Introduction:

Choosing an insurance policy can be a difficult experience. If you want to get the best deal, you have to do a lot of work (searching for insurances policies, contacting insurance companies and brokers, applying for the policy etc...). And some insurance companies don't make it easy. They use vocabulary/terminology which most normal people may have heard before, but do not fully understand. This can cause problems in the future for the people who have taken out the insurance policy.

To help you understand what these different words and phrases used in insurance policies mean, you will find a exercise below that will explain them in normal English. Doing this exercise will help you both understand and remember this vocabulary better and ensure that you can decide which insurance policy is best for you.


Exercise: Commonly used insurance policy vocabulary

Read the following conversation between Peter and Eric. Peter is advising his friend Eric what he has to think about when deciding which insurance policy to choose.

From the context, try to guess what the meaning of the words/phrases in bold are. Then do the quiz at the end to check if you are right.

Eric:'Peter, you know a lot about insurance. I'm looking to get some life insurance for me and home insurance for the house. Do you have any recommendations?'

Peter:'So, you're looking to get two insurance policies? Are you going to be the policyholder for both? Both will be in your name?'

Eric:'That's right. I'll be the policyholder.'

Peter:'The first thing is to only get a policy with a reputable company. An insurance company that has a good reputation, because you don't want to take any risks. You then have to decide what type of cover you want the insurance policies to have. What things the insurance company will pay for when or if you make a claim, ask them to pay for something. In some policies you can choose full coverage or partial/liability coverage. Full coverage is when the insurance company will pay for everything when you make a claim to them. Partial or liability coverage is when the insurance company will only pay for a part of the cost and you have to pay the rest.'

Eric:'So the premium I pay, the amount of money I pay each month for the insurance, will be less for the partial coverage than for the full coverage?'

Peter:'Normally, yes. Also, a really important thing that you need to do Eric, is to read the terms and conditions for the policy.'

Eric:'That's the insurance policy contract information, which people often call the small print?'

Peter:'That's right. It's important to know what types of things are not covered in the policy and you will be liable for. What things are not the legal responsibility of the insurance to provide/do. It also contains all the information about the fees that you have to pay for obtaining an insurance policy. You know the additional costs like processing the application or for administration.'

Eric:'I'll have to look at that.'

Peter:'Also, it's important to see what the exemptions are in the policy. That's the situations the insurance company aren't liable for paying you money when you have made a claim. For example, an insurance company won't pay a claim on car insurance if you are doing an illegal activity at the time of damaging your car.'

Eric:'Really!'

Peter:'It can be a nasty surprise if you don't know what the exemptions are. Also read about the policy cancellation terms and conditions. In what situations an insurance company has the right to terminate an insurance policy. If you miss paying them a premium one month, they could cancel the policy. Most companies offer a grace period of between 14 to 30 days. That means the insurance policy will continue to cover you for between 14 to 30 days after the insurance company has not received a premium/payment. After that grace period, the policy is cancelled/terminated.'

Eric:'I didn't know about that.'

Peter:'A lot of people don't. Also, check when the expiration date is. That's when the insurance policy cover finishes, the last day of coverage.'

Eric:'Ok.'

Peter:'Some types of insurance policies are tax deductible. That means you don't have to pay income tax on the amount of money you pay for the insurance policy. You can do that with private health insurance. So, it'll save you money.'

Eric:'A lot to think about. Thanks Peter.'


Now do the QUIZ below to make sure you understand the meaning of this vocabulary.



Quiz: Insurance policy vocabulary exercise

Below is a definition/description of each of the words in bold from the above text. Now choose the word/phrase from the question's selection box which you believe answers each question. Only use one word/phrase once. Click on the "Check Answers" button at the bottom of the quiz to check your answers.

When the answer is correct, two icons will appear next to the question. The first is an Additional Information Icon "". Click on this for extra information on the word/phrase and for a translation. The second is a Pronunciation Icon "". Click on this to listen to the pronunciation of the word/phrase and to do a pronunciation speaking test.

1. When an insurance policy is terminated/finished before it was originally agreed to, is    
         

Cancellation:
(noun) This means to stop an insurance policy before it was originally agreed when the policy was signed. Both the customer and the insurance company can cancel an insurance policy. In fact, it is normally easier for the customer to 'cancel' (they just need to inform the insurance company or broker in writing and give them some days of notice) than it is for the insurance company. The insurance company can only really do it if the customer has breached the contract with them (e.g. hasn't paid a premium, lied on the application form etc...). You should read about 'cancellation' in the terms and conditions in the insurance policy contract before you sign, to see what it says about it. In Spanish: "cancelacíon".

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Cancellation:

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2. Another name for the 'small print', is the    
         

Terms and conditions:
(noun) Basically, the 'terms and conditions' or 'small print' contains details of the insurance policy agreement between the the customer and the insurance company. It details what is covered and what isn't and in what situations. It also explains all the responsibilities that both the customer (e.g. not lie on the application form etc...) and insurance company (e.g. pay money for a valid claim etc...) have to do and what will happen if either of them don't do them (e.g. charge a customer for a late premium payment). It's very important that when you are taking out an insurance policy that you read the 'terms and conditions' on the policy contract, because an insurance policy can include 'terms' ( e.g. paying fees that they didn't tell you about etc...) and 'conditions' (e.g. not cover things in some situations) that can cost you more money or cause you problems in the future. In Spanish: "términos y condiciones".

