Understanding Terms on a Car Insurance Policy

You might be intimidated by the big words in an insurance policy. And this makes you hesitate in purchasing. But the truth of the matter is, there are only a few terms you have to know. Leave the rest to the underwriters and insurance carriers.

 

Basic terms

Policy - The first thing you have to know is the policy. It is the agreement between you and the insurance company. It contains the extent of coverage you will be purchasing and the period it covers. You have to be careful in choosing your policy because it determines the assistance you will get in case you meet an accident. To acquire this policy, you must pay the company regularly.

Premium - The money that you give to the insurance company monthly is called the premium. The premium is not constant since it depends on many factors.

Quote - A quote is a statement that bears the premium you will be paying if you decide to use an insurance company's services. If you don't like to pay for a very expensive premium, you must first inquire from different companies and get different quotes. You must choose the carrier with the best quote to get the best value for your money.

Underwriting - Private insurance carriers will not accept your application right away. They will still determine whether you are eligible for a policy or not. This process is called underwriting, which will be done by an insurance underwriter. Since the underwriter works for the same company, you may also ask him or her about the liabilities that you will include in your policy.

Liability - A liability is the financial obligation, which you will pay in case of an accident. Since you have insurance, the liability will be covered in the plan in exchange for your monthly premium. If you plan to change your policy before it ends, you will have to go through a policy change.

An understanding of these basic insurance terms will greatly assist you when selecting a policy that's right for you.