Term

What does the word insurance "term" mean? I hear this from the broker but sometimes it seems to mean one thing and then sometimes it means another. I am confused about insurance. Have you said this?

The usual insurance policy is issued for a 12 month term. It is easier for the insurers to do things on annual plans and most people want the convenience of a yearly renewal. Some insurers will offer a six month auto or home policy but this is becoming more difficult to find.

A two year term is now being offered for some types of insurance. It can be a smart move to take a two year policy if you expect rates to go up. Having a two year policy will lock in pricing for that time period. We expect to see big increases in sewer backup rates so a two year home policy is a good bet right now. Of course, if prices go down then you are paying more.

Legally insurance can be any term within reason agreed to by you, the insured, and the insurance company. If you need special consideration then your broker or agent may be able to get a shorter term when required. It is usually less expensive to purchase a one year term then a six month term.

An example would be a trip insurance policy for moving a newly purchased car from one province to another. Another example would be if home builder completes construction and wants insurance for a short period while the home is listed for sale. it could even be that you want one of your policies to run to a certain date so that it is more convenient for you to deal with. An example would be a "snow bird" who is away in Arizona all winter wants insurance policies to renew in June. They are always home by then.

Term can also refer to a type of life insurance. The policy is written for a certain term, usually five or 10 years. The amount that will be paid out upon your death is agreed upon. The amount that you will pay for the insurance per month/year is agreed upon. At the end of the term then expect the rates to go up.

It is important that you understand that insurance policies expire at 12:01 a.m. on the last date of the policy. So your policy which expires January 10, 2011 with expire at 12:01 a.m. January 10, 2011. You do not have a day's grace. If you have not replaced or renewed the insurance then you are without coverage.

Talk to your agent or broker if you have any questions or want to amend any of your insurance terms.