A Glossary Of Common Insurance Terms

| September 2, 2015 | 0 Comments

Here at Finance Category, we admit that we’re a little geeky when it comes to insurance and finances. We’re obsessed with finding the best deals, and saving money. We also relish the complex and tricky processes that others hate. The likes of insurance, mortgages, and investment are incredible confusing. But, we must admit, we find it weirdly exciting!

Of course, we recognise that not everyone shares our strange passion for finances. In fact, those complicated processes often leave people bewildered and confused. One of the biggest reasons for this is the tricky terminology. Insurers and mortgage brokers throw out all sorts of strange terms at you. Sometimes it’s like they’re speaking in tongues. So, today, I’m breaking down some of the complicated terms, and putting them into plain English.

Premium – Your insurance ‘premium’ is simply the cost you agree to pay your insurer. It’s usually paid on a monthly basis, though many choose to pay it in quarterly or annual instalments. The ‘premium’ is paid in exchange for insurance protection over certain things. It could be your car, your home and contents, or your pets.

Excess – The ‘excess’ is one of the more tricky concepts to get your head around. Put simply, it’s the cost you’ll pay for damages before your insurance money kicks in. Let’s say your dog is treated for an illness (poor Fido), and the vet charges £1000. If your ‘excess’ is £300, you’ll pay the first £300 in vet bills. Your insurer will then pay the rest. You can set your excess amount yourself. By setting the ‘excess’ high, you’ll get a lower ‘premium’.

Broker – A ‘broker’ is the person or company who sells you a particular insurance policy. Most common insurance companies are ‘brokers’ who act as the middleman. They negotiate policies and will settle some insurance claims. One example is Stoneways, who are a broker for pet insurance.

Asset – The ‘asset’ is the physical thing you are insuring. Typically, an asset is considered as such when it has the potential to rise in value. For example, if you own a house, it’s an asset. Over time, the value will fluctuate, and hopefully rise. Your car is also an asset, though it’s much more likely that it will depreciate in value!

Indemnity – ‘Indemnity’ is a term you’ll often hear in business insurance circles. It essentially means returning to your original financial state after a loss or financial burden. It is used to guard against huge losses on the stock market or other investments. It’s also a term used by financial advisors to protect them against clients who suffer financial trouble. Let’s say you advise a client to invest in a particular stock. That stock then crashes, and the client loses money. ‘Indemnity’ means you’re protected against that client coming after you for damages.

Fully comprehensive – Also shortened to ‘fully-comp’; the term refers to a complete form of insurance coverage. Most insurers offer various forms of protection. ‘Fully comp’ insurance typically protects you against all possible accidents and possibilities.

Hopefully, that clears up some confusion when looking at insurance. Got any other words that you’ve been pretending to understand? Let us know, and we’ll clear that up for you.

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Category: Personal Finance

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