Many people hesitate to get insurance policies due to legal terms that they can’t understand. On the other hand, there are also some who already have insurance but don’t know how it works. The most important thing to do is to search for the meaning of these terminologies since all of it are significant and part of the contract when you purchase insurance policies. To understand what you are getting into, here are some of the basic terms that you should familiarize yourself with.
It can be a person or a company that will transfer the responsibility of covering the risk of loss to a third party (also known as aninsurance company). The details of the agreement will be put under a contract and the entity will have to pay a premium for an exchange.
The person or usually a company that will accept the responsibility of paying the losses that the insured party will sustain. They will be compensated with a premium that the insured party will give them.
- Insurance Rider/Endorsement
Policies usually have a prearranged structure and details but using this, it can be altered. Depending on the needs of the insured party, the coverage, terms, and limits can be customized.
- Insurance Umbrella Policy
Sometimes the coverage of a policy is not enough. But with the help of this umbrella policy, you can cover the losses that are above the limit of your policies.
- Insurable Interest
This is proof or evidence that the insured party needs to present so that the insurer will provide them their services. The proof should present that there is a huge economic impact in case that the insured party will suffer a loss.
If the insurer and insured parties both accept the terms and agreement under a contract, it will be then called “bound”, then it will then be called as “binding process” after.
The amount that the insured party needs to pay periodically to the insurer so that he/she can get a coverage in case he/she suffers from a loss. It will be used to pay off the insurer since the responsibility of bearing the risk was transferred to them.