Finding affordable insurance can be difficult, especially if there are insurance terms you don't understand. Simply having the basic understanding of insurance definitions can make the difference between having a policy that will cover you for the majority of your expenses and one that leaves you paying thousands of dollars out of pocket.
Listed below are some of the most important definitions that InsNerds has compiled to better help you navigate the sometimes confusing world of insurance.
Basics of Insurance:
Insurance: Paying a company a little money for the promise they will pay a lot of money for things we break without meaning to.
Risk: Chance of something changing either for better or worse .
Pure Risk: An event that can only leave you worse off, but not better.
Speculative Risk: An event that could leave you better or worse.
Probability: The chance that an event will happen written as a number.
Physical Hazard: something real about a building, job or place that creates a larger chance of a poor ending
Moral Hazard: Something that might lead the owner to break his own stuff.
Morale Hazard: Something that might lead the owner to not care if his stuff breaks.
Liability: When the law says you have to pay for breaking something.
Premium: The little bit of money that the company asks you to pay for the promise that they will pay a lot of money if you break or lose something covered by their promise.
Claim: Asking somebody else to pay when something breaks or is lost.
Insurer/Carrier: A company who promised to pay for big things you break or lose if you pay them a little money before it happened.
Insured: The person who gets paid when something breaks or is lost.
Policy: A written paper that explains in long words the promise you have bought from the company and what is covered or not covered.
Contract: A written promise.
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