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Welcome to Nerdsurance…

…where we do the dirty work to answer your burning questions about insurance. 

Shouldn’t we be writing about bitcoin or something?  Probably, but we’re on a thankless mission to help you figure out why you need insurance (or do you?!), what kind you need, and how much you should be paying.  

Here’s what’s really going on: we love insurance. This is a blog written by insurance nerds (hence the name) that are committed to making insurance a little less terrible. Someday soon we’re going to be starting our own insurance company, but in the meantime we want to help set the record straight on the fundamentals of insurance.  

We’ve got some ideas of topics to cover, but welcome your suggestions / questions! If we don’t know the answer, we’ll figure it out – so get in touch with your questions/ideas and let’s figure this sh** out together.

– Christie (Chief Insurance Nerd)

Ten insurance words you need to know

Insurance is a nightmare, we know. But don’t worry – we’re here to distill some key need-to-knows about insurance for smart, young consumers like yourself.

Insurance is one of the many industries (looking at you, finance!) that invented a whole slew of fancy terms to explain pretty simple stuff. So, before we get into the weeds of translating your policy docs, let’s get some basic vocab down:

  1. Premium: your monthly payment to the insurance company. How it’s calculated is a post for another day, so stay tuned.
  2. Deductible: the amount your insurance company expects you to chip in before they cover your claim.  By making you have some skin in the game, the insurance company is trying to keep you from making excessive or unnecessary claims.  For example, if your deductible on a renters policy is $500, then you are expected to pay the first $500 of any claim out of pocket, meaning you are only going to make a claim for amounts greater than $500.  Often times insurance companies will give you a discount on your monthly premiums in exchange for a higher deductible, make sure you know the trade-offs!
  3. Appraisal: the estimated value of an insurable item.  It could be done by the insurance company’s appraiser (sketchy…because they’re incentivized to low-ball you when it comes time to make a claim and over-inflate your value when you’re looking to buy insurance), or by a third party (makes more sense, but could cost more).  For example, if you’re looking to get a piece of art insured you will need an appraisal value to determine the amount of coverage you’ll need to purchase.
  4. Actual Cash Value (ACV): what it costs to replace something including depreciation.  That means if you paid $2,000 for an insured laptop 5 years ago, the ACV today will be considerably less than $2,000.  Often times This is different from Replacement Cost Value, and is a sneaky clause that many insurance companies will put in their policies.
  5. Hazard / Peril: a peril is something that will damage an insured item and ultimately cause a loss.  This includes things like floods, fires, falling, dropping your phone. A hazard is the condition that makes the peril likely to happen, so icy conditions after a storm would be a hazard that could lead to a peril like falling.
  6. Claim: when something happens to an item covered by insurance, you submit a claim to request your payment from the insurance company.  Keep in mind that in many cases the claim will be investigated by the insurance company to ensure that it is a true loss that warrants an insurance payout.
  7. Rider: think of riders as add-on coverage to an existing policy. For example, a cheap renters policy will only cover ~$1,000 in personal items – meaning if you wanted that $15,000 engagement ring covered you’re going to need a special rider.
  8. Liability: in insurance land this is a specific type of loss that happens to someone else (other than the insurance policyholder).  Liability coverage is for things like if your dog bit your neighbor and they needed stitches.  Or if you crash your car and do damage to someone else’s property, the liability coverage will pay for the other persons’ losses on your behalf.  This is typically the most expensive type of coverage, since the range of potential losses are huge (and often involve bodily injury).
  9. Exclusion: arguably the most important section of your policy, the exclusions are things that your insurance coverage will not pay for.  In a basic renter’s policy these often include things like water damage (crazy, I know), general neglect, war, and intentional loss.  There are all sorts of loop holes written into this section, so read carefully.
  10. Underwriting: evaluating the likelihood of incurring a loss.  It means different things in other contexts, but in insurance land this is the key process through which they price policies.  It’s often carried out by actuaries that use data science and predictive models to guess how often someone is going to file a claim, and for how much.  They then use that data to price their policies.

There are definitely more words to know, so stay tuned for round 2 of insurance  . Did we miss any key terms? Let us know!

-Christie