If you're considering insurance, or have received quotes from different providers, you might come across some unfamiliar terms. Understanding them will help you compare different types of insurance policies, what they cover, and what they don’t.
Here are the most common terms and phrases you're likely to encounter:
A certificate of insurance is an official document that provides legal proof of your insurance coverage.
A claim is when you ask your insurance provider to cover some or all of your financial losses in response to an insured event - such as a theft or a car accident. If a deductible applies to your policy, this will be your contribution towards the costs of those losses.
A cooling off or free look period refers to the period during which you can cancel an insurance policy after purchase.
Exclusions are specific risks or events that you're not being covered for.
A grace period is the length of time after a premium is due in which a policy holder can make a premium payment without their insurance coverage lapsing.
The insured is the person who the insurance coverages – usually also the policy holder.
An insurance broker is a person or third party that places insurance with an insurer on behalf of a customer. They can advise customers on insurance products depending on their needs. They can also provide other services such as handling claims.
Insurance coverage refers to the specific risks or events that your insurance policy is covering you for.
Insurance deductible is the amount you must pay towards the cost of any claim you make. Some policies do not have a deductible, while others allow you to pay a higher deductible in order to reduce the cost of your premium. Keep in mind that you'd need to cover the cost of any damages or losses if they were below the deductible amount.
An insurance policy is a contract of insurance, which refers to the level of coverage you have, summarises its terms, and details any particular conditions you should be aware of.
Maturity is when certain types of policy (such as life insurance or a pension) reach their agreed time limit. At this point, the policy ends, and its value is paid out.
The policy holder is the person who is taking out the insurance policy.
A premium is the total amount you pay for an insurance policy. It's often calculated annually, but depending on the type of insurance and policy maybe paid in regular instalments, for example monthly.
A rider is any additional coverage that you add to an existing policy, like coverage for specific items of value, or adding an extra driver to a motor insurance policy.
In most countries or regions, a Summary of Insurance document that sets out the main features of an insurance plan or policy in clear, jargon-free language. This will make it easier for you to make like for like comparisons between products from different providers, and ensure you select the product that best suits your needs.
The sum insured is the agreed value of an insured item or risk, which will form the basis of a claim.
Surrender value applies principally to life insurance, and is the amount of money you will get if you decide to access the money in your life insurance policy.