When you are reaching out to an insurance company for auto, home, or renters insurance, it’s important to understand the terminology to ensure you are getting the right policy to suit your needs.
While we can’t list every single insurance term in this article, here are some basic and common terms to get you started:
Insurance Terms You Should Know:
1. Actual Cash Value
Actual cash value refers to the cost of replacing a piece of property with something similar and in the same condition.
2. Additional Coverage
Insurance coverage policies are written to cover specific perils and often include exclusions that are not covered. You can add additional coverage to cover things that are not included such as flood damage, sewer backup damage, etc.
An adjuster is an individual that works for the insurance company who investigates a claim or loss. They determine if it is covered under a policy and negotiate a settlement with the claimant on the insurance company’s behalf.
When it comes to motor vehicle accidents, “at-fault” refers to the person involved in the incident who is liable for the damages, i.e., the person who caused the accident or is legally responsible for causing it.
When you utilize your insurance policy to cover a loss, you have to submit a claim to your insurance provider. They are then investigated by the insurance carrier to determine if you are eligible for a payment.
6. Collision Coverage
When it comes to vehicle insurance, collision coverage covers damage to your vehicle resulting from a collision with another vehicle or object.
7. Comprehensive Coverage
Comprehensive coverage refers to damage to a vehicle that is not caused by a collision such as theft, vandalism, and weather damage.
Coverage is the protections and benefits provided by an insurance policy that is outlined in your policy or contract provided to you by your insurance company.
Damage refers to any loss, harm, or destruction to a person or property (vehicle, home, etc.).
Damages refer to the actual money a person or party legally pays to another.
11. Declarations Page
In the hard copy of your contract of insurance, there is a page of basic information that identifies the policy term including the policyholder, property/vehicles covered, coverages, and premium amounts. This is known as the Declarations Page.
The deductible is the cost that you, as the insurer, must pay out-of-pocket before your insurer pays a claim. This is to prevent people from making multiple and frivolous claims. When you choose a high deductible on your policy, you may pay a lower premium.
Depreciation happens when a property loses its value over time and is calculated by subtracting a percentage of the property per year. For instance, a car you paid $100,000 for five years ago is worth less now due to wear, tear, and use.
An endorsement is a statement that can be added to an insurance policy to change, remove, or add coverage, provisions, and terms to the insurance plan. This is also known as a “rider.”
An estimate is the amount of money required to repair or replace the damaged property covered by the insurance policy.
An exclusion is a provision in the policy that excludes certain conditions and coverages.
For example, your home insurance may exclude flood damage from your coverage if you live in a special flood hazard area. In this case, you may need additional flood insurance coverage.
A hazard is any condition that creates or increases the chances of a loss occurring. For example, having a wood-burning stove in your home may be considered a hazard since it creates a risk of fire.
18. Insurance Agent
An insurance agent sells insurance policies for an insurance company or carrier. They often work on commission and are contractually obligated to one single insurance carrier.
19. Insurance Broker
An insurance broker is an individual that can reach out to multiple insurance companies and find the best fit and price for the insured.
The insured person is the individual that is covered by the insurance policy. They are also known as the “policyholder” or “named insured.”
The term “insurer” refers to the company that provides the insurance policy. The insurer is also referred to as the “carrier.”
Liability is the legal obligation or responsibility someone has for causing bodily injuries, damage to property, or loss to someone else.
23. Liability Insurance
Liability insurance protects you if you are the person responsible for bodily injuries or damage to property.
The limit is the maximum amount of protection you receive from an insurance company when it comes to paying out a claim.
When it comes to insurance, a “loss” means any damage caused to an insured piece of property, and a “covered loss” means any injury or damage that the policy provides coverage for.
A peril is a term used to describe an event that can cause a loss such as fire, water damage, and theft. “Named perils” refer to the perils that are specifically covered in your insurance policy. “All perils,” or all risk, is a policy that covers all perils except for specifically identified exclusions.
27. Policy Limit
When it comes to covered losses, the policy limit is the maximum amount you will pay and typically higher limits carry higher premiums.
The monthly or annual cost you pay for an insurance policy is known as a premium. It is determined based on your risk level. For instance, if you have a history of motor vehicle accidents, you are likely going to pay a higher premium for your policy.
29. Replacement Cost Coverage
Replacement cost coverage, unlike actual cash value, covers the cost of replacing property. It doesn’t take depreciation into consideration.
An underwriter is an individual that evaluates risks and determines premiums.
Understanding Your Insurance Policy
Looking for the right coverage? Knowing what you are signing up for is important when it comes to choosing the best policy for your needs.
Thankfully, experienced Barrie insurance brokers like BKIFG are dedicated to getting to know each and every one of their clients so that they can provide the best policies and the right coverage.