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Insurance Policy Components
When choosing a policy, it is important to understand how insurance works. Three important components of insurance policies are the premium, policy limit, and deductible. A firm understanding of these concepts goes a long way in helping you choose the policy that best suits your needs.
A policy's premium is its price, typically expressed as a monthly cost. The premium is determined by the insurer based on your or your business's risk profile, which may include creditworthiness. For example, if you own several expensive automobiles and have a history of reckless driving, you will likely pay more for an auto policy than someone with a single mid-range sedan and a perfect driving record. However, different insurers may charge different premiums for similar policies; so, finding the price that is right for you requires some legwork.
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