Common Insurance Terms Explained In Simple Words
It might seem like insurance companies have their own secret language to keep you in the dark. They throw around big words, and you just nod along, hoping it all works out. But here is a little secret: the language isn’t that hard to learn.
Once you understand the five or six main terms, you’ll be able to read any policy with confidence. You’ll know exactly what you’re paying for and why. If you’re ready to put this knowledge to use, start by talking to the best insurance brokers in Dubai.
Premium:
This is the price you pay for your insurance. Think of it like a subscription fee. You usually pay it every month to keep your policy active and your coverage in place. If you stop paying your premium, your insurance company can cancel your policy.
Deductible:
This is the amount of money you agree to pay out of your own pocket before your insurance company starts to help. For example, if you have a car accident and the repair bill is $2,000, and your deductible is $500, you pay the $500 first, and then the insurance company pays the remaining $1,500.
Coverage:
Coverage is simply the protection that the insurance company promises to provide. It is the list of specific things your policy will pay for. If your policy says it covers fire damage that means you are protected if a fire happens.
Policy limit:
This is the maximum amount of money your insurance company will pay for a covered loss. If your policy has a limit of $100,000 for damage to your house, and a storm causes $150,000 in damage, the insurance company will pay $100,000, and you would be responsible for the rest.
Claim:
A claim is a formal request you make to the insurance company asking them to pay for a loss. If your home is broken into, you file a claim. The insurance company then reviews the claim to decide if it is covered by your policy and how much they will pay.
Exclusion:
An exclusion is something that your insurance policy will not cover. It is very important to read the exclusions so you know what risks you still carry yourself. For example, a standard home insurance policy might have an exclusion for flood damage, meaning you would need a separate policy to be protected from floods.