Insurance 101: Defining Common Insurance Terms
Whether you’re starting the new year with a new insurance policy, getting ready to file a claim, want to upgrade an existing policy, or are simply trying to get a better understanding of your coverage, it’s important to familiarize yourself with some common insurance terms. We at Bearingstar have done the homework for you.
We have compiled this list of some of the most common insurance words and terms and their basic definitions. While our agents are always available to answer questions, this guide can also serve as a quick resource for whenever you come across any of these terms while reviewing one of your policies.
- Actual cash value (ACV) — There are a few ways your policy can be set up that impact the amount you are paid when filing a claim. Actual cash value is one such method, and it is calculated by subtracting the amount of depreciation from the replacement cost of the property.
- Replacement cost – As opposed to the actual cash value, replacement cost refers to the cost of replacing property without subtracting depreciation due to normal use or wear and tear. For example, if you have auto insurance, replacement cost coverage would pay out to replace that car with an identical model, or a model of comparable quality.
- Bodily injury — An injury that someone sustains in a car accident or on your property. If you’re determined to be at fault, then you could be liable for this.
- Carrier — This is another word for the insurance company that provides you with your policy. For example, Bearingstar is the agency and Arbella is one of our insurance carriers.
- Claim — A request for your insurance company to pay for something that’s covered by your insurance policy. This could be anything from a car accident to a fire at your home. When you file a claim, you’re asking your insurance company to investigate and provide you compensation for any loss or damages.
- Coverage — The protections and benefits you receive under your insurance policy.
- Damages — The money that someone is legally required to pay as compensation to another person or party for tangible losses or liability.
- Deductible — A deductible is the amount of money that you are responsible for paying toward an insured loss. When a disaster strikes your home or if you have a car accident, the amount of the deductible is subtracted, or “deducted,” from your claim payment.
- Liability — The legal obligation that someone has for causing damage, injury, or loss to someone else. For example, if you’re in a car accident, the other driver was injured, and you were at fault, then you may be found liable and be required to pay damages.
- Limits — The highest amount your insurance company will pay for a claim that they cover. You’re responsible for paying whatever exceeds the limit that was set by the insurance company.
- Loss — Damage caused to an insured piece of property or automobile. This is also the basis for filing an insurance claim.
- Premium — What an insured person pays for an insurance policy. This could be a monthly, quarterly, or annual payment to your insurance company.
Contact one of our agents at Bearingstar today if you have questions about any of the terms in your policy or for a no-obligation review of your policy. Our goal is always to make sure you have the best possible coverage.