Understanding exactly what you’re reading when dealing with insurance is absolutely vital in getting the most out of your policy. After all, if you don’t know what you’re getting yourself into, or if you don’t fully understand the terms and conditions, you may find yourself disappointed later on down the road.
We don’t want that. So, we put together some of the most important terms you may come across when looking for car, life, building or household content insurance. We will continue to update these in alphabetical order.
Let’s get started.
Accident – Defined as an unforeseen and unintended event or occurrence.
Accidental Death Benefit – With regards to life insurance, accidental death benefit is an additional benefit which pays out to the beneficiary should death occur due to an accident. There are, of course, certain limits or exclusions such as the time of the incident and the age of the deceased.
Actuary – A specialist in the mathematics of insurance. An actuary calculates rates, dividends, reserves and other statistics.
Adjuster – Also known as an assessor. This is a representative of the insurance company who will determine the extent of the insurer's liability for loss when a claim is submitted.
Agent – A person who sells and services insurance policies. An independent agent may represent up to two or more insurance companies and earn commission based on a percentage of premiums paid. A direct agent, on the other hand, represents only one insurance company – the one they work for – and will only sell products offered by that insurer.
Annuity – An agreement by an insurer to make periodic payments that continue during the survival of the annuitant(s) or for a specified period.
Asset – Defined as a property or financial commodity which can, if need be, be converted into cash.
Average – This is a policy condition related to the insuring of your items. It is important to insure them for their full replacement value. If you don’t, the average applies. This means that your claim payment will be reduced if the items are underinsured.
Benefit Period – With regards to health insurance, the benefit period refers to the number of days in which benefits are paid out to the person insured and their dependents.
Broker – A broker is an insurance salesperson, acting as an intermediary, who searches the marketplace for the best possible insurance products in the interest of clients, not the insurance companies. A broker-agent may represent certain insurance companies in particular, but will not prefer one specifically over another. The broker-agent still acts in the interest of the client, and will source the optimal products available.
Building Insurance – This type of policy covers the costs of repairing or replacing the structure of a house or building in the event of damage. Damage could be caused by flooding, fire, lightning or natural disasters. This usually includes garages, outhouses, gates and boundary walls or fences.
Claim – In the event of an unfortunate incident, such as a car accident or hijacking (related to car insurance), death or disability (related to life insurance) or a natural disaster damaging your home (related to building insurance) – a claim is then made by the person insured against such risks to the insurance company. A claim, then, is basically a request made by the insured for payment of the benefits as provided by the policy.
Claim Number – Every claim submitted by the insured will be given a unique identifying number allocated to it for referencing purposes. Essentially, it’s a reference number, which in this instance is referred to as a claim number.
Coinsurance – This is an arrangement that commonly involves separate insurers sharing the cover of one particular risk.
Comprehensive Insurance – This is the ultimate car insurance product. Comprehensive car insurance covers your vehicle in the event of almost any form of damage or theft.
Contents Policy – Also referred to as Household Contents Insurance. This kind of policy covers the contents of your home or building, whether it be furniture, appliances or other valuables.
Coverage – This is the range of protection provided under an insurance policy. In car insurance, for example, the coverage will list the risks or perils that your vehicle is insured against – depending on the type of cover you have chosen. For instance, a third party, fire and theft policy will cover the damages inflicted upon the other vehicle involved in a collision, but not the damage to your own. Every insurance policy covers certain incidents, so it’s important to know what the limits of your coverage.
Dead Peasant Insurance – Also known as Corporate-Owned Life Insurance. This is a form of life insurance which a company will take out on the lives of its employees. The insurance policy, however, is owned by the employer. This means that any benefits payable either go to the employer or directly to the employee's families.
Deductible – An American term. See Excess.
Depreciation – This is the extent to which insured property, such as your car, has diminished in value due to factors such as wear and tear. A brand new car begins to depreciate in value the minute you drive it off the showroom floor.
Disclosure – It is the duty of all parties entering into a contract of insurance to disclose (reveal) all true facts before the contract can be concluded, as well as prior to each renewal. Similarly, a declaration refers to when the person insured declares all information given to the insurer to be complete and honest. Just like taking an oath in a court room.
Elimination Period – Better known as a waiting period. This is the amount of time which has to pass after filing a claim before the policyholder may collect the insurance benefits.
Escalator Clause – This is a clause in a policy, related to property, which allows the sum insured to rise in accordance with the assumed rate of inflation.
Ex Gratia – Sometimes, an insurance company just isn’t compelled to pay for a specific damage to your property. These are damages or losses which aren’t covered in terms of your insurance policy, but the insurer might be feeling generous and cover it for you. In insurance terms, ex gratia is a show of goodwill compensation.
Excess – This refers to an amount of money which the policyholder has to pay toward the cost of a claim before the insurer pays out the rest. The insured can opt for paying a higher excess at the time of the claim in return for lower monthly premiums, or vice versa. Exclusions – These are items, or conditions, that are not covered by the insurance contract.