It’s beneficial for everyone to have insurance to protect their most valuable assets, whether it’s to protect your home, your health, or high-value jewelry. However, interpreting the jargon that often accompanies selecting the right policy can often be a challenge. When shopping for insurance, understanding the basic insurance terminology in the contract can facilitate the decision-making process and help you make better choices when determining your insurance coverage needs. Details can make all the difference in times of crisis, so read below for the most basic insurance terms and definitions you need to know before making a well-informed decision.
To begin, we gathered a few general insurance terms that apply to all kinds of insurances, no matter what kind of policy you’re shopping for. Which leads us to the first definition:
- Policy – a contract between the insurer and the insured (policy holder) which determines the claims the insurer is legally required to pay.
- Insured/PolicyHolder – the person or organization covered under the insurance.
- Claim – a formal request by a policyholder to an insurance company for coverage or compensation for a covered loss or policy event.
- Premium – the amount of money an individual or business pays for an insurance policy.
- Deductible – the amount of money the insured will pay in an insurance claim before the insurance coverage kicks in. The insured must pay the deductible on the contract in order for the insurance company to pay the rest of the claim value (up to the policy limits).
- Policy Period – the time length during which the insurance policy is in effect.
- Renewal – the continuation of a policy after its time limits have expired.
- Adjuster – an agent hired by an insurance company tasked with evaluating an insurance claim to determine the insurer’s liability under the policy.
If you’re interested in purchasing homeowners insurance or understanding the terminology, here are some of the most essential insurance terms and definitions.
- Homeowners Insurance – property insurance that covers losses and damages to an individual’s house and assets in the home.
- Dwelling Coverage – a part of your homeowners insurance policy, dwelling covers the structure of your home, but not structures that aren’t directly attached to the home such as the shed, or cabana. Dwelling also excludes liability coverage.
- Contents Coverage – insurance that covers damage to or loss of an individual’s personal possessions located within the individual’s home.
- Cash value – the cost of repairing/replacing property minus the depreciation.
Even if you have homeowners insurance, this does not cover damage to the home caused by leaks or floods from storms, which can cost millions of dollars to repair. This is why it’s crucial to opt for flood insurance in addition to homeowners insurance to ensure you are prepared in times of need. Though not required by your mortgage, and even if the home is not in a designated flood zone, flood insurance helps pay for much-needed repairs in the event of water damage.
- Flood insurance – an insurance coverage that pays for property loss due to flooding.
- Topographical maps – to determine the risk for each specific property, and what the insurance company will charge on a policy, insurers will use topographical maps to determine the lowlands and floodways where the home-to-be-insured is located that may lead to flooding.
- Base Flood Elevation – The elevation on a Flood Insurance Rate Map that indicates the water surface elevation. Zones include AE, AH A1-A30, AR, AR/A, AR/AE, AR/A1-A30, AR/AH, AR/AO, V1-V3, VE.
If you’re seeking insurance for personal possessions, a jewelry insurance policy will cover damage to your jewelry in the event of loss, damage, or theft. It’s recommended to have jewelry insurance, as homeowners insurance will only cover jewelry in the event of theft, not damage or loss. Even so, homeowners insurance pays a lower amount for theft (generally up to $1,500), which is why it’s recommended to purchase jewelry insurance to make sure your expensive items are suitably covered.
- Jewelry insurance – an insurance policy that provides coverage for loss, theft, or damage to one’s jewelry (timepieces, necklaces, engagement rings, etc.).
- Insurance Appraisal – To estimate the amount of money your jewelry is worth and determining the coverage necessary, insurance companies need an appraisal, an evaluation of the amount of money the piece of jewelry is worth. The insured must get an appraisal certificate and show this to the insurance company to move forward with the insurance policy.
When shopping for insurance, understanding insurance policy terms and definitions is invaluable to guarantee you’re making the right decision when it comes to your coverage needs. Whether you’re interested in homeowner’s insurance, flood insurance, or jewelry insurance, this guide provides all the knowledge you need to begin comprehending all the important details written in your contract. While you can update and change them in the future, usually these policy limits are binding in the event of a claim. You’ll want to have peace of mind that you made all the right decisions to the best of your knowledge. For all your insurance needs, contact NSI Insurance Group.