder. If the policyholder pays the premium during this period, then the coverage continues.
8. Revival Period
If you cannot make the premium payment after the grace period, do not worry, as there’s also a revival period. You can re-activate the policy during the revival period.
This is a condition where an insured purchases coverage than the value of a replacement. It can also mean a scenario where the value of insurance constitutes a moral hazard.
When the policy is not enough to cover the value of the insured property, this is peculiar to home owner’s insurance.
11. Period Of Cover
The period during which you will be provided with insurance cover. The period of cover is stated on your insurance schedule and renewal notice.
12. Cover Note
An insurance contract where the insurer provides a temporary insurance cover to be replaced later by insurance.
13. No Claim Bonus
This is a reward for an unclaimed bonus during the tenure of a policy. Depending on the length of the policy, an insured can get as much as 50%.
14. Guaranteed Insurability
A permission for the policyholder to acquire additional amounts of life insurance at specified periods in the future.
15. Material Misrepresentation
This occurs when policyholders or applicants falsify information on their applications. For example, when a life assured policyholder lies on the state of his health.