This general insurance glossary defines some of the terms you’ll hear when discussing insurance. However, there are many, many other terms that are helpful to understand. Our agents would be happy to help you decipher the jargon and clear the clutter so you can make the best decision when it comes to home, life, auto, business or any other type of insurance. Just reach out!
Deductible: All individual and group health plans have a deductible. The deductible is the dollar amount an insured individual must pay for covered expenses during a calendar year before the plan begins paying co-insurance benefits.
Coinsurance: the percentage of covered expenses an insured individual shares with the carrier. (i.e., for an 80/20 plan, the health plan member’s co-insurance is 20%.) If applicable, co-insurance applies after the insured pays the deductible and is only required up to the plan’s stop loss amount.
Co-Pay plans vs. Saver plans: A co-pay plan has a predetermined, flat fee that an individual pays for health-care services, in addition to what insurance covers. A Saver Plan does not have a co-pay and the individual is responsible for paying for all health-care services until the deductible is met.
Stop-loss: the dollar amount of claims filed for eligible expenses at which the insurance begins to pay at 100% per insured individual. Stop-loss is reached when an insured individual has paid the deductible and reached the out-of-pocket maximum amount of co-insurance.
Coverage Limits: The highest dollar amount the insurance company will pay if you make a claim on a “covered loss.”
Uninsured Motorist: Endorsement to a personal automobile policy that covers an insured collision with a driver who does not have liability insurance.
Medical Payments PIP: medical payments coverage protects your passengers, and any family members driving in the insured vehicle at the time of the accident.
Comprehensive Insurance: Auto insurance coverage providing protection in the event of physical damage (other than collision) or theft of the insured car. For example, fire damage or a cracked windshield would be covered under the comprehensive section.
Collision: Covers physical damage to the insured’s automobile (other than that covered under comprehensive insurance) resulting from contact with another inanimate object.
Towing (Road Side Assistance): It is an addition to your auto insurance policy that allows you to either get direct towing service from the Insurance Company or to be reimbursed for expenses relating to needing a tow truck.
Home Owners Insurance
Dwelling coverage: This is the part of the policy that covers the actual structure of your home. There are various policy types ranging from basic ACV to all perils replacement cost.
- Basic will only cover the actual cash value of a home and does not take into account the depreciation of the property. This opens up a lot of possibilities that a claim will be denied by an insurance company.
- The dwelling value for a replacement cost policy will typically be calculated based on many factors including square footage, year built and any customization work. If you are concerned about being overinsured or underinsured, give us a call. Most people want to be sure they are covered in the event of a loss so be sure you have the right policy for you before you have a claim.
Personal Property: This is the part of the policy that would cover the contents (furniture, clothing, electronics, etc.). Many times there are limits on items like jewelry, guns, silver/gold, and fine art. If you think you have pieces that might be over a couple thousand dollars per piece, contact Insurance Connection USA and we will be able to schedule this property on a personal articles policy or a blanket policy.
Medical Coverage: You may also see this coverage called “Guest Medical” or “Medical Payments to Others”. This is Coverage designed to pay for medical expenses to others who are accidentally injured on an insured location or by the activities of an insured. No Negligence on the part of the insured has to be proven for payment to be made
Slab and foundation coverage: This is an additional coverage especially important in Texas. If there is a leak in the plumbing, heating, air conditioning, or automatic fire protective sprinkler system then the foundation, floor slab, or footings that support the dwelling will be covered. This includes the cost of tearing out the floor and foundation to access the leak. This does NOT cover the repair of the actual plumbing system where the leak originated. Various limits are available, but the best companies will cover up to the limit of your dwelling coverage.
Personal Liability: Liability coverage provided by the homeowners policy that protects the insured against the financial consequences of liability to others for bodily injury and property damage. This coverage also insures the cost of defense in addition to the policy limit.
Deductibles: This part of the policy specifies what amount you are responsible for FIRST before the insurance company will pay for any claim. In some areas, there are 2 or 3 different kinds of deductibles, depending on what type of loss occurred.
Part 1 is typically for wind/hail and generally, there is a minimum deductible of 1%. What this 1% means is that the deductible equals 1% of the dwelling amount (coverage A). An example is if your home is covered for $100,000 then your deductible will be $1000.
Part 2 typically is for All Other Perils. So if you have an open perils policy, then every cause of loss, except wind and hail will carry that deductible. This can range from anywhere starting at $250. Call Insurance Connection USA if you would like to increase or decrease your deductible.
Umbrella policies supply extra coverage in the event of a lawsuit. Just as umbrellas shield you from rain, umbrella policies protect you from losing the entirety of your wealth and assets. These policies supplement your personal policies by covering beyond the limits of liability associated with those policies. Also, you chose how much more it covers; typically starting around $1 million.
You must have advanced limits of liability on the entirety of your personal policies before they offer the option of an umbrella policy. Typically, the limits of liability needed are $250,000 for bodily injury protection per person and $500,000 per accident.
Types of life insurance
Term life insurance is an insurance policy covering a person’s life for a specified number of years. It is often offered with a guaranteed premium for a particular number of years. Term life does not have accumulated cash value. Accumulated cash value generally is the distinction between term life insurance and whole life or universal life insurance. Cash value policies are initially much more expensive than term life insurance policies for the same amount of coverage.
Universal Life Insurance – A combination of flexible premium, adjustable life insurance policy
Whole Life Insurance – Life insurance which might be kept in force for a person’s whole life and which pays a benefit upon the person’s death, whenever that might be.
How much coverage do you need? There is no set rule as to how much insurance you need to purchase. You need to decide how much life insurance you want to leave your dependents to carry on in your absence. You have to decide how much support you wish to provide. Many financial planning experts recommend 10 to 20 times your annual earnings. For business life insurance the amount is often even more. For many, the answer is simply the amount makes you feel your family is safe.
Long Term Care Insurance
Long-term care insurance is a type of insurance developed specifically to cover the costs of long-term care services, most of which are not covered by traditional health insurance or Medicare. These include services in your home such as assistance with Activities of Daily Living as well as care in a variety of facility and community settings.
There is a great deal of choice and flexibility in long-term care insurance policies. You can select a range of care options and benefits that allow you to get the services you need in the settings that suit you best. The cost of your long-term care insurance policy is based on the type and amount of services you choose to have covered, how old you are when you buy the policy, and any optional benefits you choose, such as Inflation Protection.
Long-term care insurance policies have a benefit period or lifetime benefit maximum, which is the total amount of time or the total amount of dollars up to which benefits will be paid. Common benefit periods for long-term care policies are two, three, four, and five years, and lifetime or unlimited coverage. Other options between five years and lifetime/unlimited coverage are also available from many companies. Most policies translate these time periods into dollar amounts and do not actually limit the number of days for which they will pay for care – just the overall dollar amount that the policy will pay. There are fewer companies today willing to offer an unlimited/lifetime policy, although some have a “high coverage option” like a $1 million lifetime limit.
With long-term care insurance, you pay premiums in amounts you know in advance and can budget for, and the policy pays – up to its coverage limits – for the long-term care you need when you need it. Typically, premiums are waived during the time you are receiving benefits.