If you're considering insurance, or have received quotes from different providers, you might come across some unfamiliar terms. Understanding them will help you compare different types of insurance policies, what they cover, and what they don’t.
Here are the most common terms and phrases you're likely to encounter:
An insurance policy is a contract of insurance, which refers to the level of coverage you've chosen, summarizes its terms, and details any particular conditions you should be aware of.
Insurance coverage refers to the specific risks or events that your insurance policy is covering you for.
A certificate of insurance is an official document that provides legal proof of your insurance coverage.
Exclusions are specific risks or events that you're not being covered for.
Insurance deductible is the amount you must pay towards the cost of any claim you make. With some policies you can choose to pay a higher deductible in order to reduce the cost of your premium. Keep in mind that you'd need to cover the cost of any damages or losses below the deductible amount.
A premium is the total amount you pay for an insurance policy. It's usually calculated annually, but can often be paid in monthly installments.
The sum insured is the agreed value of an insured item or risk, which will form the basis of a claim.
The policy holder is the person who is taking out the insurance policy.
The insured is the person who the insurance covers – usually also the policy holder.
A cooling off period refers to the period during which you can cancel an insurance policy after purchase.
A grace period is the length of time after a premium is due in which a policy holder can make a premium payment without their insurance coverage lapsing.
A claim is when you ask your insurance provider to cover some or all of your financial losses in response to an insured event - such as a theft or a car accident. If an excess applies to your policy, this will be your contribution towards the costs of those losses.
A rider is any additional coverage that you add to an existing policy, like coverage for specific items of value, or adding an extra driver to a motor insurance policy.
An insurance broker is a person or third party that places insurance with an insurer on behalf of a customer. They can advise customers on appropriate insurance products depending on their needs. They can also provide other services such as handling claims.
Surrender value applies principally to life insurance, and is the amount of money you will get if you decide to access the money in your life insurance policy.
Maturity is when certain types of policy (such as life insurance or an annuity) reach their agreed time limit. At this point, the policy ends, and its value is paid out.
