Insurance-Speak: Insurance Terms Explained Here
Every industry has its own lingo. Are you familiar with the language of insurance? Consumers frequently encounter common insurance terms, but many are unsure how to define them.
Following are a few of the most common definitions. Becoming familiar with these will help you navigate insurance purchases, questions, and claims.
- Actual cash value: This form of insurance provides coverage equal to the value of your damaged property less the depreciation.
- Adjuster: This individual evaluates losses to help settle claims.
- Comprehensive coverage: This portion of your auto insurance covers any damage to your car that is not related to a vehicle collision, including damage from events such as fire, vandalism, and theft.
- Deductible: Your deductible is the amount you pay out of pocket before your policy kicks in to cover the rest of the claim. If you set a higher deductible, you can pay a lower premium.
- Depreciation: Over time, your property decreases in value due to wear and tear. This decrease in value is called depreciation.
- Exclusion: An exclusion highlights certain risks or specific types of damage or acts that won’t be covered under your policy.
- Liability: Liability insurance protects you if you become legally responsible for personal injury or damage to another person’s property.
- Premium: This is the price of your insurance policy. It is typically paid annually, semi-annually, or monthly.
- Replacement value: This coverage provides the amount you need to replace damaged property with a new item, regardless of the damaged item’s depreciated value.
- Rider: Also referred to as an endorsement, this agreement expands or limits the benefits of a policy.
- Underwriting: This is the process by which an insurance company reviews a policy application and sets the appropriate premium for coverage.