Insurance is a complex subject that can be difficult for newcomers to understand. But, with the help of this policy jargon glossary, you can navigate your insurance policies with confidence.
Decoder breaks down the fine print, jargon, and complicated terms and conditions of top health insurance plans to give you a clearer understanding of your coverage.
1. Coverage Limits
Insurance policy contracts are often confusing, owing to their complex language and the numerous terms they include. This confusion can lead to misunderstandings and a lack of clarity about what coverage entails. Two of the most important terms in any insurance policy are coverage limits and deductibles.
Coverage limits set the maximum amount an insurer will pay for a claim in any given time frame. Generally, limit options are outlined on a per occurrence or aggregate basis, though some policies may use both.
For instance, a homeowner’s policy will likely list dwelling and other structure limits as well as personal property and loss of use coverage limits. Many policies also provide a combined single limit that covers all claims for the same dollar amount regardless of their classification (per occurrence, aggregate, or both). This is helpful because it prevents one claim from wiping out all the available insurance limits.
2. Deductibles
The deductible is the amount you must pay before an insurer starts to pick up the tab for a covered claim. It is a component of most insurance policies, including health coverage and car coverage. It can be a confusing element, especially since it varies widely between policies and has a direct impact on premium prices.
Insurance Business explains how deductibles work and why they exist, which is important for anyone looking to secure an insurance policy. This knowledge will help you navigate discussions, contracts and documents within the industry. It will also empower you to make wise decisions when choosing a policy, based on your finances and tolerance for risk. This way, you will ensure that you have adequate coverage to cover catastrophic losses.
3. Copayments
Copays are fixed dollar amounts that you pay for a healthcare visit, test or medication. They are usually applied after a policy’s deductible is met and may vary by type of service.
These costs are shared between the insured and the insurance company, and they help to reduce insurance premiums. It also helps to encourage the insured to seek medical treatment that is necessary for their health.
It is important to understand how copayments work in order to make the best decisions about your healthcare coverage. Copayments, deductibles and coinsurance are all important terms to know in order to choose the right healthcare plan for your needs.
4. Coinsurance
A coinsurance policy is a way for insurance companies to share the risk with their customers. It works differently than a deductible and is often confusing for new policyholders.
Health care policies that contain a coinsurance provision will require you to pay a percentage of your medical bills after you meet the yearly deductible. This is a common feature in many health care plans and helps keep down your out-of-pocket costs.
Commercial property insurance policies often contain a coinsurance clause, which requires the insured to insure their property up to a stated percentage of its value. This protects insurance carriers from inaccuracies during the underwriting process and maintains equity within a class of coverage. This also provides incentives to insureds who adhere to the required coinsurance limit by reducing their premium.
5. Exclusions
Insurance policies are a nearly impossible-to-solve puzzle for the average person. That’s why it is important to read and understand them.
Insurance exclusions are specific provisions in a policy that eliminate coverage for certain acts, property, types of damage or locations. Exclusions limit the scope of a policy, which can save insurance companies money by not covering events that are too high-risk.
Often, exclusions are listed in the endorsements, definitions or conditions sections of a policy. However, some are included in the coverage section.
It is common for health insurance to exclude pre-existing medical conditions. Whether or not these are included in the policy scope after a waiting period depends on the terms of the individual insurance plan. For example, some plans may include a pre-existing condition after a period of 4 years.
