Insurance Basics: Understanding Common Insurance Terms
Insurance is a way for individuals and businesses to protect themselves against financial losses resulting from unexpected events, such as accidents, natural disasters, or illnesses. To understand how insurance works, it is important to be familiar with some common insurance terms.
Premium insurance:
The premium is the amount of money that a policyholder pays to an insurance company in exchange for insurance coverage. The amount of the premium depends on a variety of factors, including the type of insurance being purchased, the level of coverage being requested, and the policyholder’s risk profile.
Deductible insurance:
The deductible is the amount of money that a policyholder must pay out of pocket before their insurance coverage kicks in. For example, if a policy has a deductible of $500 and the policyholder experiences a loss of $1,000, they would need to pay the first $500 of the loss themselves, and the insurance company would pay the remaining $500. Higher deductibles typically result in lower premiums, but they also mean that the policyholder will be responsible for paying more out of pocket in the event of a loss.
Co-pay insurance:
A co-pay is a fixed amount of money that a policyholder must pay at the time of receiving a covered medical service. For example, if a policy has a $25 co-pay for doctor’s visits, the policyholder would need to pay $25 each time they visit the doctor, even if the visit is covered by their insurance.
Co-insurance:
Co-insurance is a type of cost-sharing arrangement in which the policyholder and the insurance company both pay a percentage of the covered medical costs. For example, if a policy has a 80/20 co-insurance requirement, the policyholder would pay 20% of the covered medical costs and the insurance company would pay the remaining 80%.
Policy limit insurance:
The policy limit is the maximum amount of money that an insurance policy will pay out for a covered event. For example, if a policy has a policy limit of $100,000 and the policyholder experiences a loss of $150,000, the insurance company would only pay out the first $100,000 of the loss. It is important for policyholders to be aware of their policy limits and ensure that they have sufficient coverage for their needs.
Exclusions insurance:
Exclusions are events or circumstances that are not covered by an insurance policy.For example, a homeowner’s insurance policy may exclude coverage for losses resulting from flooding or earthquakes.
It is important for policyholders to carefully review the exclusions in their policies to understand what is and is not covered.
Endorsement insurance:
An endorsement is an addition or amendment to an insurance policy that adds or removes coverage. Endorsements can be used to tailor a policy to the specific needs of the policyholder and can be added at any time during the policy period.
Claim insurance:
A claim is a request made to an insurance company for payment or reimbursement of covered losses or expenses. Policyholders can file a claim by contacting their insurance company and providing information about the loss or expense. The insurance agency will then, at that point, survey the case and decide if it is covered under the approach.
Underwriter insurance:
An underwriter is an individual or company that evaluates the risk associated with providing insurance coverage and determines the premiums and terms of an insurance policy. Underwriters consider a variety of factors when evaluating risk, including the policyholder’s age, health, and the type of coverage being requested.
Actuarial science insurance:
Actuarial science is the study of the statistical analysis of risks, used to determine the likelihood of various events occurring and the cost of insuring against them. Actuaries use statistical models and data analysis to assess and manage risk, and they play a key role in the insurance industry by helping to determine premiums and policy terms.
Understanding these common insurance terms is an important step in making informed decisions about insurance coverage.
When a policyholder files a claim with their insurance company, the company will review the claim to determine whether it is covered under the policy. This process usually involves reviewing the policy terms and conditions, collecting supporting documentation and information from the policyholder, and evaluating the loss or expense being claimed. If the claim is determined to be covered under the policy, the insurance company will pay the policyholder the amount of the claim or a portion of it, depending on the policy terms and any deductibles or co-payments that may apply.
Premiums are typically paid on a regular basis, such as monthly, quarterly, or annually. The frequency of premium payments is typically specified in the insurance policy and is determined by the insurance company based on a variety of factors, including the type of policy, the level of coverage, and the policyholder’s risk profile. Policyholders are typically required to make premium payments in order to maintain their coverage, and failure to make premium payments can result in the cancellation of the policy.
