The description of coverage that comes with your insurance may include terms not found in your everyday vocabulary. Usually, areas involving money â€“ such as costs or payouts â€“ contain the more obscure terms. Â To help you understand your insurance policy, below are some insurance terms you need to know:
Deductible â€“ An amount that the insurance policyholder must pay toward a claim before the insurance company will begin to cover the cost. For example, say you get into an auto accident and file a $1000 dollar claim to repair damages to your vehicle. If you have a $300 deductible, you must pay for the first $300 in repairs before the insurance pays for the rest (up to the policy limit). If your damages were only $200, you would be responsible for the full amount because itâ€™s less than your deductible. Usually, taking on a higher deductible will lower your premium.
Premium â€“ The cost of an insurance policy. You must keep payments toward your premium current to prevent a lapse in insurance coverage.
Claim â€“ When you request reimbursement from your insurance company. When you incur costs for something your insurance policy protects you from, you file a claim to be reimbursed for those costs.
Benefit â€“ An amount of money that an insurance company pays to you when you file a claim. Benefits are paid to the policyholder, or to a beneficiary if applicable.
Indemnity â€“ Compensation paid to the victim of a loss. For example, if you damage another personâ€™s property, and have the proper insurance, your insurance company will pay an indemnity to the other person â€“ which protects you from having to reimburse them yourself.
This content is offered for educational purposes only and does not represent contractual agreements. The definitions, terms and coverages in a given policy may be different than those suggested here and such policy will be governed by the language contained therein. No warranty or appropriateness for a specific purpose is expressed or implied.