Every business has its own jargon- that is, language that pertains to only those in the business. These esoteric words can sometimes be confusing to an outsider, and let's not pretend that we are included in everything. We are the outsiders when it comes to many different professions, and even more so when you think about all the different careers and business out there. Each one is different.
One unifying thing about insurance is that everybody needs it. Nobody lives a risk-free life where accidents NEVER happen. That's why even though you may not work in the insurance business, it's important to understand insurance vocabulary. You're paying for it, so you should at least know what you are buying and understand certain descriptions that may be written in your policy.
Claim- The formal request by a policy holder or claimant to be paid under the terms of the insurance policy.
Deductible- An excluded amount or threshold for payment on an insurance policy. A $500 deductible would mean the insurance policy will start paying after they have deducted the first $500 they owe you.
Effective Date- The first day of a policy term. Denotes the beginning of the insurance coverage.
Named Insured- The person or persons designated as the insured in an insurance policy.
Peril- The cause of a loss. Examples of perils are fire, wind, an accident and acts of vandalism.
Policy- A formal contract outlining the terms and conditions of the insurance provided by an insurance carrier.
Premium- The amount you are asked to pay for an insurance policy.
Renewal- A new policy which replaces one that is expiring or cancelled.
Let's end our little vocabulary lesson with the actual definition of insurance:
"A contract by which one undertakes to indemnify another or to pay a specified amount upon determinable contingencies."
Or, in plainer English:
"A written agreement between and insurance company and an individual where the insurance company will pay for damage or loss upon certain fulfillments or requirements."
We do have an Insurance Glossary right here on our website if you have any questions about what any of the policies mean. If you cannot find a word in our glossary, feel free to contact us. We will provide you with the correct definition and explain any questions you may have regarding your policy. Any other insurance questions? Click the button below. Learn more about personal insurance here.