When you get a vehicle, you need to also get car insurance. It is essential to understand the various terms associated with car insurance so you can fully understand how your insurance works.
Term #1: Premium
Your premium is basically the bill that you pay so that you have insurance coverage. Insurance companies recalculate your premium rate every so often. Sometimes you can pay the total amount for your coverage term up front, or you can have your premium divided into monthly payments, just like a regular monthly utility bill. At the end of every coverage term, the rates you are charged can change, as the insurance company evaluates the risk of providing you with insurance.
Term #2: Deductible
Your deductible is different than your premium. Your deductible is only something that you have to pay if you have to file a claim. A claim is what you file when your vehicle is damaged and you need your insurance company to help you pay to fix the damage to your vehicle. The deductible amount should be an amount that you can pay on short notice if necessary. The deductible amount also has a big impact on your premium. A larger deductible can help lower your monthly premium.
Term #3: Claim
When you get into an accident, you have to file a claim with your insurance company. This is the name for the formal process you have to go through to get your insurance benefits. With a claim, you will have to contact your insurance company and let them know that an accident occurred. Then, you are going to need to provide the insurance company with details about the insurance. If medical care is required, you are going to share that information with the insurance company.
The insurance company will evaluate your claim, determine how much money to pay you, and offer you a settlement.
Term #4: Settlement
When you file a claim, the settlement is the amount of money that an insurance company will offer you for a claim. The settlement amount is dependent upon a number of various factors. For example, in a simple accident, the settlement amount is based upon the cost of repairing your vehicle. For a bigger accident where your vehicle is totaled, the settlement amount is based on your vehicle's value. If someone was injured, the settlement amount gets more complicated to calculate, as medical bills, lost wages, and pain and suffering are taken into account.
These are just a few of the basic terms you need to understand when you have an insurance policy. If you encounter any terms you don't understand with your insurance, be sure to ask your agent to clarify what those terms mean.
Contact an auto insurance service to learn more.
