The Ultimate Insurance Glossary: Part 1 – Demystifying Insurance Jargon

Navigating the world of insurance can often feel like learning a new language. Phrases and terms abound on policy documents, which can sometimes leave us scratching our heads. 

Understanding this lexicon is not just for the savvy investor or the legal expert – it’s essential for every policyholder who wants to make informed decisions and ensure they have the coverage they need.

In the first instalment of this two-part series, we’ll explore terms from A to M, providing you with the knowledge to confidently manage your insurance needs.

Stay tuned for Part 2, where we will continue our exploration from N to Z.

The ABCs of Insurance: Terms A to M

A – Assessing Risks with ‘Adjuster’

An adjuster is a person who assesses the extent of the insurer’s liability when a claim is made. Their role is to investigate the claim and determine how much compensation is fair, ensuring that neither the insured nor the insurer is at a disadvantage.

B – Beneficiary: The Recipient of Your Policy

The beneficiary is the person or entity you nominate to receive the benefits of your insurance policy, typically seen in life insurance or annuities. They are the ones who will benefit from your thoughtful planning.

C – Ceiling of Your Coverage: ‘Coverage Limit’

The coverage limit is the highest amount your insurance company will pay out for a covered claim. It’s essentially the financial ceiling of your policy’s benefits, so it’s essential to set it at an adequate level.

D – Your Share of the Risk: ‘Deductible’

The deductible is the portion of a claim that you agree to pay out of your pocket. It’s your share of the risk before your insurance kicks in, acting as a deterrent against small, unnecessary claims.

E – Understanding What’s Not Covered: ‘Exclusion’

An exclusion is a policy provision that removes coverage for certain types of risks, events, or properties. It’s the insurance way of saying, “This is where we draw the line.”

F – Flood Insurance: Shielding Your Property

Flood insurance is specialized coverage for damage caused by flooding, which is typically excluded from standard home insurance policies. In flood-prone areas, it’s an indispensable part of home protection.

G – The Safety Net of Payments: ‘Grace Period’

The grace period is the additional time given to you to pay your premium after the due date, during which your policy remains active. It’s a little breathing space to ensure continuous protection.

H – The Catalysts for Claims: ‘Hazard’

A hazard is any circumstance that increases the probability or potential severity of a loss. Identifying hazards is the first step in mitigating potential insurance claims.

I – The Promise of Compensation: ‘Indemnity’

Indemnity is the principle based on which insurance contracts are signed, promising that the insured will be compensated for their loss and restored to their original financial position, no better, no worse.

J – Joint Life Insurance: A Dual Safety Net

Joint life insurance is a cover that insures two lives, usually that of spouses, paying out on the first death, thereby ensuring the financial stability of the survivor.

K – Key Person Insurance: Protecting Your Business’s Assets

Key Person Insurance is a policy taken out by a business to compensate for the financial losses that could arise from the death or incapacity of an important member of the business.

L – Liability Insurance: Your Legal Shield

Liability insurance is designed to offer specific protection against third-party insurance claims, payment is not typically made to the insured, but rather to someone suffering loss who is not a party to the insurance contract.

M – Maturity: The Policy’s Payday

Maturity is the date on which the life insurance policy’s face amount will be paid out, typically at the end of its term, or upon the death of the insured.

A Look Ahead

Knowing the language of insurance helps ensure that the relationship between you and your insurer is transparent, effective, and mutually beneficial.

Having delved into the first half of the alphabet, you’re now better prepared to untangle the complex terminology sometimes found in your insurance documents. But our journey doesn’t end here. Look forward to Part 2 of our glossary where we continue from N to Z, completing your transition into a well-informed policyholder.

Should you need further clarification or wish to discuss the specifics of your insurance needs, our team of experts is always here to assist.