There are so many insurance terms that you can fill an entire encyclopedia with them. After all, we did. Some of these terms are quite technical and not absolutely necessary to know. However, there are a few that you definitely should understand, even if you aren’t in the insurance industry. Here are 10 of the most important.

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. Reducing your exposure to different 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. Perils or situations 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 would only pay a maximum of $100,000, not up to $500,000, due to the sublimit.

Watch out for policy sublimits because they can catch policyholders off-guard with too little coverage. You can fill this coverage gap with policies designed for the sublimit risk, like flood insurance.

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. You file a damage claim after a car accident or fire in your house. In other cases, someone else files a claim on your policy. Your doctor can be the claimant on your health insurance after you receive treatment, as this is how they get paid.

4. Schedule of Benefits

A schedule of benefits (SOB) is an important document for a health insurance policy. 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 if only one routine checkup a year is covered. If you want to learn more about your health insurance coverage, 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 to be worth the 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. However, if the primary beneficiary is still alive, the successor beneficiary will not receive anything. Naming one can prevent delays with the insurance death benefit in case both the insured and the primary beneficiary die at the same time, such as in a car accident.

7. Excluded Peril

An excluded peril is a cause of loss an insurance policy does not cover. For example, flood 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, like a standalone flood insurance policy.

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. In case 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 when a medical provider confirms that a health insurance company will cover a treatment or procedure for a policyholder. Some procedures, like MRIs, need to be pre-certified before being performed. This stops a patient from getting an uncovered procedure and then being unable to pay.

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 do not need to be a complete insurance expert, but it definitely helps to know more than the basics. By keeping these 10 important terms in mind, you should have a better and more helpful understanding of how your key insurance policies work.