Basic concepts of insurance

Terms in most insurance policies that define the content and coverage included

Throughout the contracting process of a health insurance policy there are numerous terms that a person with little understanding of the insurance sector could find difficult to understand.

Below is a list of the basic concepts of insurance that you can consult in case of doubt. 

Accident

Beyond the control or intention of the insured person who suffers any type of injury due to a sudden and accidental event. It is understood that this accident occurs while the policy is in force

Actuario

Expert who works in the companies to advise them by means of mathematical calculations and based on statistical, legal and financial knowledge, on the risks of the injured person and the costs involved.

Insurance agent

Individual or institution that mediates in an insurance operation. We talk of party concerned when it is linked to a specific company. 

Annex

Supplement added to an insurance contract to modify or refine any of its terms and conditions.

Anualidad

A period of twelve calendar months during which a policy remains in force, with the possibility of automatically extending it.

Cancellation

Termination of a policy, taking into account any condition set out in the contract, a bilateral agreement between the parties or a unilateral decision, provided that there has been advance notice.

Insured

Person or individuals (in this case, you or all your family) covered by an insurance policy. In the absence of the policyholder, he/she assumes the obligations and rights set forth in the contract. The policyholder is the person that signs the policy. The concept of policyholder is explained further on in this glossary.

Insurer

Legal entity (a company) that assumes the coverage of a third-party risk through an insurance contract that establishes certain compensation and services in the event of a claim.

Bases técnicas

The study carried out by the actuary based on statistics to determine the cost of the premium to be paid by the insured person.

Payee

Person designated in the policy by the contracting party as the holder of the right to receive the benefits and to benefit from the services specified therein in the event of risk or loss. Insured person, policyholder and beneficiary can be the same person, or different people.

Discount

Discount on an insurance premium is usually granted when the covered risk is reduced for a specific policy./p>

Capital insured

Value that the policyholder attributes to the assets that they insure. Determines the maximum amount that the company will pay in the case of accident.

Grace period

Set period from the date of entry into force of the policy, during which the insured person will not be covered by some of the guarantees included in the contract, totally or partially. It is usually stipulated in life, illness or health insurance policies for a condition that has been hidden by the insured person. This is one of the most important basic concepts of insurance policies.

Cláusula

Agreements that figures in the list of terms and conditions of an insurance contract, setting a standard or condition in the relationship between insurer and insured person. It modifies and adds information in addition to that established in the policy.

Coverage

All the health services and benefits to which the beneficiary or policyholder is entitled. A basic concept in insurance terms.

Contrato de seguro

Formalised contract through a document, the policy, that establishes the terms and conditions of the relationship between insurer and insured person. The insurer, in exchange for the charge of a premium, warrants to compensate and cover certain damages that could be suffered by the insured person within certain time and cost limits. 

To be valid, civil law establishes that an insurance contract must be entered into freely between parties with legal capacity, must ensure a certain objective and the cause of its obligation must be legal. 

Daño

Damages suffered by the person or goods owned by the insured person object of an accident.

Deceit

A civil law term that is applied when someone acts in a fraudulent or misleading way to achieve to enter into a contract or the coverage of an insured provision to which it has no right. In criminal law it is used when a criminal offence is committed intentionally. 

Franchise

Part of the damage that the insured party must cover on his/her own account. This is the amount or percentage of the total established in the policy in exchange for a discount on the premium. If the cost of a claim is lower than the amount negotiated in the excess, the insured person will pay all the costs. This concept 

Guarantee

The insurance company's commitment to assume the cost of a claim, according to the maximum limit established in the policy. Guarantee and coverage are both the same.

Compensation

Compensation or financial benefit through which an insurance company attempts to restore the financial damage incurred by the insured person, within the limits established in the policy. It implies the payment of the premiums by the insured person. It can be specified in two ways: a deposit of money or the replacement of goods damaged by others for a value that cannot be higher than the original cost. 

Policy

Document drawn up between two parties to establish the terms and conditions of an insurance contract. 

Premium

The amount that the insured person must pay in exchange for being covered in the event of determined risks. This amount depends on matters such as the probable risk or the duration of the insurance. In the premium, In addition to the part intended to cover claims, the premium includes an amount intended for the company's administration expenses (commercial premium) and a part corresponding to taxes. 

Rescisión

Cancellation of the contract in cases where one of the contracting parties believes that their rights have not been respected. A basic concept that should always be taken into account.

Risk

Probability of damage occurring and that is covered in an insurance policy for an indemnity in the event it finally occurs. 

Claim/Incident

The foreseen risk covered by the terms and conditions of an insurance policy that actually occurs and results in a series of obligations by the insurer, either through the payment of an indemnity or the replacement of damaged goods.

Policyholder

Person that takes out the insurance contract with the company, signs the policy and, as long as it isn't indicated that the insured person is another person, acquires the rights and obligations derived from it. 

Vencimiento del seguro 

Termination of the validity of the insurance contract in application of some of the terms and conditions set forth therein, usually because the established term has expired. 

Vigencia del seguro

Period during which the stipulated insurance contract and terms and conditions are applicable. In certain special circumstances, such as non-payment, a contract may be temporarily suspended. 

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