Important Insurance Terms You need To Know

Insurance is a very important thing that you should have in life. It will protect you from potential financial loss and it will also protect you from potential lawsuits filed against you. There are a lot of insurance types that you could take out. Each one has its own particular purpose. Car insurance exists for cars. Homeowners insurance is for your home and your properties inside. Event insurance is for a special event. Renters insurance is for your things when you donĂ­t own a house yet. Non owners car insurance is for when you are driving a car that is not yours. There are so many other insurance types, but you get the idea.

Since insurance is very important, you have to understand what it is and know what it is for before you take one out. The first step is to understand the common insurance terms that will be used. Below is a list of terms and their definitions to help you out.

Premium

This is the amount that you have to pay for your insurance. You will have to pay this on a monthly or yearly basis or at a single time. The amount will be indicated on your policy.

Policy Holder

This is the person who got the insurance or who bought the insurance. This is the customer of the insurance company. You buy the policy, so you are the policy holder.

Sum Assured

This is the guaranteed amount that you would receive. This also called your coverage. It is what you will get from the insurance company if something happens (something that is covered by your policy, that is).

Rider: This is an additional and optional feature that you may choose to purchase to supplement your insurance plan. If you have something that you want insured but is not yet included in your insurance plan, you can purchase a rider.

Deductible

This is the amount that you, as the policy holder, would need to pay before your insurance company would be required to pay their share. In general, a higher deductible means a lower premium, and vice versa.

Liability Insurance

Aside from covering for costs to yourself of your property, insurance can also cover damages that you may cause to other people and their property.

Limit

There will be a maximum amount that the insurance company would pay. For some types of insurance, they implement a lifetime limit. Others implement a yearly limit. Once your limit is reached, any future incidents would no longer be covered.

These are only some of the terms used in the insurance industry. There are a lot more terms that are specific for each type of insurance. As mentioned, it is best that you get to know these terms and understand them so then when you start looking for insurance, you will not be clueless on what is going on. You should be able to know what is happening so you can make a good decision when choosing the policies that you would be taking out.