CHAPTER 2 Insurance Terms Explained erms 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. (Note: If you go to Appendix A, you’ll find a sample policy.) 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 how much 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 insurance policies are made up of a variety of coverages, such as collision, bodily injury, and more, all of which I’ll go over in the next chapter.
Money-Saving Tip: Automate It
Some companies offer a discount if you set up an electronic funds 4
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