Gnomenclature

Inflation is a period of rising prices. A moderate amount of price increases is considered healthy; but when the inflation rate is high or accelerating quickly, it tends to be disruptive to consumers and businesses. Inflation in the United States is commonly measured by the Consumer Price Index (CPI), though the Federal Reserve uses a measure known as the Personal Consumption Expenditures Price Index.

Insurance coverage cap specifies the upper limit of the amount covered. The amount the insurance company will pay will be based on the assessed cost of damage or loss, but only up to the coverage cap specified by the policy. You should know the potential cost involved in repairing or replacing any insured policy before signing on to a coverage cap. A lower cap might make the policy cheaper, but it may leave you with unexpected expenses far in excess of that cap.

Insurance deductible refers to the portion of any covered expense that you must pay out of pocket before the insurance kicks in. Having a higher deductible will typically make an insurance policy cheaper, but it will also leave you on the hook for a greater amount of the cost if you experience damage or loss to covered property.

Interest is money paid on borrowed funds in addition to repayment of the borrowed principal. Interest is assessed as a percentage of the amount owed. You may pay interest when you borrow money or earn interest when you invest in a savings account, certificate of deposit, or a bond.