Understanding Insurance: Is insurance a scam - Episode 2Key terms/frequently used terms27 February 2025Welcome dear reader, to the second episode of our journey on ‘Understanding Insurance: Is Insurance a Scam?’. In our 1st episode, we established that insurance is not a scam, and that insurance companies do not exist to scam their customers or unjustly enrich themselves. In this episode we will take you through some frequently used terms in insurance.

  • What is insurance?

    • Insurance is a contract, represented by a policy, in which a policyholder receives financial protection or reimbursement against losses from an insurance company.
    • Insurance is a financial tool that protects individuals, families, and businesses from unexpected risks.
    • Insurance can give you peace of mind, knowing that if something unexpected happens, that huge bill can be taken care of.
    • It is a way to protect your loved ones, property, business and lifestyle from financial losses and unexpected costs. By paying an insurance provider, you receive coverage that will preserve your way of life in case of unfortunate events

  • Types of insurance?

    • Insurance comes in many different types, originating from the type of contingency it provides security against. Some of these many different types include travel insurance, disability insurance, education insurance, life insurance, professional indemnity insurance, car insurance, aviation insurance, homeowners’ insurance. So, in almost every situation, there is a type of insurance that comes to the rescue. Insurance can therefore assume any role in times of need.

  • Who needs insurance?

    • Anyone looking to protect their family, assets (cars, houses etc), and themselves from financial risk or losses.
    • Those who want to pay for medical emergencies, hospitalization, illnesses, treatment, and future medical care.

  • Who is a Policyholder or the Insured?

    • A person who owns an insurance policy and can exercise the rights under the policy.
    • A person or group that has made an agreement with an insurance company that it will provide insurance against particular risks.
    • A policyholder must be 18 years and above.

  • Who is the insurer

    • A Company that agrees to compensate people, companies or other organizations or provide financial cover in the case of unexpected events covered under the policy.

  • Beneficiary

    • An individual or entity designated to receive assets, benefits, or proceeds from an insurance policy upon the occurrence of an insured event such as the policyholder's death in a life insurance policy.

  • Policy

    • The contractual agreement between the insured and the insurer that states the events that are covered and the cost of the premium to be paid by the policyholder. It also outlines the obligations of the Insurer and Insured, conditions not covered under the policy (Exclusions), duration of the policy (Policy term) and renewal terms. The insurance policy serves as proof of coverage and governs how claims are handled.

  • Premuim

    • The amount of money a policyholder pays to an insurance company in exchange for coverage under an insurance policy. This is normally paid on a monthly or yearly basis.

  • What is an insurance claim

    • A formal request made by a policyholder to an insurance company for financial reimbursement following the occurrence of a covered event (such as death, accident, illness, or property damage) under the insurance policy.
    • The financial benefit promised by the Insurer for the premium paid by the Policyholder upon the occurrence of a covered event.

  • Coverage

    • The risks that an insurance policy will protect against. It includes the financial limits of the insurer’s liability and any deductibles (administrative fees etc.) that the policyholder is responsible for before the insurer will pay a claim.

Return to Episode One