Basic Insurance Terminology

Listed below are a few key terms to know before discussing insurance. If you have had a lot of experience dealing with insurance in other contexts, these will likely be familiar to you.

  • The policy. The written document or contract between you or your company and the insurance company.

  • Premium. The periodic payment paid to the insurance company for the benefits provided under the policy.

  • Rider. A special provision, sometimes referred to as an endorsement, attached to a policy that either expands or restricts the policy.

  • Claim. Notification to an insurance company that you believe a payment is due to you or your company under the terms of the policy.

  • Commission. A fee or percentage of the premium paid to an insurance broker or agent.

  • Deductible. The amount of out-of-pocket expenses that you or your business must pay before the payment is made by an insurer. For example, if the deductible for business equipment loss is $1,000 per year and you suffer $1,000 in damage in one year, there will be no payment under the policy.

  • Exclusions. Losses an insurance policy will not cover.

  • Underwriter. The person or company that evaluates your business and determines if it qualifies for insurance coverage.

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