Commonly Misunderstood Insurance Terminology

Personal LinesShopping for insurance can be daunting especially when you are unfamiliar with the terminology used in the wide variety of policy options. You probably recognize the frequently used terms, such as “premium” or “deductible,” but do you understand the less common, yet equally important, terms such as limit, schedule, medical payments coverage, replacement cost versus actual cash value and comprehensive coverage? Here are some fast facts that explain what these words mean:

  • A limit is the maximum amount an insurance company will pay for a claim. You are responsible for anything above the limit.
  • A schedule fully protects valuable items on a separate coverage, often with a smaller or zero deductible.
  • Medical payments coverage is designed to pay for for minor medical costs regardless of who is at fault. It is often confused with liability where negligence must be proven.
  • Replacement cost is the cost to replace damaged property. This is distinguished from actual cash value, the actual value for which the item could be sold, as it excludes the deduction for depreciation.
  • Comprehensive means all-inclusive, but in terms of insurance, comprehensive coverage protects your car against damages unrelated to a collision, such as theft, vandalism, or fire.

Understanding the details of a policy will help you make a more informed and smart choice tailored to your specific needs. To learn more about protecting your assets, contact a trusted AssuredPartners NL agent at (888) 702-0901.

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