Important Insurance Terms You Should Know

Insurance is always associated with many unique terms. Hence it becomes necessary for us to know about the important insurance terms before buying any policy. Understanding these terms will help you to search affordable insurance policy.

Here are some of the useful insurance terms and their definitions given below:

Actual Cash Value (ACV) : It is the value of an item at the time it was damaged by the insured event. ACV is calculated as Replacement Cost Value (RCV) less depreciation.

Claim: A request for an insurance company to pay for a loss. Claims to your own insurance company are known as 'first insurance company' while claims made by one person to another person’s company are called 'third party claims'.

Claimant: A person who makes a claim against a party based on legal liability.

Coverage: It is the range of protection that you are provided under an insurance policy.

Deductible: It is the amount you are required to pay before the insurance company begins to pay.

Depreciation : Decrease in the value of an item due to age, usage, wear and tea. Most things decrease in value as they age.

Exclusive: Things that are not covered under the policy.

Grace period: It is the amount of time between the payment due date and when the policy will be canceled if payment is not received.

Liability insurance: Liability insurance pays the loss of other people when you are responsible for that loss.

Peril: It is the cause of the possible loss or damage.

Policy: Policy is the legal document issued by the insurance company that outlines the general terms and conditions of the insurance.

Policyholder: The one who buys the insurance is called policyholder or insured.

Premium: It is the amount you need to pay to the insurance company.

Underwriting: The process of selecting risks for insurance and determining in what amounts and on what terms the insurance company will accept.

Get familiar with the above given common insurance terms so that you can choose the right insurance policy for yourself.