It doesn’t matter if you’re shopping for Car, House, Health, Life or Commercial insurance – if you don’t know the jargon you’re likely to wind up over-paying or buying the wrong insurance coverage. Here’s a useful guide to some of the more crucial insurance terms to keep you on the right track.
General Terms:
Deductible – Deductibles reduce the price of insurance because you pay a predetermined amount of the loss or expense BEFORE the insurer pays. You select the deductible and the higher you choose, the lower your premium.
Premium – This is simply the amount you or your company pays to the insurance company in exchange for their coverage and benefits provided.
Property and Casualty – Property and casualty is the term for that segment of the insurance industry that pays for damage to property or for personal injury. This includes auto, home-owners and business liability insurance among other things.
Life and Health – This is the part of the insurance industry that covers life and health insurance as opposed to property and casualty.
Umbrella Insurance – This is wider insurance coverage than the original fundamental policy. For instance, a householder’s insurance policy that also admits a universal liability provision of $1,000,000 for personal lawsuits may be considered an umbrella policy.
Car Insurance:
Collision – Like the name implies, this is the aspect of your car insurance that compensates for fixing damages to your car following the deductible.
Comprehensive – This term also applies to auto insurance and it is that part of your coverage that pays for “non-collision” types of losses like fire, flood, vandalism or theft.
Liability – this is the part of your coverage that pays for damage done to a third party such as bodily injury, property damage or pain and suffering. Homeowners policies also typically have liability provisions to protect you against various types of personal injury lawsuits.
No-fault – About 50% of the states have “no fault” laws which require insurance companies to pay for damages to vehicles, property and person no matter who is at fault in the accident.
Medical Insurance:
Ancillary Care – Ancillary simply means “additional” or “related” or “extra”. It applies to policies that not only have basic coverage but have additional (ancillary) coverage for prescription drugs or eye care, for example.
Cobra – Cobra is a U.S. law that compels organizations to offer extended health-care insurance coverage to dismissed employees for a specified time period. This insurance coverage is generally paid for by the ex-employee but at group rates.
Co-payment – An amount much your insurance requires you to pay for each visit to the doctor’s office, or for other care. The insurance company then pays the remainder of the bill assuming the deductible has been met.
Fee for Service – This is health Insurance that permits you to choose any Doctor and covers some predetermined share of “reasonable and customary” fees. You then pay the remainder.
H.M.O. – HMOs give comprehensive medical coverage for a set fee. But they require you to use their facilities and medical employees thus limiting your choice.
P.P.O. – “PPOs” are networks of physicians who offer their services at a discount negotiated by the insurance company. Thus insurers will normally pay a bigger portion of your expenses when you use these “preferred providers.”
Life Insurance:
Annuity – Annuities are special types of policies that pay benefits while a person is alive for a specified period of time. They are sometimes connected to Life insurance policies.
Term Life – Term life is a form of insurance bought for a specified time (or term). If the insured dies during this time period, the insurance is paid. If not, the insurance coverage expires or must be renewed to keep the benefit.
Universal Life – A Life policy accompanied by a savings plan tied to market rates of interest and the benefits are not fixed but can change within boundaries.
Whole Life – A standard life policy that accrues cash value over the life of the policy and with preset premiums. The insurance benefit is also a set at an assured amount.
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