As an entrepreneur, knowing insurance terminology is important so that you make the right decisions and protect assets. Beginning a new venture or operating an existing business, either, you must know the right jargon so that you comprehend policies, coverage, and claims better. This guide explains key insurance terms and phrases to define business insurance.
Why It’s Beneficial to Understand Insurance Terms
Insurance is a difficult subject, but having a knowledge of the key terms can be useful to business owners:
- Make the right coverage choice
- Know policy limitations
- Be an effective communicator with insurers
- Make sound financial choices
Insurance Terms Business Owners Should Know
Premium
The amount charged by the entrepreneur to the insurance company for the protection is referred to as the premium. Premium is paid on a yearly, quarterly, or monthly basis depending on the insurance.
Deductible
A deductible is the initial amount paid by the policyholder prior to the payment by the insurance company of the balance. The deductibles rise with rising premium levels because the premium levels are extremely low.
Coverage Limit
Coverage limit is the maximum figure an insurance company insures against a covered loss. The limits of coverage must be proportionate to the risk capacity of business owners.
Exclusion
Provisions or circumstances excluded by the policy. Familiarity with them prevents shock upon rejection of claims.
Claim
A claim is an insured’s request for documents from the insurer requesting payment on an insured loss.
Endorsement
An endorsement is a change in the present policy enlarging, decreasing, or modifying the coverage.
Liability Insurance
Business insurance protects businesses against third-party body injury, property damage, or negligence actions.
Types of Business Policy
General Liability Insurance
General liability insurance protects companies from third-party injury, damage, and courtroom costs. General liability is legally required for most companies.
Property Insurance
Physical property like equipment, buildings, and goods is covered for loss by fire, burglary, or natural acts through property insurance.
Workers’ Compensation Insurance
Workers’ compensation insures workers for illness and injury incurred on the job. It is compulsory in most states.
Professional Liability Insurance
Also known as errors and omissions insurance, this insurance covers company negligence, error, or failure to act.
Business Interruption Insurance
It compensates firms for lost incomes and overheads in case of unexpected interruptions, e.g., natural disasters.
How to Choose the Most Appropriate Insurance Policy
Define Your Risks
Identify the specific risks your firm is liable for, i.e., lawsuits, damage to property, or injury to employees.
Compare Quotes
Compare quotes from different insurers to acquire the best cover at a reasonable cost.
Read Policy Terms
Read policy terms carefully, e.g., exclusions, endorsements, and coverage limits.
Seek Professional Advice
Use an agent or broker insurance to assist in selecting the most efficient policies for your company needs.
Conclusion
You are struggling to make sense of business’s insurance universe, but becoming familiar with the insurance terminology simplifies life into a piece of cake. Being familiar with all these terms and concepts enables the entrepreneur to make well-informed decisions, safeguard their assets, and ensure that their businesses are sustainable in the long run. From choosing an insurance policy to filing a claim, understanding insurance jargon guarantees that you’ll be able to speak and maximize your benefits.
FAQs
What are the 7 general principles of insurance?
The seven core principles of insurance are utmost good faith, insurable interest, indemnity, contribution, subrogation, proximate cause, and loss minimization. All these have the objective of ensuring fairness and honesty in insurance coverages.
What are the insurance words?
Insurance common vocabulary are premium, deductible, coverage, claim, liability, policyholder, underwriter, and endorsement. They make reading and understanding insurance contracts easier.
The four components of an insurance contract are what?
The four components of a contract of insurance are offer and acceptance, consideration, legal purpose, and legal capacity. They render the contract enforceable and valid.
