Understanding an Insurance Quote

Buying insurance can be confusing but if you are aware of the basic concepts, you will be able compare your quotes effectively to ensure that you are purchasing the best possible insurance value.

Premium

When you purchase insurance, a fee is due to the insurance company. This is the premium, or the price you pay for insurance. Insurance companies use different rates to determine the amount of your premium. Various factors affect the rates that are used which usually have something to do with the level of risk that the insurance company will accept. For example, a home in a moderate climate away from seashore is less likely to sustain damage from a hurricane so a less expensive rate would be used. Similar concepts apply to auto, health, and life insurance.

Coverage

Within every line and type of insurance available, consumers have a choice of the coverage that is available.

In homeowner's insurance you can choose a policy that covers many types of losses, or a policy that only covers specifically listed causes of loss. You can also choose if payments are made on a full replacement cost value or on an 'actual cash value' basis, which is a depreciated version of the repair costs. You also have the option with some insurance companies only to have the building covered for damage, and to eliminate any coverage for liability if someone is injured on your property.

In car insurance quotes, you have a choice of covering only accidents that cause injury or damage to others, or to also have your own vehicle covered regardless of who is at fault for the accident. If you choose to buy coverage for your own car, you may elect to cover the car in the event of a collision, and to cover it in the event of a fire or theft. This is called 'comprehensive' coverage.

Health insurance choices are vast and varied. You can opt for coverage for various types of treatment and medications.

Life insurance policies are available that provide coverage for your entire life, or for a specified term.

Policy Limits

When reviewing a quote for a property policy, you should note that limits are placed on the amount of insurance on buildings, contents, additional living expenses, liability, and medical payments. All of these limits should be compared from one quote to the next to ensure that they are comparable.

Auto policies will typically have limits that apply to liability, property damage (to others) and medical payments. A specified limit for the vehicle itself is uncommon and is usually used when a vehicle is an antique or specialty automobile.

Health insurance policies will typically have a limit that applies per year and life insurance policies will have a maximum payout in the event of death.

Excess

The Excess is an amount that the customer has to pay toward a claim before the insurance company makes any payments. This can vary by choice in almost all types of insurance. When comparing insurance quotes, make sure that you select the same excess across all of the quotes to determine which offers the best value.