Understanding Your Insurance Policy Basics
Some of us have home or vehicle loans that our banks require us to have coverage on our homes and cars and most of us live in states that mandate liability insurance on our automobiles. Still, it's important to understand a few basic principles and common terms when signing up for an auto or homeowners policy.
Insurance Premium-- You can mentally substitute the word "premium" for "price" here. In other words, your premium is the amount of money you pay for your policy. Generally, these payments can be made monthly, quarterly, semiannually or annually.
Lapse-- If you fail to pay your premiums at the subscribed time, you'll experience an interruption in coverage known as a lapse.
Deductible-- Your deductible is the amount of money you'll be expected to pay out of pocket before your policy will cover or reimburse you for any damages. Typically speaking, the lower your deductible is, the higher your premium costs will be.
Exclusions-- Just because you have a homeowners policy doesn't mean all items, conditions and circumstances are covered. Some natural disasters such as floods are commonly excluded. And if your home is damaged as a result of neglect or failure to properly maintain it, any related claims could be denied. Be sure to read your home insurance policy thoroughly to see what is and isn't covered.
Comprehensive & Collision Coverage (Auto)-- Commonly referred to as full coverage, this type of plan goes beyond the minimum required coverage. Where basic liability primarily protects other cars in the event of a collision, comprehensive & Collision coverage goes further, also insuring your vehicle against damage, whether it's due to a traffic accident or stormy weather.
Understanding the basics (and considering if there have been any recent changes to your situation), is beneficial, especially if the need for a claim arises.