Familiarizing Insurance Terminologies


Lawyers have their own set of jargon words and for most people these terms are just a way too complicated and redundant to understand. The reason can be traced several hundred years ago where people are using several languages across the country. Lawyers were forced to use two languages to avoid being misunderstood. For instance, many of the today’s jargon words are seemingly redundant in context such as break and enter, land and tenement or fit and proper. Because of the need to define in extreme precision, the practice continued until this date, which is evidently shown in today’s modern contracts.

The term insurance itself is not a difficult subject, per se. However, since it is considered as a legal contract between two parties – the insurance provider and you – the need to be precise in terms and agreements are needed, hence that style of writing is being enforced.

Actual Cash Value. As soon as you drive off your newly purchased car, about 10% of its market value is shed off, and continue to drop thereafter. The actual cash value is the amount that the insurance provider would be willing to pay at the time of accident or loss. If you do not want this to happen to you, you can purchase a rider or policy that could cover this amount. Be sure to discuss this option to the insurance company.

Bodily Injury Liability:  Because of the nature of the U.S. health care system, there is the need to make necessary arrangements beforehand for the medical expenses when people are incapacitated due to accidents. This policy covers all the medical expenses for the injured third parties up to the maximum coverage policy limit.

Medical Payments. This payment will cover your own injuries and all your passengers at the time of the accident. Like any other existing policies, this too has its own limitations that can be easily remedied by purchasing additional policies. This has been proven to be useful in such cases where the medical expenses, surgeries, rehabilitation and other therapies exceed the minimum liability coverage.

Indemnity. This term is used when the insurance provider will restore your previous condition prior to your accident. The coverage amount is usually determined during the time when the policy is written. 

Income Loss Protection. As the name implies, this will give you the income in case you are incapable of working because of your injuries. This amount may be included in your “medical payments” or maybe not.

Exclusions. Accidents that happened and are not covered by your policy are said to fall on this category. These include but not limited to the loss of the vehicle due to flood, fire or perhaps somebody, other than you, operated the vehicle. Before your policy is written, be sure to bring up this idea to your insurance provider; such exclusions are normally written on a declaration sheet for review.

Endorsements. It is a term used when there are necessary changes to be made in your policy in the middle of its term. For instance, you want to add drivers or additional coverage for fire or flood into it – the insurance provider will need to “endorse” the changes once approved.