If you’re looking around for home or auto insurance, you may find the process confusing, especially if you’re new to buying coverage and aren’t familiar with the terminology. Here are five essential things you should know when you consider options for your residence or vehicle.
What Is a Deductible?
A deductible is the amount you pay out of pocket when you file an insurance claim. Deductibles were created decades ago to discourage policyholders from filing petty or even fraudulent claims.
In most cases, deductibles are a flat fee, such as $500 or $1,000, but can vary based on your policy. You can potentially lower your deductible by paying a higher premium (the cost of the insurance policy). This works in reverse, too: being willing to pay a higher deductible typically results in a lower premium. It’s a bit of a gamble, but if you have a good driving record or never file homeowner claims, it may be worth having a higher deductible so you can pay less for your policy.
What Is "Full Coverage" Auto Insurance?
Full coverage auto insurance can mean different things but usually has three components:
- Liability insurance (almost always dictated by your state)
- Collision insurance
- Comprehensive insurance
Liability coverage can help pay for medical care and property damage if you are at fault in an accident. Collision insurance is designed to help cover the repair or replacement of your vehicle if it is damaged while it's moving. Comprehensive insurance is intended to protect your car or truck in the event it's damaged while it isn't moving (hail, theft, parking lot, etc.).
Does Your Insurance Always Pay After a Motor Vehicle Accident?
Insurance carriers usually pay out for liability or collision insurance only when you are at fault in an accident. If someone else is determined to be at fault, their insurance typically pays.
There are exceptions to this; for example, some states are “no-fault” states, meaning each party’s insurance pays for their own damages, regardless of who is at fault. Missouri is not a no-fault state. There are also situations where an uninsured or underinsured driver may hit your car. We recommend you understand how this works before purchasing auto insurance and deciding on coverage options.
What Is Replacement Cost Versus Actual Cash Value?
Most home insurance policies are based on either replacement cost (RCV) or actual cash value (ACV).
Actual cash value insurance pays out at what your property is worth at the time of the claim with depreciation for wear and tear over time. This is why ACV insurance usually costs a bit less than replacement coverage.
RCV will then make you whole for the full cost to repair or replace property at today's prices. That's why RCV is a little higher.
For example, if your roof is damaged by hail and has an RCV settlement, the company will pay the ACV first and then the full RCV amount when the replacement is complete. Very often your insurer will work with your roofer to get the job done.
Why Do Independent Agents Offer More Choices?
Independent agents don’t work for just one insurance carrier with a limited number of insurance products — we network with multiple insurance carriers to find you the right coverage.
Do you have more questions about selecting home or auto insurance? Call CW Rea Insurance Agency at 314-965-0501 for more information, or contact us for a quote.