Why Is Insurance So Complicated?

Whether you’re buying a health insurance, auto insurance, or a home insurance policy, it’s important to choose one that meets your needs and your budget. But understanding and comparing the details of various insurance policies can be frustrating and time-consuming. In the end, you find yourself wondering why insurance is so complicated and if you’ve found the right policy. Getting familiar with basic insurance terms will help you understand your insurance options and make the process of finding the best policy less complicated. Here are six terms you should familiarize yourself with.

1. Coverage

An auto or home insurance policy outlines “coverages,” which are conditions under which the insurance company may pay the policy holder for a loss.

2. Premium

A premium refers to how much the subscriber pays for their insurance policy. Insurance premiums can be billed in a number of ways, but are commonly done on a monthly, semi-annual, or annual basis.

3. Deductible

A deductible is how much the policy holder must pay before the insurance company may make a payment on a loss. Let’s say your annual deductible is $500, and you’re reporting a $1,500 loss, you’ll have to pay $500 before your insurance company makes a payment for the remaining $1,000.

4. Rider

Sometimes referred to as an “endorsement,” a rider is a special provision that attaches to a policy and either restricts or expands what the policy will cover. For example, you may decide to add a watercraft and recreational vehicle endorsement to your homeowner’s policy.

5. Claim

You’re filing a claim when you notify your insurance company that you think a payment is due to you under the terms of your policy. If your home is burglarized, you might file a claim under your homeowner’s policy to help cover the cost of repairing damages the burglar caused.

6. Exclusions

Exclusions are events or losses not covered by your insurance policy. A health insurance policy may exclude optional procedures, such as acupuncture.

It’s important to understand the details of your insurance policies to make certain you have the coverage you need, at a competitive price. If you are have additional questions regarding your insurance policy, or wonder if you could be paying too much, give an expert a call. They can help you find an insurance policy that is not only transparent and easy to understand, but also fits your budget.