When you get an auto insurance quote, it is essential to understand the industry-specific language contained within the quote. This will help you better understand the offer in front of you.
When it comes to an insurance quote, the premium is the amount you pay every six months for your insurance coverage. Generally, the premium is given as a full six-month amount for car insurance, and you have the option to pay the premium in monthly installments if you want.
On the quote, you will see the word limit. The word limit is the maximum amount that your insurance provider will pay for a specific coverage type. If that coverage involves a deductible, the limit is the amount the insurance provider will pay after paying your deductible.
For example, if your bodily injury liability policy has a $50,000 limit per person and a $100,00 limit per accident, that is the maximum amount your insurance will pay. The limit is the maximum amount of coverage and money your insurance provider will provide you with. If one's bodily injury exceeds that limit, that will come out of your own pocket.
With an insurance policy, you will need to pay a deductible for some of your coverage. A deductible is an amount of cash you will have to pay before your insurance starts paying the damage. A deductible is commonly used for the comprehensive and collision portion of a car insurance policy.
For example, if you get into a car accident, your car experiences $5,000 worth of damage, which is covered under your collision insurance policy, and you have a $500 deductible, you will have to pay $500, and then your insurance company will pay the remaining $4,500.
#4: Actual Cash Value or Replacement Cost Value
When your vehicle is totaled, some insurance companies will pay you the actual cash value (ACV) of your vehicle, or they will pay you the replacement cost value (RCV) of your vehicle. With the ACV, you will get the appraised market value for your vehicle if it is totaled in an accident. With an RCV, you will get the sum of money the car was worth when it was brand-new. ACV policies are more common, and RCV policies tend to cost more.
When you are reviewing an insurance quote, it helps you understand some of the industry-specific terms you will find on the policy. If there are any terms you don't understand, you will want to ask for clarification so you can fully understand your policy