It is a contract between you and an insurance company in which you agree to pay a premium in return for the company’s promise to pay a certain amount in the event of a covered event.
The costs of a car accident, medical bills, or property damage can all be covered by insurance, up to the limits of your policy.
For instance, if you have collision coverage on your car that has a limit of $25,000 and you get into an accident that damages your vehicle by $30,000, the insurance company would only pay you $25,000 to cover the cost of repairs.
If a covered event occurs, you may be liable for a deductible, depending on the terms of your policy. This indicates that before your insurance coverage kicks in, you will be responsible for paying a predetermined amount.
