How to Better Understand Your Insurance Contract
We all know we need insurance for many things, but there may be some terms and phrases in our insurance contracts that we don’t completely understand, even if they are part of any standard policy. When you’re wondering how to better understand your insurance contract, here are a few key components you should know.
The deductible is the amount you pay out-of-pocket before your insurance provider will pay for other amounts that are due. For example, if your auto insurance policy has a $500 deductible and you’re involved in an accident where there is $2,500 worth of damage, you must pay the $500 deductible yourself before your insurance will cover the $2,000 remainder. Many people prefer low deductibles because it comes out of their own funds, but lower deductibles often mean higher premiums.
The insurance premium is the amount you pay on a periodic basis to keep your insurance coverage active. Some people pay for their insurance on a monthly basis, while others have premiums they pay every six months or even once a year.
Make sure you are aware of coverage limits in your insurance policy. Coverage limits are the maximum amount your insurance provider will pay for certain circumstances that require them, under the terms of your insurance policy, to compensate you or someone else. Some coverage limits are set on an annual basis while other policies have a lifetime limit.
If you have specific coverage needs for your auto, home, life, or other insurance, be sure your policy will provide for those needs and that they are not part of any exclusions or special provisions that require the purchase of additional coverage or an add-on policy.