Insurance is one of the cornerstones of an individual’s personal financial security, however, the policies they apply to themselves are rarely simple to understand as they’re explained in paper containing many jargon (of which many civilians overlook). There is a benefit to having knowledge of these terms in order to prevent surprises when submitting a claim.

In this blog, we’ll break down some of the most important insurance terms, helping you make informed decisions and sidestep common pitfalls.

Premium

The premium is the amount of cash you are paying on a recurring basis (monthly, quarterly, or yearly) to maintain the insurance policy active.

Watch Out for : Make sure you will be able to pay the premium in instalments. Missed payments can lead to policy lapses.

Please pay special attention to the differences between core coverage and rider premiums.

Coverage

Coverage determines which risk and event are under the insurance policy coverage.

Watch Out for : Understand the scope of coverage, including inclusions and exclusions. Alternatively, healthcare coverage may be cut off for an unknown period of time, e.g., that depend on the presence of so-called pre-existing conditions(s) or some special diseases as mentioned in policy document.

Exclusions

Exclusions are cases and/or conditions that are not covered by the policy.

Watch Out for : Glean attentively the no eligible area in order to avoid a claim denial when claim is submitted and you need the Insurance money most.

Examples of such situations are isolated illness, damage which can occur under typical conditions (chronic disease detection) or claims made in a period of suspension.

Waiting Period

Waiting period is the number of days you have to wait upon purchasing a contract before a part of the coverage becomes effective

Watch Out for : But precisely in the matter of health insurance, to say the least, these waiting periods are usually present for maternity, pre-existing diseases and certain listed ailments. They can range from 30 days to 48 months, so consult your advisor on this point as well.

It is also true in the above scenario if buying insurance for specific short term requirements.

Deductible

Deductible is the total amount of money you are obliged to pay before the insurance company starts to pay (i.e., the deductible amount).

Watch Out For : Increasing deductible leads to a decreasing of premium but leads to a higher financial risk during the process of claim.

Select a deductible not only with a low cost on pocket and good reduction in premium.

Co-Payment

In co-payment, the premium to be paid is reduced while a fixed part of claim is paid by the insured person while rest is paid by insurance company, either a fixed value or percentage.

Watch Out for : Confirm the co-pay agreement, including the policies applicable to older adults or any special processes.

Understand how much you’ll need to pay for medical expenses and judge effectively.

Sum Insured

Sum insured (annual worldwide maximum amount that the insurer is legally entitled and sanctioned to pay in respect of an event leading to a claim for the period of the policy) defines the maximum amount of the policy.

Watch Out for : However, the indemnity cover should be adequate for it to cover the possible costs incurred by the insured, including excessive medical costs and other related costs as well.

Regularly review your sum insured e.g., for inflation or life events and increase if you policy allows.

Grace Period

Grace period refers to the time window in which a premium payment can be made after the premium payment deadline without loss of coverage.

Watch Out for : Unforeseen late payment during the grace period may result in policy lapse that, furthermore, may leave the subject uninsured.

Confirm the exact grace period duration in your policy.

Claim Settlement Ratio (CSR)

CSR represents the rate at which an insurer has received compensated claims out of total claims received.

Watch Out for : Select insurers with robust CSR in the hope that they will have procedures less prone to errors in an insurance claim, and that you have a greater chance of being your claim sanctioned and paid.

Review customer reviews to assess their claim settlement process.

Riders or Add-Ons

Optional rider benefits, however, that will have to be paid for through an additional premium.

Watch Out for : When deciding the rider, please make sure it matches with your personal requirement (e.g., availability of the serious illness coverage, life insurance benefit in the accidental death situation).

Avoid unnecessary riders that increase costs without adding value.

Free Look Period

Policy free look window is the elapsed time by which you can view and decide to pay back (refund) the policy if by any chance, it turns out to be unacceptable.

Watch Out for : Make good use of the present opportunity to carefully read the policy terms and conditions.

Be decisive as soon as you decide to cancel, because free look is limited (typically 15 days).

Policy Renewal Terms

Renewal clauses defined below specify under what circumstances, and to what extent, renewal is likely to take place.

Watch Out for : Examine features (health insurance products) of lifelong renewal.

Renew your policy before expiration to avoid lapses.

Sub-Limits

Sub-limit caps on reimbursement of certain claims to a specific sum insured.

Watch Out for : Health insurance schemes have a sub-limitation for the cost of room rent, operation, testing, etc.

Understand these limits is very crucial to avoid out-of-pocket expenses.

Claim Process

The claim processing description outlines what the sequence of components comprises in a claim.

Watch Out for : Show that you have read and understood the documentation needed and the deadline by which claims must be submitted.

Keep emergency contact details and policy documents easily accessible.

Portability

Portability allows the user to switch insurance companies without losing, for example, waiting periods or No Claim Bonus.

Watch Out for : Policy comparisons and confirmation that a new admitted insurer will continue ongoing transfer of benefits.

Begin the portability process prior to the expiration of your current policy, preferbly 60 days before expiration.

Avoiding Common Pitfalls

Not Reading the Policy Document: Always read the policy thoroughly to understand what you’re buying.

Underestimating Coverage Needs: Estimate your risk and select a policy that ensures an appropriate coverage.

Focusing Only on Premiums: Low rates of premiums have been linked to a narrower range of coverage and a higher deductible. Consider overall benefits.

Delaying Claims: Report incidents and file claims promptly to avoid rejections.

Conclusion

For good decisions and not to hit insurance deadlock, it is a necessity to understand the fundamentals of insurance. Read the small print, ask for clarifications, and select policy options as needed. If, on the other hand, you have accurate data, you are able to enjoy full coverage and peace of mind for yourself and for your family and/or friends.