Insurance touches many elements of our lives, whether it be health insurance for you or your pet, car insurance and even plans to cover your new phone. Unless you are an insurance professional, there are likely a few terms you’re unfamiliar with or are just plain confusing. We’ll try to take the guess work out of some of the more difficult-to-understand terms!
Note, this is for insurance in general and the below definitions and examples may not pertain to your Bivvy policy.
So, what is insurance anyways?
Here’s a quick history lesson for your next trivia night: Insurance is one of the oldest industries in the world and its origins can be traced to the 2nd and 3rd millennia BC to protect maritime traders from cargo loss. Traders did not want to suffer large losses that would put them out of business, so they worked together to pool their resources and distributed the risk of cargo loss across a group. This way no one individual would risk losing their entire business because of a loss.
In today’s form, insurance is a transfer of risk from one party to another for a fee. For example, an individual enters into a contract with an insurance company to assume a defined risk; i.e. a house fire. The insurance company calculates the rate they would be willing to take on that risk and then charges the individual a cost (premium) for assuming the risk. The risk of loss must be uncertain, losses that have occurred in the past or are reasonably predictable are not insurable. You cannot insure a house that burnt down last week.
What is coinsurance and how does it work?
Coinsurance is the amount the policyholder is responsible for after any deductibles have been met. Coinsurance is like splitting a portion of the bill with the insurer so that the policyholder does not have to pay the full expense of the loss. Coinsurance is typically configured as a percentage vs. a fixed dollar amount. For example, if a covered vet bill is $1,000 and the coinsurance is 25% and there is no deductible, the insured is responsible for $250 and the insurance company will pay $750.
What is a deductible?
A deductible is the amount of money you pay before the insurance will kick in. Deductibles are typically structured as annual or per incident. An annual deductible is the amount you must first pay in any given policy year before the insurance coverage will start. For example, if you have a policy with a $500 annual deductible and incur a covered claim in month 1 of $300, you will have $200 remaining before meeting the insurance deductible for the year. If within that same year you incur another $300 covered claim, your insurance would kick in and cover $100 subject to any other terms and exclusions. You should always report any losses to your insurer, and especially when you have a policy that is structured with annual deductibles.
An incident deductible is a type of deductible that first must be met for each incident before the insurance will kick in. Auto insurance policies are one of the most common examples where incident deductibles are used.
What is a Declaration Page?
A Declaration Page is often referred to as a ‘dec page’ and is a one-page summary that lists the insurance company, the insured, the start and end date of the coverage, as well as the actual terms of coverage; including limits, premiums and deductibles. Its important to review this page for accuracy, since it provides a summary of your coverage.
What is a pre-existing condition?
A pre-existing condition is a condition that first occurred or showed clinical signs before your pet’s coverage started, including waiting periods. Insurers may exclude some pre-existing conditions (addiction or chronic health problems, for example) because the risk of having to provide protection is too likely and/or they would not have enough money available for every policyholder who needs it.
As with all pet health insurance policies, Bivvy excludes pre-existing conditions.
What does premium mean and how is it determined?
Premium is the amount to be paid to the insurance company for taking on a portion of the risk. Simply put, this is the cost of the insurance. This amount is based on several factors including the policy limits, size of the deductible and coinsurance percentage.
Sometimes an insurer will determine the cost of your insurance by looking at your individual risk profile. If you are more likely to find yourself in need of insurance coverage (for example, if you have a history of high-risk driving) or in need of especially costly protection (for example, if you drive an expensive car), your premiums may be higher.
Other times, insurers will provide individuals with different combinations of premium and coverage amounts to choose from. In that case, they leave it up to the individual to analyze their own risk of such a loss occurring and let them decide how much they are willing to pay and the amount of coverage they may need.