It happened with me a lot of times that while inquiring about insurance, the agent used a lot of terms which I could not understand. And due to my not-so-open behavior, I could not ask for explanation. Once this led me to a not-so-suitable policy and then I decided to get to know about important insurance related terms. So here I present the list based on my research, maybe it helps you while going for an insurance policy.
INSURED: A person or corporation who is protected by the insurance company in the case of damage and loss!
NAMED INSURED: The person, corporation, or firm on the name of which insurance is taken! There may be other insured persons as well within a policy which are not named but are protected under some circumstances.
ADDITIONAL INSURED: Individuals or an entity which are not directly insured under the policy but the same provides certain degree of protection for them. Provision of ‘additional insured’ by a policy holder may be due to a close relationship between them, for example the insured persons of a company or club members.
CO-INSURANCE: Two or more people or insurance companies share one insurance policy. The insurer directly pays to each insured their respective share of loss.
PREMIUM: it’s the amount of money which an insured pays directly to the insurer for insurance coverage.
DEDUCTIBLE: It’s the amount insured person must pay to the insurer before they begin to pay the covered loss. It is similar to self-insured retention (SIR). The liability of insurer begins with the exhaustion of deductible.
SELF INSURED RETENTION: It’s similar as above but the insured person is responsible for payment of all legal fees incurred.
POLICY LIMIT: The maximum amount for which insurance is done, i.e., the max amount an insurance company is liable to pay the insured in case of any loss.
FIRST PARTY INSURANCE: Insurance applicable for the insured’s own property or person. It only covers insurance to insured’s own property from whatever the causes specified in the policy. For example Builders Risk Insurance – insurance for the loss of rigs or vessels during the course of construction! It only involves the insurer, the owner of rigs and the contractor holding financial interest in the rigs.
THIRD PARTY INSURANCE: A liability insurance which covers the negligent acts of the insured person against the claims from a third party. For e.g., a third party insurance of a car ensures the liability of any person having a loss due to the car.
NEGLIGENCE: Not taking reasonable care. It’s an act which a reasonable person will not do or to be precise, an act which a reasonable person will not do under the similar circumstances. It is the ‘legal cause’ of damage and it directly or in continuous sequence produces such damage. So that it can say that the damage would not have occurred if not for the negligence.
WILLFUL MISCONDUCT: An act of producing damage with the knowledge of the fact that the act will produce damage and is a potential cause to injury.
MANUFACTURING DEFECT: even after all the possible care, if a defect appears in a manufactured product, it is called manufacturing defect.
Getting to know all these terms made my journey through complicated documents of insurance companies very easy. Hope it will work the same way for you as well.
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