The 3 top misunderstood insurance terms

For a newcomer to the insurance industry, or a policyholder who reads the fine print of their policy, both could be left scratching their heads over some of the terminology. Much of it is steeped in hundreds of years of history.

Check out these three commonly misunderstood insurance terms:

Inland marine

Back in the day — way back before the 19th century — most cargo was transported by ocean vessels. The owner of the items being shipped would purchase marine insurance to protect his property while it was in transit. As the rise of new transportation developed, a need for a new type of insurance coverage arose to cover the unique perils of transporting items over land versus the sea. Hence, inland marine came on the scene.

Most inland marine coverages are for property that is taken off the primary premises of the policyholder. Some examples may include a photographer who uses his camera equipment at a wedding reception, a contractor who takes his tools to a job site, or a traveling art exhibit.

We’re not talking about celebrity endorsements here. An insurance endorsement is an agreement that is attached to an existing policy that either expands or limits the coverage. Think of it as an add-on.

Perhaps you have a business that you run out of your home — you can add an endorsement to your homeowners policy to cover those extra risks. Or maybe you have a collection of expensive jewelry and its value exceeds your standard coverage limits — an endorsement can cover its replacement cost for an additional premium.

On a typical rainy day, you may get by with a raincoat. But when it pours, you need an extra layer of protection to shield you from the storm — that’s where an umbrella comes in handy. This is a good picture of how insurance works.

Most insurance policies cover typical perils that you may face — your home gets damaged, or you have a minor fender bender in a parking lot. But what happens if you’re at fault for that accident and the other driver sues for $1 million when your liability limit is only $300,000? If the other driver wins the lawsuit, you’d be responsible for paying the balance. Wouldn’t it be nice to have an umbrella to shield you from this type of storm?

A personal umbrella policy provides an extra layer of protection above the liability limits in your home and auto policy. The most common limit for an umbrella policy is $1 million. However, depending on your unique situation, higher limits are available.

Talk with your insurance agent to determine proper coverage for your individual needs.