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A Beginner's Guide to Insurance Terminology

Insurance has its own terms which can be confusing and tough to understand. Here's a cheat sheet on some basic insurance terminology:

  • Claim. A demand by a person or business seeking to recover from an insurer for a loss that may be covered by an insurance policy.

  • Coverage. The specific protection provided by a policy against the results of the hazards insured against.

  • Deductible. A certain dollar amount beyond which insurance protection begins. The insured assumes the loss up to the deductible limit and the insurer pays the remainder, up to the policy limit.

  • Exclusions. The section of the policy contract that specifies the losses not protected by the policy.

  • Peril. The specific event causing a loss, such as fire, windstorm or accidental death.

  • Policy. The written contract effecting insurance, or the certificate thereof, by whatever named called, and including all clauses, riders, endorsements, and papers attached thereto and made a part thereof.

  • Premium. A periodic payment by the insured to the insurance company in exchange for insurance coverage.

  • Replacement Cost. The cost of replacing or repairing property using new materials of like kind and quality without deduction for depreciation.

  • Risk. The hazard or chance of loss on any particular item of insurance. The term "risk" usually is used in a general way to designate the entire subject matter of insurance covered under a policy or upon which an application for insurance has been received.

  • Quote. The rate at which an insurance company indicates its willingness to assume certain liabilities or provide coverage under an insurance policy. A quote is an approximation of the premium for a given policy.


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