Virtually every state requires its drivers to carry some kind of insurance policy. If you plan on purchasing a car in the near future, regardless of whether it is new or used, shopping for an insurance policy should be one of the first things on your list of things to do. Yet many policies can contain language that is confusing or vague. Keep reading below to gain a better understanding of some of the most important auto insurance concepts.
Claim
One term that you will see used throughout an insurance policy is "claim." This is a report that a driver must file after an incident in order to receive compensation from their insurance provider. Once the claim is processed and approved, the appropriate party is compensated per the terms of the policy.
Deductible
A deductible is the amount that you must pay out of your own pocket after an incident that has resulted in damage of some kind. To take one example: suppose you are involved in a car accident that causes extensive damage to your vehicle, and you are not at fault. The total cost of repairs is estimated at $10,000, and your policy's deductible is set at $1,000. In this hypothetical, you would receive $9,000 from your insurance provider to cover the damage if your claim is approved.
Premium
Many drivers confuse deductibles and premiums, and it's true that the amount of one can affect the amount of the other. Unlike a deductible, however, premiums are regular payments made to an insurance provider to keep a policy current. These payments made be made monthly, annually, or semi-annually. If you don't have a long commute and are confident in your driving skills, you may want to consider opting for a higher deductible and a lower premium.
Underwriting
If you inquire as to how a certain premium, deductible, or other rate was calculated, an insurance provider is likely to refer you to the underwriting process. This usually involves a few complex algorithms that take into account a number of different variables. Your age is one determining factor, as is your credit score and the vehicle itself. If you're a new driver, you won't be able to present a safe driving record to lower the rate determined by the underwriting process, but you can negotiate based on other factors such as a good academic record or completion of a defensive driving course.
Reach out to an auto insurance provider to learn more.
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