Let’s face it—insurance terms can be confusing. If you’re just getting your first job, moving out, or buying a car, understanding your policy probably isn’t at the top of your to-do list. But trust us—knowing what those insurance words really mean can save you a ton of money and help you avoid big surprises.
Here’s a no-fluff guide to 10 terms you need to know.
1. Premium
This is the amount you pay every month (or year) to stay insured. Like a Netflix subscription—but for protection instead of movies.
Example: You pay $80/month for your car insurance = premium.
2. Deductible
Before your insurance pays a dime, you have to pay a certain amount first. That’s your deductible.
Example: Your deductible is $500. Your medical bill is $2,000. You pay $500, they cover the rest.
3. Copay
This is what you pay every time you go to the doctor or get a prescription. It’s usually a small, fixed fee.
Example: $30 every time you visit the doctor = copay.
4. Coinsurance
This is a percentage of the cost you split with the insurance company—after your deductible is met.
Example: You and the insurer share the bill 20/80—so you pay 20%.
5. Out-of-Pocket Maximum
This is the most you’ll spend in one year. Once you hit that number, insurance pays 100%.
Example: If your out-of-pocket max is $6,500, you won’t pay a penny more for covered stuff after that.
6. Claim
It’s the official “Hey, I need help!” form you send your insurer after something bad happens.
Example: Your apartment floods and you file a claim for water damage.
7. Coverage
This is everything your policy actually pays for. No coverage = no payout.
Example: Your phone isn’t covered under your car insurance, obviously.
8. Beneficiary
The person who gets your life insurance money if something happens to you.
Example: Most people list their spouse, kids, or parents as beneficiaries.
9. Exclusions
The stuff your insurance doesn’t cover. Read this carefully!
Example: Most car insurance won’t pay if you’re racing or drunk driving.
10. Network
For health insurance, your network is the group of doctors and hospitals your plan works with.
Example: Go outside the network? You might pay way more.
Conclusion
Insurance terms don’t have to be scary. Once you get the basics, you can make smart decisions about your health, car, or life coverage. Keep this list handy—and don’t be afraid to ask questions before you sign anything.