Insurance terms you should know

The word insurance triggers some apprehension if you are not familiar with how it works, more so with the terms you hear when agents discuss offers. That fear of being lost in translation could be among the many reasons why you chose not to get insurance.

And even if you are insured, you still struggle to understand what you are getting. For example, your expectations of what coverage you will get may be different from what the insurance company would give when unexpected events happen.

With that in mind, here are some terms you should know to help you navigate your insurance, and provide you with knowledge on what you should be getting.

Policy. A written contract that provides details of your insurance. This is often a long document which you will eventually sign and have to refer to when collecting insurance.

Policyholder. This is you, the insured, who is identified as the owner of the insurance policy.

Insurer. This is the company or the organization that offers insurance coverage and services as detailed in your insurance policy.

Beneficiary. This is a person or group of people who will receive the proceeds or benefits of your insurance policy. Your family can be your beneficiary for a life insurance, for example.

Coverage. This is everything that is included in your policy, from unexpected events, such as death, accident, illness, to damage or loss of property or assets. An insurance coverage may vary depending on how much you can afford to pay as premium.

Premium. The amount of money or fee you pay for your policy. A premium payment can be done monthly, quarterly, or at the end of the year.

Payouts. This is the money that the insurer gives to the beneficiary after they file for a claim.

Claim. This is the formal request made for payment by the policyholder or beneficiaries. So if a policyholder gets into an accident, he or she can file a claim to cover the cost of his or her hospitalization and possibly some medical bills.

Term. This refers to the specific period or duration when the policy is in effect. So a term can refer to how long you’re going to pay your insurance premium so you get coverage.

Deductible. This is the amount of money you pay – usually out-of-pocket – on an insurance claim before its coverage kicks in and pays the rest. A deductible is a way for you to share costs with the insurer after the occurrence of an unexpected event, for example, a claim for car insurance following a vehicular accident. The deductible is actually a portion of a loss that the insured is responsible for paying, and it is usually standard part of almost any insurance policy.

There are other terms that insurance companies use. But the list above are the most important things to know for starters. The more of these terms you understand, the more you know what policies to get that apply to your needs.