This guide is general information, not insurance or legal advice. Coverage, prices and rules vary by insurer and by state, so read your policy documents and check with your insurer, a licensed agent or your state’s department of insurance before you decide.
Key facts
- The premium is the price of the policy; the deductible is the part of a loss you cover yourself before the company pays its share.
- A coverage limit sets the top payout for a single accident under each coverage type; an aggregate limit caps the total paid across all claims in a policy period.
- The declarations page summarizes your coverages, limits and deductibles, but it is only a summary, not the full policy.
- Definitions differ from insurer to insurer, so check how each policy pays claims, such as replacement cost versus actual cash value.
- Cancellation usually means a refund for unused premium, while nonrenewal means the insurer declines to continue the policy at the end of its period.
Comparing insurance quotes gets easier once the vocabulary stops getting in the way. Two policies can carry the same price and still cover very different things, so the words on a quote sheet matter as much as the numbers. These are the terms that show up most often on quotes, declarations pages and policy documents, explained in plain English.
Premium and rate
- Premium. What you pay an insurance company to keep a policy in force.
- Rate. The pricing basis behind your premium. Actuaries, specialists in the mathematics of insurance pricing, work out rates, and the details about you and what you insure then shape the premium you are actually offered.
Deductible and out-of-pocket costs
These terms describe who pays what as a claim moves through the process.
- Deductible. The part of a loss you cover yourself before the company begins to pay its share.
- Coinsurance. Your share of the cost of a covered service once the deductible is met. You pay a set percentage of the cost and the plan pays the rest.
- Out-of-pocket maximum. The ceiling on what you spend for covered services in a year. Once you reach it, the plan pays the full cost of covered services.
Coverage, limits and exclusions
- Coverage. The kinds of damage or injury the policy commits the insurer to pay for.
- Coverage limit. The top amount the insurer will pay for a single accident under each kind of coverage. Some liability limits are written as three numbers, such as 50/100/50; our guide to car insurance liability limits explains what each number covers.
- Aggregate limit. The total cap on what an insurer pays across all claims during a policy period, however many separate events occur.
- Exclusion. A cause of loss, type of property or situation the policy does not cover. Exclusions are where shoppers get caught out, so read them before you buy.
- All-risk coverage. Sometimes called open perils. This kind of policy covers every cause of loss except the ones it lists as excluded. The alternative is a named perils policy, which pays only for the causes of loss written into the contract.
- Endorsement. An amendment that adds or trims coverage and can affect your premium.
Quote, declarations page and named insured
- Quote. An estimate of what a policy will cost, based on the information you provide. Keep the details basic. The FTC warns that you should never hand over your Social Security, bank account or credit card number just to see a health insurance quote.
- Declarations page. Often called the dec page, this is the summary at the front of your policy. It lists your coverages, limits and deductibles, plus the dates the policy takes effect. An auto dec page also names the insured vehicles and drivers, while a homeowners page shows where the insured property is. You should get a fresh one at each renewal.
- Named insured. The person, firm or organization shown on the declarations page as the policy owner. The named insured gets every benefit the policy provides and is the only party allowed to change the policy, file claims, receive payments or cancel it.
Smart tip
A dec page is only a summary and will not show everything inside the policy. Read the full document before you sign, and make sure the contract matches what the salesperson described.
Surcharges, discounts and rating factors
- Surcharge. An extra charge added to your premium, the opposite of a discount.
- Discount. A reduction to your premium. Discounts you already receive may appear on your dec page, and it never hurts to ask your agent or insurer whether you qualify for others.
- Rating factor. A detail about you, your vehicle or your property that an insurer uses to calculate your rate. Insurers can weigh the same factors differently, which is part of why prices vary between companies for the same driver.
Cancellation, nonrenewal and claims
- Cancellation. Ending a policy before its stated end date. Policyholders usually get back the premium they have not used, though some insurers charge a fee to cancel.
- Nonrenewal. When the insurer chooses not to continue a policy once its current term runs out.
- Claim. A formal request a policyholder sends to the insurer asking for payment toward losses or damages.
Why definitions vary between policies
Whichever definition counts is the one in your own policy. Insurers do not all define terms the same way, so the same word can mean slightly different things on each quote you compare. One difference worth checking is how a claim would be paid: some policies settle losses on a replacement cost basis, while others pay actual cash value, which subtracts depreciation. That single distinction can change the size of a payout. Our guide to replacement cost vs. actual cash value explains how each method works.
With the vocabulary in hand, comparing quotes becomes a matter of matching each number to its definition instead of scanning for the lowest price. For a next step, our guide to what affects car insurance rates explains which rating factors you can change and which ones you cannot.
Questions we hear
What is the difference between a premium and a rate?
The premium is the amount you pay the insurance company for your policy. The rate is the pricing basis behind it, which actuaries calculate and your personal details then shape into the premium you are offered.
Is the declarations page the same thing as my full policy?
No. The declarations page summarizes your coverages, limits, deductibles and effective dates, but it does not show everything the policy contains. Review the entire document and ask questions before you buy.
Will I get money back if I cancel an insurance policy?
Typically, policyholders receive a refund for any unused premiums when a policy is canceled before its end date. Insurers may charge a cancellation fee, so check the terms of your policy.
What should I never provide just to get a price quote?
The FTC advises against entering your Social Security, bank account or credit card number just to get a health insurance price quote. A legitimate quote needs only basic information, such as your age and income.