Coverage
What the policy covers exactly and up to how much. What matters is not what it includes but what it excludes.
In the chapter
The cushion and the cover, before anything else
From the same chapter
- Emergency fundMoney available instantly to cover several months of expenses. Not an investment and not meant to earn: its job is to be there on the bad day.
- InsurancePaying a small certain amount to avoid exposure to a large unlikely one. It only makes sense when the blow it covers would ruin you.
- DeductibleThe share of the blow you pay before cover kicks in. Raising it cheapens the premium, and it is sensible right up to what you can absorb without flinching.
- Insurance premiumWhat you pay periodically to stay covered. Comparing premiums without comparing cover is comparing prices of different things.
- Insurable riskThe unlikely but catastrophic kind. The likely and small kind is paid out of pocket: insuring it is expensive because the insurer knows it too.