10 Insurance Terms You Should Know

Posted on November 8, 2023

IMAGE: Two people standing in rain boots inside a homeWhether you’re a college student looking for renter’s insurance, or you’re preparing for the future with life insurance, it’s important to live life fully insured. Shop for your next policy with confidence by understanding the key terms and definitions used in most policies.

1. Premium

As a policyholder, you pay a monthly premium to the insurance company for coverage. Premium amounts vary based on how much and what your plan covers. Other factors, like deductibles and limits, also determine your monthly premium.

2. Deductible

The deductible is the amount you pay out-of-pocket before your insurance makes a payment. For instance, if you have a $1,000 deductible and file a claim for damage totaling $2,000, you pay $1,000 and the insurance policy pays the remaining $1,000.

3. Policy Limit

The maximum amount that a policy pays for a covered loss is the policy limit. For most policies, higher limits will also carry higher premiums. You can set policy limits for a term, type of loss, or for the lifetime of the policy.

4. Claim

When you make a request to your insurance company to cover a loss, you’ll file a claim. Your policy lists the events covered that are eligible for a claim. The company reviews your claim, and if it’s approved, they will issue payment to the insured. Keep in mind that filing a claim can cause your premiums to rise.

5. Declaration page

This page lists important details about your policy, including what’s being covered and for how much. The declaration page includes the policy term, deductible, policy limits, and premiums. When asked to show proof of insurance, you’ll provide the declaration page.

6. Liability

You are liable to pay compensation if you cause injury or damage to another person or property. Liability insurance protects you by covering legal obligations to the injured parties, avoiding lawsuits.

7. Beneficiary

The beneficiary is the person who receives insurance benefits if the policyholder dies. When choosing a life insurance policy, you must select a beneficiary. This can be a person like your spouse or children, a trust, your estate, a charity, or a company you own.

8. Underwriting

To determine how much coverage you need, an insurance underwriter evaluates the amount of risk you present to the insurer. During the underwriting process, the insurance underwriter sets the policy, coverage, and premium amounts based on the level of risk to the insurance company. For example, a driver who does not have frequent accidents or tickets will have less coverage and lower premiums because they are less likely to file a claim.

9. Exclusion

Insurance policies may have specific conditions or situations that are not covered by the policy. These items are listed as exclusions on the policy, and they are the responsibility of the policyholder.

10. Rider

An addition to the insurance policy to add benefits or change the terms is called a rider. Adding a rider usually increases the premium as it adds to the original policy. Common types of riders include accidental death and dismemberment (ADD), guaranteed insurability, long-term care, family income benefit, and waiver of premium.

Texell Insurance Is Here to Help

Find the insurance coverage you need from trusted carriers providing competitive rates. Texell Insurance can help you find affordable protection for your vehicle, home, business, wedding, pet, and more. Our agents will also shop your plan at renewal each year to make sure you’re still getting the best deal on the policy that meets your needs. Call 254.774.5181 for a free quote or visit TexellInsurance.com for details.

If you wish to comment on this article or have an idea for a topic we should cover, we want to hear from you! Email us at editor@texell.org.

You might also like...

IMAGE: Woman hugging small child sitting on car hood with sunset behind
Term vs. Whole Life Insurance

3 minute read

IMAGE: Couple holding tablet and smiling talking to an insurance agent
How to Choose an Insurance Agent

3 minute read

IMAGE: Boys in living room in tent with toy telescope and play fire make of paper towel tubes and construction paper.
All About Homeowners Insurance

5 minute read

Read more about...