Home Insurance A Brief Guide to Insurance Terms

A Brief Guide to Insurance Terms

Insurance is basically a way of protection against financial loss. It’s a sort of risk management, mostly utilized to mitigate the inherent risk of some future or contingent liability. For instance, if you own a home and there’s a chance of a fire, your insurance can protect your assets, while your homeowners insurance can assist in paying for the rebuilding expenses of your home. The two kinds of insurance are often interchanged because one pays for the benefits that may accrue after an event while the other does not.

Life Insurance is an insurance product that pays the insured amount as a benefit upon the death of the insured. Usually, when we think of life insurance we think of it as a policy limit. The policy limit is the amount by which the premium may be increased. Policy limits differ from company to company.

Policy tenure is another term you might come across when talking about insurance. It’s the duration over which the insurance company has the right to collect premiums from an insured customer. Usually, the longer the tenure, the cheaper the premium is likely to be. Insurance companies typically have fixed policy tenure and a fixed premium for the duration.

Other terms you need to be familiar with our peril, premium, and loss perils. A peril is an event or cause that impairs the financial situation of an insured individual. Examples of perils are death, natural disasters, theft, loss of use, and litigation. A premium is the amount an insurer charges for insuring a particular risk. There are different ways in which insurers determine their premiums such as the age of the person insured, whether the person is a smoker, his or her health condition, whether the person has filed any claims previously, and many more.

When you buy insurance, make sure to check all clauses of the policy carefully. Most policies will have a co-payment option where you must pay a specific amount of money before the insurer will pay your claims. If the premium for the coverage seems extremely high, you can always consult your insurance agent or your insurance company’s webpage to find out what options you have to lower the amount of your premium.

Life insurance provides coverage only up to a particular sum assured by the policyholder. The sum assured is defined as the amount the insurance company has agreed to provide the policyholder in the event of his or her death. In such a case, the policyholder will not get anything upon death because the sum assured is non-refundable. If the policyholder outlives the contract, the insurance company will make a payment to the named beneficiaries upon the policyholder’s death. The named beneficiaries are also known as the benefit recipients. This sum assured concept is highly important in life insurance because it ensures that the policyholder is covered for the minimum amount needed.


Peter Conley

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