Understanding Insurance Terminology
When you buy an insurance policy, you are transferring the risk of loss to the insurance company. In return, the insurer will pay a certain amount of money for the coverage. The amount of money paid in losses varies with the type of coverage. Generally, an insurance policy covers a specified period of time.
There are many terms and acronyms used in the insurance industry. The first is risk, which is based on the likelihood of loss. This determines the cost of coverage and premiums. The risk of a particular event can also determine the premiums that will be charged. In addition, it can determine the coverage options.
A policy can also include medical payments coverage. This covers medical expenses that result from an incident. This is typically included in personal auto insurance policies, although some liability policies also include this type of coverage. Other terms used in insurance include peril and endorsement. The policyholder is the person covered by the policy. This information is found on the declarations page.
Another important term is formulary, which lists the prescription medications covered by the plan. The formulary can also contain exclusions and limitations. The insurance company can refuse to pay for some items or services, while others may pay a portion of the costs. Finally, you should know what an explanation of benefits (EOB) is, which is a written explanation of the medical claim payment. In other words, this document will tell you exactly how much your insurance company will pay and what you will need to pay.
The next term to know is deductible. A deductible is the amount of money you will have to pay before your insurance starts to pay for damages. This coverage is optional, but your lender may require it. It is also important to know that collision coverage is often not mandatory. If you are at fault in a collision, you may still be able to make a claim against your insurance company.
Comprehensive coverage is the other type of insurance coverage. This type of coverage covers a variety of losses, including non-collision losses. You can purchase several types of insurance coverage with a single policy. For example, you could choose to have a $50,000 insurance coverage for your vehicle. This type of insurance coverage will pay out up to half of the damages that you cause.
Dispute insurance covers disputes between customers, suppliers, and employees, and is particularly useful if your business is involved in disputes with one or more of them. It also covers criminal prosecutions against company employees. A letter of appointment, meanwhile, appoints a broker to act as your designated insurance broker.