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Know Your Policy

Do you spend more time researching purchases like coffee makers, vacuums and running shoes than you do your insurance? You’re not alone. Use our tips to understand what information is in your home, auto and business insurance documents. It’s important to know your policy.

Why it’s important to know your policy

Your car, home or business are likely your most valuable assets. That’s why it’s important to ask questions and know your policy before a potential disaster strikes.

Contact your insurance representative to review your existing policies, start new policies, and ask questions to ensure you're properly protected.

How insurance works

Insurance is a contract – also known as a policy – that protects you against financial loss under certain circumstances. Understanding your policy includes understanding how insurance works.

When you buy insurance, the money you pay – your premium – is put into a large pool with the money many others pay. Some of that pool of money helps pay insured people who suffer a financial loss in that year. Financial payments for these losses are called claims. Here’s how it works:

  1. Your insurance company estimates an annual cost or premium to accept the risk of covering your home, business or car. Premiums are based on how much money insurance companies think they will need to pay for the coming year's claims. There are many factors that go into this – like where you live, your claims history and the value of your property. Learn how home, auto and business rates are set.

  2. On a monthly or annual basis, you pay a premium to your insurer for taking on this risk on your behalf.

  3. Your insurance company puts premiums into one large pool of money to pay for claims. Typically, insurance is an annual contract, so the pool has premiums being added and subtracted from it all the time.

  4. Not everyone makes a claim so your insurance company uses the pool of premiums from many people to pay the claims of a few people.

Know how to read your insurance policy

Your policy is a legal document and it’s your responsibility to understand what is – and is not – included in it. While your insurance representative should be your go to person to understand the details of your policy, we’ve highlighted some important terms here.