Insurance basics
The words every insurance policy uses.
Almost every policy, whether for a car, a home, a life or your health, is built from the same few ideas. Learn them once and every policy becomes easier to read and compare.
Core terms
Eight words that explain most policies.
These definitions match the ones in our glossary, which has more than forty terms.
| Term | What it means |
|---|---|
| Premium | The amount you pay to keep an insurance policy in force, usually monthly, every six months or every year. |
| Deductible | The amount you pay yourself before your insurance pays toward a covered loss. |
| Limit | The most an insurer will pay for a covered loss under a given coverage. |
| Exclusion | A cause of loss or a situation that a policy specifically does not cover. |
| Claim | A formal request to your insurer to pay for a loss that you believe your policy covers. |
| Declarations page | The summary page of a policy. |
| Endorsement | An addition to a policy that adds, removes or changes coverage. |
| Policy | The contract between you and your insurer. |
Inside a policy
What you are really buying.
An insurance policy is a contract. Reading its few main parts tells you more than any summary can.
The declarations page
A one-page summary of who and what is covered, the coverage limits and the deductibles.
The policy form
The contract itself, which says what is covered, what is excluded and what you must do after a loss.
Endorsements and riders
Changes that add, remove or modify coverage, such as extra protection for a specific item.
Questions to ask before you buy
- What are the limits?The most the policy will pay for each type of loss.
- What is the deductible?What you pay before the insurer pays its share.
- What is excluded?Read the exclusions, because they decide what a claim will not cover.
- What does the price include?Compare policies with the same limits and deductibles, not just the premium.
Your state sets many insurance rules, so the details differ by where you live. Use our state pages for the rules that apply to you.
Questions
Common questions.
What is the difference between a premium and a deductible?
The premium is what you pay to keep the policy active. The deductible is what you pay toward a covered loss before the insurer pays its share.
Why do insurance rules differ by state?
States regulate insurance and set many of its rules, such as minimum car insurance limits, so the requirements depend on where you live.
Where can I look up an unfamiliar term?
Our glossary explains more than forty insurance terms in plain English, and most link to a guide that goes deeper.
Pick a topic to go deeper.
Start with the insurance you are deciding on now, or browse every article by topic.