CHAPTER 1
INSURANCE TERMS EXPLAINED Before we move forward, you need to understand the basic terminology of auto insurance. I’m going to cover a lot of items here, but know that there’s also a glossary at the end of the book you can reference in case you forget. YOUR POLICY: WHAT IS IT AND WHAT’S IN IT? So first up, what exactly is a policy ? It’s simply the contract between you and the insurance company you’ve chosen. After you sign it, you will officially be the policyholder . The policy will list your coverage , which is everything the insurance company will pay for. It will also state your deductible ,
the amount you’re required to pay before the insurance company will pay. The policy will also include limits , the maximum amount the company will give you. (Each type of coverage has its own limit.) And, of course, your policy will show your premium , which is howmuch your policy costs. Depending on your policy, your premium may be paid all at once, every six months, or monthly.
One important note about premiums: The premium you pay is actually a combination of premiums. Most
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