Insurance Terminology You Need To Know: Part VI

Have you ever needed to purchase an insurance policy but been at a loss when you try to read the plan they offer you? There are dozens of new terms you won’t know that are defined by other strange words you won’t know! And how about when you actually need to file a claim for damages based on that insurance policy? It can be a disaster waiting to happen and a certain win for the insurance company if you can’t even discuss the basics. That’s why we’re determined to help you learn some of the most common insurance-related jargon. Here are a few more!

Broker.

This word refers to the person — usually a third party — responsible for connecting an insurer to the soon-to-be new policy owner. Brokers always take a commission, because that’s what leeches do.

Builders’ Risk Policies.

These policies protect construction companies from any losses incurred during construction. Misplaced beam, building falls down? No problem. The “builders’ risk” policy will cover the damage.

Book Value.

The book value of a transaction is the original cost of the transaction. 

Calendar Year Deductible.

Usually, you’ll see the word “deductible” on an insurance policy — and hopefully you’ll realize that the usually very large amount next to the word is what you have to pay before the insurance company will give you a dime. A calendar year deductible means that you have to pay that usually very large amount every year. 

Carrying Value.

This phrase is the book value in addition to accrued interest of a particular policy. 

Cash Equivalent.

These are flexible investments that can easily be turned into “not investments” (i.e. cash). These investments are usually mature and not subject to random, risky bouts of fluctuation. They’re the opposite of, say, penny stocks. Never invest in penny stocks unless you’re into losing huge amounts of cash.