Beginner's guide to insurance terminology
Insurance has its own terms which can be tough to understand sometimes. This beginner's guide to insurance terminology will teach you the must-haves to put in your dictionary, so celebrate along with us and make some sense of these words!
Agent: an individual who sells, services, or negotiates insurance policies either on behalf of a company or independently.
Bodily Injury Liability Coverage (BI): The type of coverage that pays for medical expenses and/or funeral costs of other individuals injured, or killed, in an accident for which you are liable.
Claim: A demand by a person or business seeking to recover from an insurer for a loss that may be covered by an insurance policy.
Collision Coverage: The type of coverage that pays for the damages to your vehicle sustained as a result of a collision with another vehicle or object.
Comprehensive Coverage: The type of coverage that pays for damage to your vehicle sustained as a result of fire, theft, vandalism, or various other stated causes.
Coverage: The specific protection provided by a policy against the results of the hazards insured against.
Deductible: A deductible is the amount of money you agree to pay out of your pocket before your expenses are paid on a claim by your car insurance.
Endorsement: A change to your policy by amending specific coverage. It can add coverage, modify it, reduce or even remove coverage or terms or provisions of the policy.
Effective Date: date at which an insurance policy goes into force.
Exclusions: The section of the policy contract that specifies the losses not protected by the policy.
Insurance: Is a contract, represented by a policy, in which an individual or entity receives financial protection or reimbursement against losses from an insurance company.
Insurance ID card: A card issued by your insurance company with basic information about your policy.
Insured: The person(s) covered by the insurance policy.
Insurer: An insurer or reinsurer authorized to write property and/or casualty insurance under the laws of any state.
Lapse: Termination of a policy due to failure to pay the required renewal premium.
Limit: The maximum amount of coverage under an insurance policy.
Medical Payments Coverage (MedPay): The type of coverage that pays for medical and funeral expenses for anyone covered under your insurance policy in the event of an accident, regardless of fault.
Motor vehicle report (MVR): A report from the department of motor vehicles listing accidents and violations on your driving record.
Peril: The specific event causing a loss, such as fire, windstorm or accidental death.
Personal Injury Protection (PIP): If you carry PIP coverage, your car insurance company will pay for the costs of medical and funeral expenses (within specified limits) of the insured driver, passengers in the driver’s car, or pedestrians struck by the insured.
Policy: The written contract effecting insurance, or the certificate thereof, by whatever named called, and including all clauses, riders, endorsements, and papers attached thereto and made a part thereof.
Policy Period or Term: This represents the time period for which the insurance policy stays in effect.
Premium: A periodic payment by the insured to the insurance company in exchange for insurance coverage. Insurance companies offers a wide variety of discounts that can lower your premium, and payment plans that can help you manage your premium payments in a way that works with your budget.
Property Damage Liability Coverage (PD): It helps pay to repair damage you cause to another person's vehicle or property.
Quote: The rate at which an insurance company indicates its willingness to assume certain liabilities or provide coverage under an insurance policy. A quote is an approximation of the premium for a given policy.
Replacement Cost: The cost of replacing or repairing property using new materials of like kind and quality without deduction for depreciation.
Rider – Also known as an “endorsement,” this is a written agreement attached to the basic policy that could either increase or decrease the amount of benefits that would typically be covered under the policy.
Risk: The hazard or chance of loss on any particular item of insurance. The term "risk" usually is used in a general way to designate the entire subject matter of insurance covered under a policy or upon which an application for insurance has been received. Risk is also sometimes used to designate a policyholder.
Total loss: The condition of a vehicle or other property so heavily damaged that repair costs would surpass its value.
Underinsured Motorist Coverage (UIM): This type of coverage is basically the same as UM, however it applies when the other driver who is at fault does not have enough insurance to cover the bills. Limits may apply.
Uninsured Motorist Coverage (UM): The type of coverage that pays for injuries, including death, which you and/or other occupants of your vehicle sustain as a result of a collision with an uninsured driver who is at fault. Limits may apply.
For the precise definitions, exclusion or limits, please refer to your insurance policy.
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