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7 Insurance Terms Your Customers Don’t Know


When you spend all day thinking about insurance, it can be easy to forget that the language you use every day may not be familiar to those outside of the insurance business – including your customers.

But when we fail to define key insurance terms for customers, they may feel confused or frustrated when looking at policy information – the opposite of what we want.

We’re probably all guilty of speaking in insurance terms without explaining what we mean. Next time you slip into jargon, refer to these handy explanations to help your customers understand what you’re talking about.

“Premium” and “Deductible”

Premiums and deductibles are key parts of any insurance policy. Customers likely understand that premiums and deductibles are related to cost – always of interest – but they may not understand exactly what they mean or how they relate to each other.

Clearly defining these terms can mitigate misunderstandings about cost down the road. Here are some key points to include whenever you talk about premiums and deductibles:

  • What they are: Premiums and deductibles are both out-of-pocket costs customers pay for insurance coverage.
  • How they’re different: Your premium is what you pay each month (or payment period) to keep your insurance coverage active, while your deductible is only paid when you file a claim. It’s the amount you pay before benefits kick in.
  • How they’re related: A policy with a high premium tends to have a lower deductible. A policy with a low premium tends to have a higher deductible.
  • The upshot: Consider both premiums and deductibles when thinking about the total cost of your policy, and make sure they align with your financial situation. For example, the lowest premium may look appealing, but that usually means you are on the hook for a higher out-of-pocket cost, should you need to file a claim.

“Liability” and “Indemnity”

The terms “liability” and “indemnity” are often spoken of together. These terms can be particularly confusing to customers because both “liability” and “indemnity” can mean different things and can be used in different ways when talking about insurance.

Here are a few points to refer to when you define these terms for customers:

  • What they are: A liability is a sum of money that a person or company is responsible (or liable) for paying. In insurance, those are the costs associated with a claim of injury or damage to a person or property. Indemnity means you are not responsible for paying for those liabilities by yourself. 
  • How they’re related: People and companies buy liability insurance so that if someone claims they are responsible for damages or injuries, they don’t have to pay the associated costs out of pocket. Homeowners insurance and auto insurance are designed to protect individuals from liabilities, while general liability insurance is designed to protect businesses. Indemnity is a general way to describe the agreement you have with your insurance company when you hold these policies. It agrees to indemnify you (pay you) for covered losses in exchange for premiums.
  • The upshot: Liabilities are the costs associated with damages and injuries to people and property. You buy insurance to indemnify, or prevent, yourself from having to pay the full cost of those liabilities.

Note: some customers may also ask about “indemnity insurance.” They’re likely referring to E&O or malpractice insurance, which they may require for business operations.

“Admitted,” “Non-Admitted,” and “Carrier”

There is a good chance that your customers don’t understand the difference between admitted and non-admitted carriers… or even what a carrier is. WE recommend that you define these terms right off the bat.

Here are key points to mention when you do:

  • What they are: An insurance carrier is the company that sells insurance policies. Other terms for the same thing are “insurance company,” “insurance provider,” and “insurer.” Insurance carriers can sell admitted or non-admitted insurance.
  • How they’re different: Admitted carriers are licensed to sell insurance by the regulatory insurance board of the state in which they operate. All states have a board because insurance is regulated at the state level. The insurance that admitted carriers sell is called admitted insurance. That insurance must comply with all state regulations and is financially backed by the state. Non-admitted carriers are not licensed by the state, and the insurance they sell is called non-admitted insurance. This insurance does not need to comply with regulations and is not financially backed by the state. 
  • How they’re related: Non-admitted insurance is not necessarily “worse” than admitted insurance. Usually, non-admitted insurance is specialty insurance, usually the kind that protects high-risk properties or areas. For example, houses in wildfire-prone areas may require non-admitted insurance. Big insurance carriers often own both admitted and non-admitted companies so they can offer the full spectrum of insurance to customers.
  • The upshot: Most standard policies are admitted insurance that is regulated by the state. High-risk speciality insurance policies often can’t align with state regulations and are therefore non-admitted.

Join the We Insure Family for More Value-Adding Support

Joining We Insure is a great way to support your independent insurance business. As a We Insure franchisee, you gain access to not only marketing assistance but also multiple carrier partners, customer service teams, and back-end support.

This means you’ll have more time to explain insurance jargon to customers, build stronger relationships, and generally find ways to meet your customers’ individual needs.

Tap into the power of We Insure! Learn more about how you can join our team.

The information contained in this page is provided for general informational purposes only and may not be applicable to all situations. We Insure makes no guarantees of results from the use of this information.

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The information contained in this page is provided for general informational purposes only and may not be applicable to all situations. We Insure makes no guarantees of results from the use of this information.