You have probably heard these terms before while shopping around for insurance, but do you know what they mean? Here are some key terms to understand before shopping for the right insurance policy for your needs.
Premium
Your insurance premium is the amount you will pay your insurer to keep your policy active. These premiums can usually be paid monthly, bi-annually or annually.
Warranty
When it comes to insurance, a warranty is a condition in your contract that, if breached, will possibly lead to the suspension of your coverage. Warranties can entail many different things, such as regular upkeep of smoke alarms or keeping certain personal items in a safe. Be sure to read your contract carefully so you understand all of your warranties!
Deductible
Your insurance deductible is the amount you will pay out of pocket toward a covered claim. When you meet your deductible, your insurance will help cover the remaining costs, up to your coverage limit. For example, if you get in a car accident and have a $2,000 auto bill and your auto insurance has a $500 deductible, you must pay $500 towards the bill and your insurer will pay the remaining $1,500.
Exclusion
An exclusion is everything that is not covered by your policy. Read your policy carefully to make sure there is nothing under your exclusions that you were expecting to be covered. Common exclusions on a homeowner’s insurance policy may include damage caused by flooding, mold, infestations or general wear and tear. If you’re worried about an exclusion, you may need to take out an additional policy.
Coverage Limit
Your insurance coverage limit is the maximum amount of money an insurer will pay toward a covered claim. The higher your coverage limit, the higher your premium may be.
Sources:
https://www.nerdwallet.com
https://thefinancialdiet.com/
