When it comes to insurance, there’s a lot of jargon that can make your head spin. But don’t worry—at Roland Abbott DeZoort Insurance, we’re here to simplify the complexities of insurance and empower you to make informed decisions. Let’s break down three key terms: insurance premiums, deductibles, and policy limits.
What Is an Insurance Premium?
Your insurance premium is the amount you pay to maintain your insurance policy. Depending on your preferences, you can pay this monthly, quarterly, semi-annually, or annually. Think of it as the "rate" you pay for coverage.
When you shop for insurance quotes, you’re essentially comparing premium options from different providers. Several factors influence your premium, such as:
Policy limits: The maximum amount your insurance will pay for a covered loss.
Deductibles: The portion of a covered loss you agree to pay.
Claim history: Your past insurance claims.
Other variables: Depending on the type of policy and your state, additional factors may apply, such as your location or property specifics.
Why Do Insurance Premiums Change?
It’s not uncommon for premiums to fluctuate, and there are various reasons for this, including:
Inflation: The cost to repair or replace insured items increases over time.
Changes in your circumstances: For example, adding a new driver to your auto policy or upgrading your home.
Claim history: Filing a claim may impact future premiums.
Policy adjustments: Increasing limits or adding coverage can also raise your premium.
Consider this analogy: If you were to buy all the food you’d need for a year at once, you’d notice the price jump when you restocked the following year due to inflation. Similarly, premium changes often stand out because we only review them at renewal time.
What Is an Insurance Deductible?
Your deductible is the amount you’re responsible for paying out of pocket when you file a covered claim. Here’s how it works:
Imagine your car needs $1,200 in repairs after an accident. If your deductible is $500, you’ll pay $500, and your insurance will cover the remaining $700.
Choosing the Right Deductible
When selecting a deductible, it’s important to weigh the trade-offs:
Lower deductible: Higher premium but less out-of-pocket cost during a claim.
Higher deductible: Lower premium but more out-of-pocket cost during a claim.
Your deductible amount is outlined in your policy documents, usually on the Declarations page. If you’re unsure, your independent insurance agent can help you locate this information and explain any special deductibles, such as wind or hail deductibles.
What Are Insurance Policy Limits?
Your policy limit is the maximum amount your insurance will pay for a covered loss. If your claim exceeds this limit, you’re responsible for the remaining costs. That’s why setting appropriate limits is crucial.
Avoid Being Underinsured
Underinsurance occurs when your policy limits aren’t sufficient to cover the full value of a loss. For instance, if your home is insured for $200,000 but the cost to rebuild it after a disaster is $250,000, you would need to cover the $50,000 difference.
Independent insurance agents—like those at Roland Abbott DeZoort Insurance—can help you calculate and select limits that ensure you’re adequately covered, giving you peace of mind.
Why Work with an Independent Insurance Agency?
We understand that navigating insurance terms can feel like cramming for a vocabulary test. That’s where our expertise comes in. At Roland Abbott DeZoort Insurance, our independent agents have the knowledge and experience to guide you through the process. Whether it’s understanding your premium, choosing the right deductible, or setting policy limits, we’re here to help every step of the way.
Contact us today to review your policy and ensure you have the coverage you need. We’re just a phone call or email away!
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