There are so many insurance terms that you can fill an entire encyclopedia with them (and we did just that!) If you were to overhear insurance professionals talking shop, you'd realize really quickly that some of the terms they use are ultra-technical and it probably doesn't matter if you never find out what they mean. But here are ten key insurance terms that you should definitely understand. Knowing what these mean will help you get the coverage you need.

1. Exposure

Exposure is how often you are in situations that could create a loss. Insurance companies use your exposure level as one factor to set your insurance cost. For example, someone who drives more miles has greater exposure to car accidents than someone who rarely drives, so their auto insurance would be more expensive based on this factor (find out how Usage-Based Auto Insurance and Telematics are revolutionizing the way insurance companies calculate these exposure levels). Reducing your exposure to various risks can lower the price of your insurance.

2. Sublimit

A sublimit is an extra limitation on how much an insurance policy will pay for losses due to specific causes. The perils named under a sublimit are covered for less money than the actual limit of the policy. For example, a $500,000 homeowners insurance policy might have a sublimit of $100,000 for flood damage. If a flood causes $150,000 of damage to the home, the policy's sublimit will cap the insurance reimbursement at $100,000, not up to $500,000 (see An Intro to Insurance Sublimits to learn more).

Watch out for policy sublimits because they can catch policyholders off-guard and leave them with less coverage than they think they have. You can fill this coverage gap with policies designed for the sublimit risk, like flood insurance (not sure whether you need it? See The Seas Are Rising: Do You Need Flood Insurance? to find out.)

3. Claimant

A claimant is the person who files a claim to receive money from an insurance policy. For many insurance policies, you are the claimant—if you have a car accident or a fire breaks out in your house, you will be the one filing a claim. In other cases, someone else files a claim on your policy. Your doctor, for instance, gets paid by making a claim on your health insurance after you receive treatment.

4. Schedule of Benefits

A schedule of benefits (SOB) is an important health insurance document. It lists the services covered by the policy, as well as what you would need to pay out-of-pocket for each treatment. It also includes any other limitations or restrictions for care, like the number of routine checkups you policy will cover annually. If you want to learn more about your health insurance coverage, looking over your SOB is a good place to start.

5. Triple Indemnity

Triple indemnity is a payment rider on some life insurance policies. This policy addition triples the stated death benefit if the insured person dies for one of the causes named under the rider (usually death from an accident). A triple indemnity policy may have even more specific conditions, such as only paying triple if the accidental death took place on public transportation, like a bus or train. If you are considering this indemnity rider, make sure it covers enough situations so it's worth the added cost.

6. Successor Beneficiary

A successor beneficiary is a backup beneficiary for a life insurance policy. If the primary beneficiary is not alive when the insured dies, the policy will then pay the death benefit to the successor beneficiary.

Naming a successor beneficiary can prevent delays with the insurance death benefit in case both the insured and the primary beneficiary die at the same time.

7. Excluded Peril

An excluded peril is a cause of loss that an insurance policy does not cover. For example, flooding is often excluded in many homeowners policies. If you haven't already, make sure to review your insurance policies to check for any excluded perils so you don't get caught off guard. You may need to buy additional coverage to protect against these exclusions (but check out A Look at Uninsurable Risk to find out whether the excluded risk is one the insurance company simply won't cover).

8. Tenant Improvements and Betterments

If you have a long-term tenant renting a building, they may decide to pay for renovations or other substantial improvements to your property. If they add value to it, this can become a problem for your commercial insurance policy as your coverage should equal the actual value of your property.

If tenant improvements and betterments increase the property's value, you should either increase the policy coverage or make an official agreement wherein they are responsible for repairing any damage to the improvements. Otherwise, if you file an insurance claim, your insurance company could penalize for not having enough coverage for the property's full value.

9. Pre-certification

Pre-certification refers to a medical provider confirming that a health insurance company will cover a treatment or procedure for a policyholder. Some procedures, like MRIs, need to be pre-certified before they are performed. This prevents patients from getting uncovered procedures that they are then unable to pay for.

10. Termination Rate

The termination rate is the rate that policies for a certain type of coverage are stopped, cancelled, or allowed to lapse. Insurance companies use this figure to help set their prices. They expect some policies will terminate and try to predict how this will impact future costs. If their termination rate estimate is off, they may need to adjust your premium because of an unexpected outcome.

Conclusion

You don't need to be an insurance expert to make sure you've got the coverage you need, but it definitely helps to know a bit more than the basics. With these ten terms, you'll know more about how your policy works and whether the ones you're considering are worth purchasing.