Insurance terms: whether or not you’re a first-time insurance customer, it can be overwhelming. So, we’ve taken the time to list a few. Maybe you’ve heard these terms before. Now, we have a list of explanations to help you.
When buying a cover plan, it’s important to know what you’re looking for. The list of insurance terms out there may seem daunting, but you’ll encounter them again and again. Simply familiarise yourself with these basic concepts.
Policies, Premiums and Policyholders
The insurance policy is the agreement between the customer and the insurer. It’s purpose is to protect the customer against a risk that could potentially happen in the future… Such as a car accident or developing a serious illness. The policy must stipulate exactly what is covered and what is not.
The insurance premium you pay is the amount of money you give to the company in exchange for cover. This could be paid quarterly, monthly or yearly: the amount you pay depends on various factors, the most important being the level of risk.
The policyholder is simply the person who has taken out the insurance policy.
A “claim” is literally what it says on the tin… You “claim” back money from a company that you’ve been paying premiums to. Claims don’t always take the form of cash, however: depending on the policy, you may be reimbursed through the payment of medical bills, car repairs or something else depending on what you’re covered for.
Essentially, an insurance claim is fair compensation for the misfortune you’ve suffered.
Deductibles and Excess
Your deductible is the amount of money that you pay in order to cover expenses that result from a misfortune or accident, before the insurer covers the rest. This is stipulated within your insurance policy beforehand. Generally speaking, the higher the deductibles you pay at the time of need then the lower your insurance premiums will be.
Excess refers to the first amount payable by you and may seem similar to a deductible. The difference is that deductibles reduce the maximum pay out you receive from a company – excess does not. In fact, many insurance companies provide excess to stop people from making minor/false claims.
No Claims Bonus
A no-claims-bonus is an optional addition to your insurance policy (typically with cars ). Sometimes called a no claims discount, is the number of years that you haven’t made a claim on your insurance – at all. Based on this count, your provider may either decide to give you money back or reduce your premiums in the future.