Car Insurance Basics

Buying a car insurance policy is like making a
contract between you and an insurance company.
You promise to pay a certain amount of money
on a regular basis. They promise to pay for
specific car-related expenses as long as the policy
is in effect. Before we get into more detail, let’s
define some basic car insurance terms.

PREMIUM
The premium is how much you will be charged
for each type of coverage you choose – basically,
how much this whole thing is going to cost you.
Looking at premiums can help you compare
insurance offers and identify possible savings
opportunities. Most insurers will give you options
for paying your premium, such as paying all
upfront or making a down payment (often 2
months worth) and then paying the rest in
monthly installments.

POLICY PERIOD
Your insurance coverage is only in effect during
the period specified in your policy. Typically, auto
policies are in effect for six months or one-year
terms. When you are shopping for insurance, be
sure you know the policy period.

DEDUCTIBLE
A deductible is the amount of money that you
pay BEFORE the insurance money kicks in.
Let’s say you back your car into a tree. Your
insurance has a $250 deductible (which is low).
If the repair bill is less than $250, you pay for the
whole thing. But if the repair bill is over $250,
then you pay $250 and the insurance company
pays the rest. (This depends on your coverage.)
If a lower deductible means that you have to pay
less money out of your pocket, why not have the
lowest deductible possible? The answer is
money. With a lower deductible, the insurance
company is at greater risk of paying for repairs,
so they will charge you MORE for the policy.

EXCLUSIONS
Exclusions are all things NOT covered by your
policy. These are important to know before you
are involved in an accident.

CLAIM
A claim is a request you make to your insurance
company asking them to pay for a loss due to an
accident or for other damage (such as theft.)