Personal insurance terms you should know about
All-risk coverage, also referred to as open perils, insures against all types of losses, except for those that are specifically excluded from the policy. This applies to several property and casualty (P&C) categories, including homeowners, auto, and commercial insurance.
This refers to the cancellation of an insurance policy before the specified end-date. Typically, policyholders get a refund for any unused premiums, although insurers may charge a cancellation fee.
An insurance claim is a formal request filed by the policyholder to their insurer for compensation for covered losses or damages. These can include vehicular accidents for auto insurance, storm damage for homeowners’ policies, and emergency surgeries for health insurance plans.
A claimant, meanwhile, is the person who files the claim. In most cases, this is the policyholder.
Conditions (Policy conditions)
This is the section of a policy document that explains the duties and responsibilities of the insured (policyholder) and the insurance company. It also states the requirements that need to be met for the coverage to be valid.
Commencement date (Effective Date)
This is the date when the insurance policy goes into force. It is also known as the effective date.
This section of the policy document, also called the dec page, summarizes the details of the policy. It contains the coverages, limits, deductibles, and effective date. This page is often located on the front page of the policy.
A deductible is the amount the policyholder agrees to pay out-of-pocket before the insurance company shoulders the cost. Typically, the higher the deductible, the lower the premiums as the insurers bear less financial risk.
There is no getting around paying insurance deductibles. Even the largest insurance companies in the world have these policies, and their main goal is to make it so insurance companies don't get flooded with small claims.
A hazard is a situation or condition that raises the likelihood that a loss will occur. Ice on sidewalks, for example, increases the chance of a person slipping and getting injured, while smoking raises the probability of a policyholder getting lung cancer.
This is different from a peril, which is something that causes a loss. This includes fire, theft, collisions, natural disasters, illnesses, and death.
This refers to a period when one goes without insurance coverage. If a person, for example, fails to renew their auto insurance policy, then they now have a lapse in coverage.
A loss is the basis for filing an insurance claim. This includes direct and accidental damage the insured or their property sustains.
The named insured is the person or business named in the policy, also referred to as the policyholder. An insurance policy can have more than one named insured. The named insureds are listed on the declarations page of the policy document.
These are the specific type of losses or damages listed in the policy document. A named perils coverage provides protection against these.
An insurance policy is a written contract between the policyholder and the insurer that lays out the details of the coverage. This includes coverage, exclusions, deductibles, and premiums.
This is the amount charged by an insurance company in return for coverage. There are several factors that impact premiums. These include age, gender, and driving history for auto insurance, weather-related and crime risks in an area for homeowners’ policies, and medical history and smoking status for life insurance.
A rider, sometimes referred to as an endorsement, is an optional coverage that policyholders can add to their policies. This includes identity theft and water backup coverage for home insurance, and accident forgiveness and roadside assistance for auto policies.