Premiums, deductibles, and limits

A premium is the price of insurance. A deductible is an amount you are responsible for under a particular coverage. In a simple property claim with a $2,000 covered loss and a $500 deductible, the insurer pays $1,500, assuming no other limit or adjustment applies. Deductibles may vary by coverage or cause of loss; not every coverage uses one.

A coverage limit is a cap on what the policy will pay under the specified terms. A separate smaller limit may apply to a category of property. Settlement wording matters too: actual cash value commonly reflects depreciation, while replacement cost uses the cost to repair or replace with comparable property, subject to requirements and limits. A higher deductible often lowers the premium but increases your share of a covered loss. Compare the specific terms and choose a deductible you could manage.

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