Making an informed insurance purchasing decision is difficult for most consumers. One of the main problems in understanding this process is the insurance policy itself. Insurance terminology can be confusing to many people because of the inherent complexity of these products. While shopping for insurance, it is important for you to know some basic insurance terms. Understanding the following terms will help you become a smarter consumer of insurance products.
People who own property are exposed to the risk of having their property stolen or damaged from various causes. Property coverage is provided for your home under the homeowners policy, and property coverage is provided for your car under the physical damage section of the personal auto policy.
People who commit negligent acts can be held legally liable for their actions, such as rear-ending another car and causing injury to an innocent motorist. This risk is particularly important to insure because there is no maximum limit with respect to the size of the loss. Liability coverage is automatically provided in the homeowners policy and in the personal auto policy.
Refers to the cause of a loss. For example, the homeowners policy covers losses arising from hailstorms, theft, and fire. The personal auto policy covers losses arising from collision, vandalism, and many other perils.
A condition that increases the probability of a loss. Examples include frayed and outdated wiring in your home (increasing the chance of a fire) and reckless driving on the highway (increasing the chance of an accident).
The front page of a policy that provides such information as the address of your covered property, the policy period, policy limits, and other information related to your particular coverage.
Article published courtesy of the International Risk Management Institute