Premiums, deductibles & limits: the words you need to know
Three words show up on every quote you'll ever see. Once you understand how they relate to each other, the rest of the process gets a lot easier.
Premium: what you pay for the policy
Your premium is the price of the policy itself, billed monthly, every six months, or annually depending on the insurer. It’s set based on your risk profile — age, location, driving record, car, and the coverage you choose.
Deductible: what you pay before insurance kicks in
A deductible is the amount you pay out of pocket on a claim before your insurer covers the rest. Choosing a higher deductible lowers your premium, because you’re taking on more of the small-to-medium risk yourself.
Coverage limit: the most your policy will pay
Every coverage type on your policy has a limit — the maximum amount the insurer will pay for a covered claim. Limits that are too low can leave you responsible for the difference after a serious accident, so it’s worth choosing above your state’s bare minimum if you can.
