Frequently asked questions

Insurance is a way to share the cost of unexpected losses across a large group of people. Each person pays a regular premium, and that money is pooled together. When someone in the group has a covered loss, they file a claim, and the pooled money helps pay for it. This system, called risk pooling, turns a rare but expensive loss into a small, predictable cost. See How Insurance Works for more detail.

A deductible is the amount of money a policyholder pays out of pocket before insurance starts paying for a covered loss. For example, if a policy has a $500 deductible and a claim totals $2,000, the insurer typically pays $1,500 after the policyholder covers the first $500.

Underwriting is the process insurers use to evaluate risk before offering a policy and setting its price. It can involve reviewing an applicant's history, health, property, or driving record, depending on the type of insurance.

A premium is the regular payment, often monthly or annually, required to keep an insurance policy active. If premiums stop being paid, a policy typically lapses and coverage ends.

A policy limit is the maximum amount an insurer will pay for a covered loss, or over the life of a policy. Costs above that limit are generally the policyholder's responsibility unless additional coverage applies.

Collision coverage is part of an auto insurance policy that pays to repair or replace a driver's own car after a crash with another vehicle or object, regardless of who caused the accident. It applies after the policyholder's deductible is met. More detail is available on the Auto Insurance page.

Comprehensive coverage pays for damage to a car from causes other than a collision, such as theft, vandalism, fire, flooding, hail, or hitting an animal. It's a separate coverage from collision, with its own deductible.

Liability coverage pays for injuries or property damage a driver causes to someone else in an accident. It does not pay for the at-fault driver's own injuries or vehicle. Most states require drivers to carry a minimum amount of liability coverage.

“Full coverage” is an informal term, not an official policy type. It typically refers to a bundle of liability, collision, and comprehensive coverage. Even under this bundle, each coverage still has its own limit, deductible, and exclusions.

Uninsured motorist coverage helps pay for a policyholder's injuries or damage when the at-fault driver has no insurance at all. A related coverage, underinsured motorist coverage, applies when the at-fault driver has insurance but not enough to cover the full loss.

Insurers commonly review claims history when pricing a policy. An at-fault accident is often factored into pricing at the next renewal, since it can indicate a higher likelihood of future claims. The exact effect varies by insurer and state. See Average Costs & What Affects Rates for general patterns.

Gap insurance covers the difference between what's owed on a car loan or lease and the car's actual value if it's declared a total loss. It mainly applies to newer financed or leased vehicles.

Renters insurance is a policy that protects a tenant's personal belongings and finances, separate from the landlord's own insurance, which covers the building itself. A renter pays a premium to keep the policy active, and if a covered loss occurs, like theft or certain water damage, they can file a claim to be reimbursed, minus their deductible. See Renters Insurance for a full breakdown.

Standard renters insurance typically covers personal property (belongings like furniture and electronics), liability (costs if someone is injured in the rental or the tenant damages someone else's property), and loss of use (temporary living expenses if the home becomes unlivable after a covered loss).

Generally, a renters policy only covers the people named on it. A roommate who isn't listed on the policy typically needs their own separate policy to cover their own belongings and liability.

Renters insurance is generally not required by state law, but many landlords and lease agreements require tenants to carry it as a condition of renting.

Actual cash value pays what a damaged item is worth today, after depreciation. Replacement cost pays what it would cost to buy a new equivalent item, without subtracting for depreciation. Replacement cost coverage often costs somewhat more but generally pays out more at claim time.

It depends on the cause. Sudden, accidental water damage, like a burst pipe, is typically covered. Gradual damage from neglect or lack of maintenance, and flooding, usually are not covered under a standard policy and may need separate coverage.

Age is generally the biggest factor in life insurance pricing, since it's the strongest general predictor of life expectancy. Other common factors include health and tobacco use, the coverage amount and term length chosen, family health history, occupation, and hobbies. See Average Costs & What Affects Rates for illustrative figures.

Term life insurance covers a set period, like 10, 20, or 30 years, and has no cash value. Whole life insurance lasts for life as long as premiums are paid, and builds cash value at a guaranteed rate. Term premiums are typically lower; whole life premiums are typically higher and fixed.

Life insurance underwriting is the process an insurer uses to evaluate an applicant's risk. It commonly involves a health questionnaire, sometimes a medical exam, and a review of family health history and lifestyle factors like tobacco use. The result determines a risk classification, which affects the premium.

A beneficiary is the person or people named to receive a life insurance policy's payout, called the death benefit, if the policyholder dies while the policy is active.

Cost varies widely based on age, health, coverage amount, and policy type. Published 2026 industry data shows illustrative rates of roughly $18–$30 a month for a healthy, non-smoking 30-year-old buying a $500,000, 20-year term policy, with rates generally higher for older applicants. See Life Insurance for illustrative tables by age.

The contestability period is an early window, often the first two years of a policy, during which an insurer can investigate and potentially contest a claim if the original application contained inaccurate information.