If you don’t deal with insurance on a regular basis — and we know that most people don’t — it’s easy to get confused and overwhelmed by the various jargon words you’ll encounter when you start looking at insurance options.
We understand completely.
At E.L. Sanders Insurance Agency, our team works hard to make sure that our customers always understand the ins and outs of insurance and the issues that affect the decisions we make together when finding the right policy for every customers.
That begins with understanding the terminology. So here’s a quick breakdown of some of the most common insurance terms that we deal with every day and that we explain to our customers when we’re working together to set them up with the best coverage and the best value.
1. Premium – The Foundation of Your Coverage
The term “premium” refers to the amount you pay periodically (monthly, quarterly, annually) to maintain your insurance coverage. It’s like your membership fee to stay protected by your insurance policy. The premium varies based on factors such as the type of coverage you choose, your age, location, and other risk factors. Paying your premiums on time is crucial to keep your insurance in effect and enjoy continuous protection. Remember, a little investment today can save you from significant financial burdens in the future!
2. Deductible – The Initial Hurdle
When you make a claim on your insurance policy, you’ll encounter the term “deductible.” This is the out-of-pocket amount you’re responsible for before your insurance coverage kicks in to help. Let’s say your deductible is $500, and the total claim is $2,000. In this case, you would pay $500, and your insurer would cover the remaining $1,500. Choosing a higher deductible often means lower premiums, but make sure it’s an amount you can comfortably afford in case you need to file a claim.
3. Coverage Limit – The Protective Boundary
Your insurance policy will come with a “coverage limit” — the maximum amount your insurance company will pay for a covered claim. Understanding this limit is crucial because it defines your financial responsibility beyond that point. If your claim exceeds the coverage limit, you’ll have to cover the additional costs out of pocket. To ensure adequate protection, review your coverage limits carefully, especially for policies like liability insurance, where lawsuits can result in substantial costs.
4. Policyholder – You’re in Charge!
You might have come across the term “policyholder” in your insurance documents. Well, guess what? That’s you! The policyholder is the person who owns the insurance policy. As the policyholder, you hold the power to customize your coverage to fit your unique needs. You can add or remove coverage options, update beneficiaries, and make policy changes as needed. Understanding your role as the policyholder empowers you to tailor your insurance to suit your evolving lifestyle and protect what matters most to you. And we’re always here to help every step of the way.
5. Underwriting – The Magic Behind the Scenes
The process of “underwriting” is an essential part of the insurance world, although it often goes unnoticed by policyholders. Insurers use underwriting to evaluate risks and determine policy eligibility and premium rates. It involves analyzing your personal information, medical history, driving records (for auto insurance), and other relevant data to assess the level of risk you present as an insured individual. Understanding the underwriting process helps you appreciate the factors that impact your insurance rates and coverage options.
6. Liability – Protecting Your Assets and Peace of Mind
Liability coverage is a crucial aspect of various insurance policies, such as auto insurance and homeowners insurance. It comes into play when you are found legally responsible for causing damage or injury to others. Liability coverage steps in to protect your assets and cover the costs of legal fees, medical bills, property repairs, and more. Without liability coverage, you could be personally liable for these expenses, which could have a significant financial impact. With liability coverage, you can have peace of mind knowing that you’re protected from potential lawsuits and claims.
We believe in empowering our clients with knowledge to make informed decisions. Understanding insurance jargon is just one step toward ensuring you have the right coverage for your needs. Our team of experienced agents is here to guide you through the process, answer your questions, and find policies tailored to your unique requirements.
Got more insurance questions? We’re here to help!