Learn the Definitions for Common Insurance Terminology to Better Understand Your Insurance
The importance of insurance and how it protects you is easy to understand. But the language used for all types of insurance can be more difficult for the average person to confidently follow. Understanding insurance terminology is crucial to knowing what your insurance does and does not do.
Read on to learn the definitions of common insurance terminology to help better your understanding of the various types of insurance protecting your financial and medical well-being.
General Insurance Terminology
The most common insurance terminology is used across all or most types of insurance. These are terms you’ll see whether you’re establishing new auto coverage or if you updated your health insurance:
Insured – The most important definition of any insurance policy. The “insured” refers to you, your family, your organization or your property, depending on the type of insurance you have. Only those classified as the insured will be protected from costs or liabilities associated with the relevant insurance. This is true for all types of insurance, from auto insurance to life insurance.
Premium – Your premium is the cost you pay for your insurance. Premiums vary depending on the type of insurance, your deductible and the benefits of the insurance. Higher premiums are typically associated with more coverage and protection. Your premium has no impact on your out-of-pocket maximum or deductible. Consider it a separate but necessary payment.
Deductible – Deductibles are the cost you must pay out of pocket before your insurance’s benefits can be applied in any given situation. If you make a claim and have a deductible of $500, you would be required to pay $500 first, and then your insurance would cover the rest of the costs associated with that claim. These costs are in addition to your premium. Most insurance companies have plans that span a range of deductibles. The higher your deductible, the lower your premium costs tend to be.
Appraisal – An appraisal is a type of inspection or evaluation to estimate the value of property. For most types of property insurance, appraisals are necessary to ensure adequate coverage. Appraisals help avoid under- or over-insurance.
Common Auto Insurance Terminology
Some common insurance terminology is associated with specifics types of coverage, such as auto insurance. When you’re looking at auto insurance, make sure you understand some of these important terms:
Collision Insurance – This insurance pays for damages incurred when a vehicle hits or is hit by another vehicle or object, such as a pole or fence. In addition to being important coverage for vehicle owners, most leases or financed vehicles will need to be protected by collision insurance as part of the financing agreement.
Comprehensive Insurance – Not every incident with your vehicle involves a collision. Things like theft, fire, tree branches or vehicle damage caused by animals, you need comprehensive insurance. When leasing or financing a car, comprehensive insurance is often a requirement. If you fully own your car, it’s still recommended, as many of these incidents can be just as costly as collisions!
At-Fault – Following an auto accident, many states will look to see if one or more drivers were the cause of the accident. Being at-fault typically means your insurance will be obligated to cover costs associated with damage incurred from the accident.
No-Fault Coverage – Some states, like Michigan, require coverage for bodily injury resulting from a car accident, no matter who was at-fault. Sometimes known as personal injury protection insurance, no-fault coverage helps assist you with medical costs resulting from a car accident, no matter who caused the accident.
Total Loss – Commonly referred to as being “totaled,” a total loss is when your vehicle is damaged beyond the capacity for safe repair. This can also apply to some other types of property.
Uninsured Motorist Coverage – While it is legally required, some people still choose to drive a vehicle when they’re not insured.Uninsured motorist coverage helps protect you when an accident is caused due to negligence of a driver who isn’t insured. Uninsured motorist coverage is important to be confident that you’re covered if you experience an accident due to the fault of an uninsured operator.
Underinsured Motorist Coverage – In other cases, drivers may have insurance, but their policy doesn’t provide enough liability insurance to cover the costs associated with the accident. Underinsured motorist coverage protects you in these instances, preventing you from having to pay out of pocket for expenses that go beyond their policy’s maximum coverage.
Health Insurance Terminology
Protecting yourself from the costs associated with medical emergencies and care is one of the most important things you can do! Here are some of the most commonly asked-about words in medical insurance terminology:
Co-Pay – Certain types of health insurance claims will require a payment from you at the time of service, known as a co-pay. Co-pays are flat amounts that you must pay, and the insurance will cover the rest. These are often used for visits to doctors or specialists. One key benefit of a co-pay is, your insurance covers the remaining costs without your deductible as part of the claim. If your co-pay is $25, that is all you must pay when you make a claim covered by the $25 co-pay.
Co-Insurance – Somewhat similar to co-pay, a co-insurance cost is the defined share of costs you split with your provider. If your co-insurance is 80/20, for example, your costs will be 20 percent of the total claim and your provider covers the remaining 80 percent. Remember that co-insurance typically applies after your deductible, so the co-insurance only applies to the remaining balance after you pay your deductible.
Network – Your health insurance contracts groups of medical providers, from individual doctors to hospitals, to offer healthcare services at pre-determined rates. Because the insurance company is familiar with these organizations or doctors and knows their costs, many plans offer discounts or co-pays for these organizations versus those that are out-of-network.
Contact Iott Insurance for a Quote Today
Iott Insurance has been a part of southeast Michigan for over 50 years. We can help you plan your insurance needs and find you the right policies or plans to protect you.
Or you can visit one of our three offices in southeast Michigan:
Blissfield, MI – (517) 486-4381
Lambertville, MI – (734) 854-4688
Petersburg, MI – (734) 279-2111
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