Insurance can be confusing and overwhelming with its many terms, phrases, and policies. Understanding the basics of insurance and the jargon associated with it is the key to making informed choices when it comes to buying or assessing an insurance policy. To get you started, we’ve broken down the most common insurance terms so you can easily comprehend what you need to know.

Premium

This is the dollar amount you pay for an insurance policy. Premiums can be paid monthly, semi-annually, or annually and are typically due before your policy starts. Depending on the type of policy you have, the premium can vary in price.

Deductible

This is the amount you must pay out of pocket before your insurance coverage kicks in. Generally, the higher your deductible, the lower your premium payments. Different types of policies have different deductibles. For example, a health insurance policy may have a $1,000 deductible, while car insurance may have a $250 deductible.

Coverage

Coverage refers to the type and amount of protection an insurance policy provides. Coverage can vary depending on the type of insurance policy; for example, auto insurance usually covers bodily injury liability, property damage liability, and medical expenses, while home insurance typically covers property damage from fires, storms, and theft.

Exclusions

Exclusions are the items that are not covered by an insurance policy. These can be specific situations, like natural disasters, or items, like jewelry or electronics. It’s important to understand what is and isn’t covered by your policy.

Benefits

Benefits refer to the type of compensation an insurance company pays out if a claim is filed. These benefits are typically outlined in an insurance policy and can include payment for medical expenses, lost wages, legal fees, or property damage.

Limits

This is the maximum amount an insurance policy will pay out for a particular coverage. Limits can vary depending on the type of policy and can be explained in the policy documents.

Risk

Risk is the potential for financial loss due to an uncertain event. Insurance policies help to mitigate this risk by providing coverage and benefits should an unforeseen event occur.

Conclusion

Knowing these key insurance terms can help you make informed decisions when selecting or assessing an insurance policy. Understanding these concepts will also help in understanding any insurance jargon you come across and can help you make the right move when it comes to protecting yourself, your family, and your belongings.