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Terms and conditions:

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3. A different way to say what things/situations the insurance company 'will pay for', is    
         

Cover:
(noun) 'cover' basically means what things or situations that an insurance company 'will pay for'. For example, with car insurance, most policies 'cover' or pay for the cost of repairing a vehicle after it's been in an accident. With some types of insurance policies (e.g. home insurance), you can choose to have 'full cover' (which in theory covers all costs) or 'partial/ liability cover' (which can cover only a part of the cost and/or only certain situations or items). In general, the more things and situations that are covered, the higher will be your insurance premium (the money you pay each month or year). It is fundamental that you read the insurance policy contract to see what things are and aren't 'covered' and for how much before you sign it. In Spanish: "cobertura de seguros".

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Cover:

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4. When you don't pay income tax for the amount of money that you are spending on an insurance policy, it is    
         

Tax deductible:
(adjective) With some insurance policies (e.g. private health insurance, car insurance) the customer/holder doesn't have to pay income tax or pay a reduced rate on the amount of money that they pay for the insurance policy. Normally, this is only for people who are self-employed (they work for themselves). Whether an insurance policy is 'tax deductible' or who is entitled to it, depends on the country. In Spanish: "deducible para efectos contributivos".

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Tax deductible:

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5. A company that is well-known and has a good reputation, is called a    
         

Reputable company:
(noun) This means any company that is well-known in the industry and has a good record or reputation for providing good products or services, e.g. Apple, AIG etc... When choosing an insurance policy, there is in theory less of a risk that something will go wrong if your policy is with a 'reputable company'. In Spanish: "empresa respetable/de confianza".

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Reputable company:

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6. The amount of money you pay each month for an insurance policy, is called a    
         

Premium:
(noun) A 'premium' is basically the money you pay to an insurance company to have their insurance policy cover you. Normally, you pay a 'premium' to the insurance company every month, but it can also be every half year or year. The quantity of the premium depends on a lot of factors (risk, what is covered, the insurance company, the type of insurance policy etc...). In Spanish: "prima de seguros".

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Premium:

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7. The time an insurance company gives a customer to pay a premium after they should have paid, before they cancel the policy, is called the    
         

Grace period:
(noun) When a customer/holder of an insurance policy fails to pay a premium on time, a lot of insurance companies give them a number of weeks to pay it before the policy is cancelled/terminated. This time is called a 'grace period'. The 'grace period' normally lasts for between 2 to 4 weeks after the date of the scheduled payment. In this time, the customer/holder is still covered by the insurance policy. If the 'grace period' has finished and they still haven't paid, the policy is cancelled. Details of the 'grace period' are contained in the insurance policy's terms and conditions. In Spanish: "período de gracia".

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Grace period:

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8. A 'request' to an insurance company to give you money or pay for something, is called a    
         

Claim:
(noun) This is a 'request' a customer/holder of an insurance policy makes to an insurance company to pay somebody (e.g. to repair a house after fire damage) or for something (e.g. a replacement car). A 'claim' can also be a 'request' to pay the customer/holder money (e.g. when somebody becomes unemployed). Normally, the insurance company will investigate if the 'claim' is valid (i.e. it's covered in the insurance policy and the customer/holder isn't trying to commit fraud). If they decide it is a valid 'claim', they will then pay. It can take months or even years for some claims to be paid by insurance companies. In Spanish: "reclamacíon de seguros".

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Claim:

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9. Another way to say somebody is 'legally responsible' for something, is    
         

Liable for:
(adjective) This is commonly used in insurance policy contracts and basically means 'to be responsible for'. It is often used to say what is not covered in an insurance policy and is the legal responsibility of the customer/policyholder to pay for. For example, 'the customer is liable for any damages that are below $100'. The information about what a customer/ holder is 'liable for' is contained in the insurance policy's terms and conditions. In Spanish: "ser responsable de".

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Liable for:

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10. The situations that are not covered in an insurance policy, are called    
         

Exemptions:
(noun) Are also known as 'exclusions'. These are situations where an insurance company won't pay you money, situations you are not covered for. For example, a common 'exemption' in a home insurance policy is 'damage caused by aircraft'. So, if your house is destroyed by an aeroplane, the insurance company have no legal responsibility to pay out a claim you make. There are lots of possible 'exemptions' or 'exclusions'. You can find them in the terms and conditions of any insurance policy contract. It is fundamental that you read these before you agree to an insurance policy. In Spanish: "exenciones".

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Exemptions:

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11. The person who owns an insurance policy, is called the    
         

Policyholder:
(noun) Insurance companies call the person who owns an insurance policy the 'policyholder'. Most of the time, the 'policyholder' is the same person as is insured by the policy. But some in cases, the 'policyholder' is a different person/people to who is actually insured (e.g. when a football club have an insurance policy for one of their players). In Spanish: "tenedor de póliza/asegurado".

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Policyholder:

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12. The extra costs that you have to pay the insurance company for getting an insurance policy, are called    
         

Fees:
(noun) 'fees' is the name for the additional charges that an insurance company charge a customer/policyholder for taking out an insurance policy with them. Some insurance companies or brokers will add a policy fee (which is also called a processing/administration fee) to the price you pay for the insurance policy when you sign for it. It is best to find out what 'fees' you have to pay before signing an insurance policy (looking in the terms and conditions will tell you). In some cases, you can avoid paying a 'fee' by asking them to remove it. In Spanish: "cuotas/cargos".

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Fees:

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13. The date when an insurance policy 'finishes', is called the    
         

Expiration date:
(noun) This basically means the day an insurance policy expires/stops covering you. This normally means that the insurance policy won’t cover you anymore from that day on. For example, if you have an home insurance policy that has an 'expiration date' of the 15th of June, the policy will stop covering you at 12.01am on the 15th of June. In Spanish: "fecha de expiración/vencimiento".

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Expiration date:

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