When you sign up for an insurance policy, you’re given an insurance contract to look over and sign. Unfortunately, if you’re like most people, you simply glance over it and then sign on the dotted line. Really, though, it’s important to know and understand what you’re signing and what it means. After all, you don’t want to find out too late that you don’t have adequate coverage or that you have more responsibilities than you realized. A contract is an agreement, and you should know what you’re agreeing to! Sometimes, sifting through all of that insurance jargon can be difficult, which is why it’s important to educate yourself on commonly used lingo and what it means.
One term you’ll probably hear tossed around a bit is “consideration.” This term simply means the amount of money that you will receive when you file a specific type of insurance claim. You will likely have different “considerations” for different circumstances, and it’s important that you know, understand, and agree with each consideration set forth by your policy.
Most valid insurance contracts, outside of life insurance contracts, will have a “statement of indemnity” somewhere. This statement simply makes clear that your insurer will never pay you any more than the financial loss you actually suffered. In other words, a claim won’t make you richer; it will just restore you to the financial status you had before the loss. This statement is very standard, so don’t be alarmed or surprised if you come across it.
Some insurance contracts contain a “statement of subrogation.” When this statement is included, it means that the insurance provider has the right to sue the person or entity that has caused you, the insured party, to suffer a loss. This is a way for insurance companies to earn back some or all of the money they pay out in claims and should not affect you negatively.
There are many, many other terms that you may come across in your search for insurance and when you sign up for a new policy. If you don’t understand what something means, step up and ask! Remember, you are entitled to know what your policy states and what you are agreeing to when you sign up for it.
Asking questions is also a good opportunity to really see if you’re dealing with a good, honest insurer. Good insurers will have no problem fully and honestly answering your questions. Unscrupulous insurers will tell you half-truths or dodge your questions, which is why it’s important to do your own research. There are a lot of good, trustworthy insurance providers out there, but there are also a lot of bad ones, and you deserve to know that you’re working with the good guys!