Insurance and the Importance of Definitions

Insurance and the Importance of Definitions

For anyone who has ever taken a look at their insurance policy’s fine print, you may have noticed the writing to be difficult to read. Policies have been dejargonized over the years, but not enough for a layman to read. While interfacing with clients, insurance agents and brokers tend to gloss over the details and give an overview that satisfies their clients’ curiosity. But what happens when an incident occurs and you seek remuneration, only to find that that same fine print actually excluded the incident?!

Every company defines their coverage differently. To further complicate matters, every state also has its minimum definitions for insurers and the insured to make claims. That being said, knowing the way insurance terms are defined is extremely important when figuring out whether you have coverage or not.

In this article, we’ll take a look at some of the instances where insurance definitions are important.

Definition of Perils

While we’ve covered the particulars of perils in this article, are you aware of what your policy covers and excludes when it comes to an incident at your home,  your vacant property, or if you’re a renter.  Even as an owner of a town-home/condo, are you aware of the difference between “walls-in” coverage and “walls-out” coverage? Just one word in your policy can mean the difference between paying for all of your lost possessions out-of-pocket or being compensated by your insurer.

Catastrophes

If you are in a flood zone and your home experiences water damage, are you aware that this type of catastrophe might not be covered, even if you have sewer backup coverage? The same goes for earthquakes; while they are a “catastrophe,” earthquakes typically aren’t covered under homeowners insurance policies.

Even defining the condition of a diseased tree that falls and damages your car can be a difficult matter, as insurers define how “at-risk” the tree was capable of causing damage and if the consumer took the defined steps to protect themselves above and beyond just having insurance.

Health Insurance Terms and Definitions

If there’s any area of insurance that causes more confusion than any other, it is the way health insurance defines medical procedures and hospital protocol. Let’s take a look at a few examples:

• Allowed Maximum Benefit: The maximum amount an insurer will pay per year. If your care is so costly that it tops this amount, you’re required to pay the difference. However, most individual plans don’t set an annual maximum benefit.
• Benefits: Services or supplies your health plan agrees to cover. Covered benefits and excluded services differ from plan to plan.
• Urgent Care: Care for an illness, injury or condition serious enough for immediate care but not so severe as to require emergency room care. Visiting an urgent care center may be cheaper than the ER. However, most plans offer only partial payment, requiring either a copay or coinsurance.

And that’s just the beginning!  As you can see, even those these definitions are industry-specific, every insurer has their own terms of terms. If you’re confused, be sure to speak to an insurance advisor that can interface between your insurer and you (the client) to ensure that your coverage meets your expectations.

Definitions of Terrorism

It’s an unfortunate reality that many U.S. citizens must face, but a terrorist attack can cause damage to both our health and businesses. While being a victim of a terrorist can be life-altering and cause unthinkable damage, one common assumption is that an act of terrorism is covered under health, life, and business insurance. The answer is NOT clear-cut: it depends on how terrorist acts are defined in various polices.

It’s important to know how terrorism is defined in the policy. Does the policy have terrorism exclusions? Does the policy reflect the Terrorism Risk Insurance Act (TRIA) definition, or does the policy have its own definition? To satisfy TRIA requirements, the U.S. Treasury secretary, the  Attorney General, and the Secretary of State all need to define the act to label it as an act of terrorism. Additionally, the act must be committed by an individual(s) as part of “an effort to coerce the U.S.  population or influence the policy or affect the U.S. government by coercion.”

If you’re unsure of these definitions, or unsure of how your insurer defines them, it may be helpful to know if you’re covered. While it may offered by your insurer, you may have to purchase a floater [ADD LINK TO “What is a Floater”] to add it to your pre-existing policy.

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As you can see, you may have insurance but might not be insured; it’s not a paradox, it is the way that insurance companies offset claims to protect their own interests. That’s why having an expert advisor in your corner can help pin down exactly what insurers mean by their jargon. Contact RiskBlock today to ensure that you and your family are protected against all the definitions that life can throw your way!