6 Frequently Misunderstood Insurance Terms

The insurance world is broad and vast. It’s not surprising that many are misinterpreting terms and concepts in this field. While you can always call your insurer or agent to explain the concepts for you, it’s good to familiarize yourself with the terms, what they mean, and how these concepts can help you. Here are some of the frequently misunderstood terms in insurance. Read well and take note! The next time you meet with your agent or insurer, you already have a better grasp of what he/she is talking about.

Misunderstood Insurance Terms  

Policy 

This term means a contract between two people – you and your insurer. It has all the information, the terms and conditions of your coverage, and it includes all your exclusions as well. Ask for a personal copy of your policy and don’t be afraid to ask for clarification on the things you don’t understand. Knowing what’s included in and excluded from your policy will make it easier for you in the future when you’re claiming benefits. 

Accelerated death benefit

This term is often considered as a rider to a policy. As a rider, it’s usually an additional coverage that you can add to your main insurance policy. Along with accelerated death benefits, long-term care is another common rider.  The accelerated death benefit is designed for terminally ill patients. This add-on is typically used to pay off a debt to cover hospice expenses or to cover a special trip for the family. 

Contestability period

This is the time period after the insurance company issues your life insurance policy. At this time, the company will review the application to ensure that everything is accurate and you haven’t misrepresented anything. This period typically lasts for one to two years. The goal is to protect the companies from insurance fraud. 

Market value 

There are policies that offer market value. This means that you get the used or second-hand market value of an item if you’re going for a claim. The market value is based on the amount of the item before it was damaged or stolen. Your insurer will determine the current market value of the item and will give you the same amount to get a new item of the same condition. 

Permanent life insurance

Just like term life insurance, this policy also pays the holder a death benefit. However, the difference is that permanent life insurance gives lifelong protection so long as the owner continues to pay the premium. The accumulated money can be spent depending on your choices – you can purchase a home, a retirement plan, pay for emergency costs, and many more. It’s a good choice if you want to protect your family financially all the more. 

Grace period

Some insurance policies have a grace period. It’s a given time until your policy stays in effect even if you failed to pay the premium before the due date. The grace period usually lasts for a month. 

 

There are still more terms to learn so if you want to learn more and speak the insurance language fluently, you can always ask for assistance from our professional agents at London Insurance Agency. We are always ready to help. Give us a call today! 

 

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