Simple Meaning of Common Insurance Terms for Everyone

Understanding Insurance Without Confusion

Insurance is something we all need, but the complicated terms can make it hard to understand. Words like premium, deductible, and coverage often leave people puzzled. However, knowing these terms can help in making better financial decisions and choosing the right insurance policy. Let’s break down these words in a simple way.

What is a Premium?

A premium is the amount you pay regularly to keep your insurance policy active. It can be paid monthly, quarterly, or yearly, depending on the policy. Think of it as a subscription fee for keeping your insurance benefits available. The cost of the premium depends on factors like age, health condition, type of insurance, and coverage amount.

Coverage What Does It Actually Mean?

Coverage refers to what your insurance policy will pay for. If you have health insurance, it means which medical expenses will be covered. If it’s car insurance, it refers to what damages or losses the company will pay for. It’s important to read the policy carefully to understand what is included and what is not.

Deductible The Amount You Pay First

A deductible is the amount you need to pay from your pocket before the insurance company starts covering the expenses. For example, if you have a ₹5,000 deductible in your health insurance, you must pay this amount first for any treatment, and then the insurance company will take care of the rest. Policies with higher deductibles usually have lower premiums.

Claim Getting the Benefit When You Need It

A claim is the request you make to the insurance company when you need financial support for a covered expense. If you meet with an accident and your vehicle is damaged, you file a claim with your car insurance provider. The company then reviews it and provides financial assistance based on the policy terms.

Sum Insured vs. Sum Assured Knowing the Difference

Many people get confused between sum insured and sum assured. Sum insured applies to general insurance like health and motor insurance and refers to the maximum amount the insurer will pay. Sum assured, on the other hand, is used in life insurance and is the guaranteed amount that will be given to the nominee in case of the policyholder’s death.Understanding these basic terms makes it easier to handle insurance policies with confidence. When buying a policy, always check the details carefully so that there are no surprises when you need the benefits.

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