Key Insurance Terms and Concepts
Claim and Coverage
Claim
- Claim: A claim is when you ask the insurance company to pay for something that happened, like an accident or theft. You need to show proof, like photos or reports, so the company can decide if it should pay you.
Coverage
- Coverage: Coverage is what the insurance policy will pay for. For example, it might pay for car accidents, but not for regular car maintenance. The specifics are listed in your policy.
Deductible and Declarations Page
Deductible
- Deductible: This is the money you pay before the insurance company starts paying. If your deductible is $500 and you have a $1,000 loss, you pay $500 and the insurance pays $500. Higher deductibles usually mean lower monthly payments.
Declarations Page
- Declarations Page: This page provides key details about your policy. It includes names, coverage amounts, and the time period the policy covers.
Effective Date and Endorsement
Effective Date
- Effective Date: This is the date when your insurance protection starts. Make sure you know this date so you are covered from that time onward.
Endorsement
- Endorsement: An endorsement, also called a rider, is an extra add-on to your policy. It can change or add coverage. For example, you might add coverage for a new diamond ring.
Understanding these terms can help you better manage your insurance and know when and how to use it effectively. For more detailed explanations, you can visit this NerdWallet page.
Specific Types of Insurance
Collision and Comprehensive Coverage
Collision Coverage
- Collision Coverage covers damage to your car when it hits another vehicle or object, like a tree or a pole. You pay a deductible first before the insurance pays. For example, if a repair costs $1,000 and your deductible is $200, you pay $200 and the insurance covers $800.
Comprehensive Coverage
- Comprehensive Coverage covers damage to your car not caused by a collision. This can include theft, fire, natural disasters like hurricanes, or even hitting a deer. As with collision coverage, you pay a deductible. For instance, if your car is stolen and it’s worth $10,000 with a $500 deductible, you pay $500 and the insurance covers $9,500.
Homeowner and Liability Insurance
Homeowner Insurance
- Homeowner Insurance protects your home and the things inside it. It covers problems like fire, theft, and natural disasters. If a fire damages your home, the insurance can pay for repairs. It can also cover losses if someone steals your TV.
Liability Insurance
- Liability Insurance helps if you accidentally hurt someone or damage their property. For example, if someone slips and falls in your home, this insurance can cover their medical bills and your legal costs if they sue you.
Life and Identity Theft Coverage
Life Insurance
- Life Insurance pays money to your family if you pass away. This money helps cover expenses like house payments, living costs, and education for your kids. If you have a $100,000 life insurance policy, your family gets $100,000 after you die.
Identity Theft Coverage
- Identity Theft Coverage helps cover costs if someone steals your identity. This can include fees for lawyers, lost wages, and expenses to fix your credit report. If someone uses your credit card fraudulently, this insurance helps you deal with the mess.
These types of insurance help protect you from different risks and can provide peace of mind. For detailed information on how these coverages can help, visit this Investopedia page.
Additional Concepts and Policy Documents
Aggregate Limit and Additional Insured
Aggregate Limit
- Aggregate Limit: This is the most money an insurance policy will pay during the policy period, no matter how many separate incidents happen. For example, if your policy has an aggregate limit of $100,000 and you have three claims that total $120,000, the insurance will only pay up to $100,000.
Additional Insured
- Additional Insured: A person or group that is not the main person insured by the policy but still benefits from its protection. For example, if you rent a property, the property owner might be listed as an additional insured on your renter’s insurance.
Bodily Injury and Certificate of Insurance
Bodily Injury
- Bodily Injury: This means any physical harm to a person’s body. For example, if someone falls and breaks their arm at your home, it is considered bodily injury. Insurance can help cover their medical costs.
Certificate of Insurance
- Certificate of Insurance: This is a paper that proves you have insurance. It shows the type of coverage you have, the limits, and the dates the insurance is active. For instance, you might need to show this certificate when entering into a new rental agreement.
Excess Insurance and Indemnification
Excess Insurance
- Excess Insurance: This type of insurance picks up costs only after the primary insurance reaches its limit. For example, if your primary policy covers up to $50,000 and your claim costs $60,000, excess insurance can cover the extra $10,000.
Indemnification
- Indemnification: This means paying someone back for a loss. If you have an indemnification clause in a contract, it might shift the responsibility for repairs or damages from one person to another.
Understanding these additional terms can make it easier to grasp how your insurance works. For more detailed explanations, you can visit this Allstate page.