Below is a brief and broad overview of insurance terms and products as a whole.
Defined insurance terms
Insurance is about minimizing risk. An insurance company assumes the risk for a fee known as a premium.
In its simplest form, insurance is a bet. The proposed insured bets that a certain peril (peril) or event will occur. The company bets that the hazard or event will not occur.
If and when the hazard or event occurs, the company loses the bet and must pay the insured a claim or benefit.
There are two main categories of insurance licenses: property/casualty (PC) and life/disability (LD).
An agent with a PC license typically insures things, such as houses, cars, and other property, as well as liability against certain perils.
A licensed ML agent insures people: Life, disability and long-term care insurance.
In general, either agent can provide health insurance.
There are basically two types of insurance agents: A captive agent is an agent that represents and is generally attached to a particular company. A non-captive agent is a broker who can represent multiple companies, allowing you to offer more options to your client.
In most cases, a proposed insured must qualify for coverage under certain conditions.
Policies have certain conditions.
Policies have exclusions, which means that certain perils or events are excluded from benefits or claims.
Some policies cannot be canceled by the company as long as the insured pays the premium.
The two types of insurance companies are limited companies, which are owned by shareholders, and mutuals, which are owned by policyholders. Mutuals offer dividends.
There are several terms that pertain to insurance companies, depending on the type of insurance:
Policy Owner – Usually the one who pays the premium and makes decisions and decisions about the policy.
Insured– person, corporation, or property covered by the insurance.
Conditions must be met for the insurance company to be responsible for a claim or benefit.
Surrender: This is what happens when a policy owner cancels a policy.
Claim-request to a company to pay a benefit.
Benefit-amount of money someone receives from an insurance company.
Beneficiary- person or entity that receives the benefit of an insurance company.
Deductible – The amount the covered person or entity must pay before receiving benefits.
Rider – An additional benefit added to and covered by a policy, often for an additional premium.
Elimination Period – The period of time that elapses before benefits begin.
Indisputability Period: A business cannot dispute a claim after this period has elapsed.
This concludes part 1. Part 2 follows.