Insurance policies can be full of terms that most of us don’t use in everyday life, but part of working with a broker who can give you great quality service at an affordable price is having all the jargon translated into everyday language.
In this article, that’s exactly what we’re going to do with two terms you probably hear a lot but may never have been given a good explanation for: deductible and premium.
What’s a Deductible?
And here’s what it boils down to: If you need to file a claim and that claim is approved, there’s an amount of money you typically have to pay first before your insurance company starts to pick up the tab. That fixed amount of money is called a deductible, and it resets every year.
Say for example that you have a $250 deductible on your homeowner’s insurance, and you file a claim because your roof is damaged in a major storm and you lose some shingles. The claim is approved—but before the insurance company will pay towards your claim, you have to pay that initial $250 towards the roof repairs.
If you file another claim in the same year, you don’t have to pay that $250 again, but the deductible does reset in the next year when you renew your policy.
Deductibles can play a role in deciding how much you pay per month for your insurance policy. To get a low deductible, usually that means your monthly payment is higher. If you can handle a higher deductible, you can usually get a lower monthly rate.
What’s a Premium?
A premium is the amount that you pay for the coverage in your insurance policy for the length of the policy. Most policies are for one year, so the premium is what you pay to have that coverage there to protect you for the year. When the year ends, the coverage ends, and you have to pay the premium again when you renew your policy.
Most of the time people pay their premium over the course of the year, broken up into monthly or perhaps quarterly installments. Less frequently, people opt to pay their premium in one lump sum at the start of their policy coverage period. It’s important to note though that whatever arrangement you have for paying your premium, you have to pay it whether you end up using the insurance or not—there are no refunds given if you don’t file a claim during the year.
The price of your insurance premium depends on a lot of different factors. The more coverage your policy provides, the more the policy is likely to cost. One way to possibly reduce the cost of your premium is to accept a higher deductible. You can also ask your agent at PA Auto Insurance Outlet about discounts like a good driver discount on auto insurance, or a multi-policy discount if you buy more than one type of insurance from the same company.
Are you looking for a policy that offers the best combination of an affordable premium and deductible for you without sacrificing great coverage? Give PA Auto Insurance Outlet a call today!