The REAL Meaning Of Words

For the next couple weeks, I'm going to focus on a few words used in the Insurance business, words that I had no idea what they meant prior to going through my insurance courses to get my Property and Casualty Insurance license. Many of the words were familiar, but if you had asked me for a definition, I would have had to either take my best guess, or fess up to my ignorance.

Now you might think to yourself, if you were not in the insurance business, you really didn't need to know the definition of these words, which is exactly what I thought (great minds think alike). Now enters the guilt trip, as I looked back over my financial records for 23 years of cabinetmaking, I discovered that I had paid in excess of $460,000 for Property and Casualty Insurance, and my total claims history looked to be less than $30,000.00 (two workers compensation claims and one theft claim).

In the case of the workers compensation claims, I really had no horse in that race (you pay your premiums, but you have little to no power in the claims process, so once again, you pay and the government determines your outcome). As it relates to those two claims, not knowing the definitions of insurance terminology was not too big of a handicap. BUT, in the case of the theft, when I did not receive the amount of money (Indemnification) that I thought I should have received, the agent actually told me a few untruths (don't know if it was intentional, or if it was in ignorance). My own ignorance allowed them to tell me something that was not true, and I accepted their unfactual explanation, along with a less than desirable outcome (I was not restored to where I was before). So as I said, I plan on focusing on the terms that I think every person that purchases insurance needs to know.

So to kick this definition party off, lets start with the most basic term of all:

indemnity 

in|dem|nityNOUN (plural indemnities)

Security or protection against a loss or other financial burden:no indemnity will be given for loss of cash

Source: Oxford Dictionary

If you remember our last series (Was it a scratch or a pick?), the insurance industry has it's own definitions. So let's take a quick peek at the insurance industries definition of indemnity. For an insurer, indemnity means to restore a policyholder to pre-loss condition; make whole. No better, no worse.

So if you compare the Oxford Dictionary definition to the insurance industries definition, although they are similar, there is a pretty distinct difference (no better, no worse), and if we purchase insurance, we need to know this distinction. I can't tell you how many people I have talked with that expect that they should not only be able to make a claim based on a loss, but actually come out better than they were before the loss.

So here is how it is supposed to work, insurance compensates (indemnifies) the policy holder for their actual economic losses, up to the insurance policy limit. Now here is the part you need to know, and know well. Insurance companies generally require the insured to prove the amount of his/her loss before he/she can be indemnified (do you have a written or video inventory of your plunder?). Recovery is typically limited to the amount of the provable loss even if the face amount of the policy is higher. This begs the question, did you know that you need to be able to prove your loss?

As I have been looking for my value proposition (something that sets me apart from other insurance agents), I keep coming back to this subject (provable loss). And have decided that to add value to every property and casualty insurance policy I sell (business or personal), If the client agrees, I will do a video interview of the clients assets, and to take that one step further, I have developed a simple database that I will provide to each client with all the assets we covered in the video interview listed, along with photos of the assets, and fields that allow them to add additional details (i.e., date purchased, serial numbers, model numbers, etc.), providing a very good picture of their assets as proof in the event of a loss, but also as a running total that will allow them to better choose their limits (remember, the insurance company is not going to pay to the limit you choose, they are going to pay to the provable loss). 

Choosing an unrealistic limit only benefits the insurance company in higher premiums, so knowing the value of your personal property is definitely beneficial to you. In conclusion, if this video inventory along with the personal property database is of interest to you, please give me a call, or email me with your renewal date and I will contact you 3 months prior to your renewal date to go over your property and casualty insurance needs.