Insurance 101 The Basic Terms

Insurance 101: the basic terms

You’ve heard time and again how important it is to be familiar with your insurance policies. However, we understand that this isn't as easy as it sounds. The insurance business, like most industries, has its own, often confusing jargon. To help you gain a better understanding of your policies, and of insurance in general, here are some common insurance terms and their definitions:

Deductible—a specified dollar amount that is deducted from the amount of loss payable for a claim made on the policy. For example: If an auto insured on a policy with a $500 deductible sustains $800 worth of damage, the policyholder pays the first $500, and the insurance company pays the $300 balance.

Endorsement—an amendment to an insurance policy that provides or restricts coverage for special circumstances not included in the basic contract, usually for an additional premium. An endorsement is generally printed on a separate page or pages and attached to the main policy document.

Floater—an endorsement to a homeowners policy that provides coverage of personal property (not real estate) beyond the limits or terms of the basic policy. Used especially when the policyholder has personal property of unusual value.

Exclusions—provisions of an insurance policy that specify what will not be paid for by the company.

Limits—the largest total amount the insurance company will pay for covered losses. Many policies have multiple limits—a certain amount per person, another amount per accident, and sometimes, an aggregate limit for all losses paid during the policy term.

Declaration (declarations page)—normally the first page of a policy contract. It includes the insured’s name, how much iinsurance is being provided, and how long the coverage is in effect.

Schedule/scheduled property – a separate listing of specific items of property covered by endorsement to an insurance policy, stating the exact dollar value of each.

Liability Insurance – coverage for the insured against losses for which he or she is legally responsible to another party or parties.  It may also provide for expenses the insurance company incurs to defend the policyholder in court.

Umbrella policy – a type of liability insurance that provides coverage for large losses that are in excess of the limits of standard liability policies.

Feel free to give us a call or stop by for more information. We are here to offer detailed explanations of your policies and to answer any questions you may have.

Personal Touch Online Vol. 14 No. 2 Copyright © 2006 Liberty Publishing, Inc.