Insurance Terms

To grasp the ins and outs of an insurance policy, you must first understand the industry's language. Basic insurance terms:

Benefit: The amount of money paid by the insurance provider when you suffer damage, injury or loss covered by your policy.

Claim: A notice by you or other injured parties to the insurance provider that a loss (injury, damage or destruction of property) has occurred, and that you are seeking payment of benefits.

Clause: A section of the policy that deals with a specific subject. For example, an Exclusion Clause might detail which hazards and perils the insurance provider will and will not reimburse you for.

Coverage: The amount of protection against damage, injury and loss the insurance policy will provide.

Exclusions: Conditions or circumstances that the provider will not cover. For example, your homeowner’s policy might exclude floods. Exclusions are listed in the policy.

Deductible: The amount of money you must pay before your insurance provider will provide coverage.

Hazard: A specific situation or condition that increases the likelihood of damage, injury or loss. For examples, an icy sidewalk or building located in a high crime area (which has an increase chance of being burglarized).

Indemnity: The amount of money you are reimbursed by the insurance company when you suffer a loss. This amount is predetermined and outlined in your policy.

Policy: The written document (contract) between you and the insurance provider that details the type of coverage you have, the benefits you will receive, the amount and payment cycle of the premium and the hazards and perils the insurance company will and will not cover. 

Premium: The payment required to maintain your insurance coverage for a certain period of time.  

Peril: The cause of the damage, injury or loss.

Rider: This is an extension added on a policy that deals with a specific issue or condition of coverage, such as how to cover an artist’s studio.

Risk: The degree of chance that damage to property, injury or loss will occur. 

Term: The period of time (number of days, months or years) that your insurance policy is in effect. The term has a specific start date and end date. 

For more insurance terms, check out Insurance Finder, Insure.com and Insweb.