Most people regard car insurance as any other piece of paper, but its importance cannot be understated, especially regarding renewals and claims. Awareness of the basic terms of car insurance is vital. If you do not know them, the insurer and the workshops can easily extract maximum profit by forcing you into paying more than you are supposed to. In this article, we will address 15 auto insurance terms that you must know.Shutterstock
- Actual Cash Value
Actual Cash Value or ACV is the car’s value, considering the make, model, age, mileage, and condition.
- Bodily injury liability
It is liability coverage, which covers the financial cost of the injury or death resulting from an accident caused by you. Additionally, it covers the loss of income claims, medical bills, and the suffering and pain damages arising from the legal action. However, you must know that the bodily injury liability will not pay for your medical expenses.
It is the money that the person believes that the insurance company must pay them in the event of an accident. It might be for bodily injury, property damage, or both. It is a documented, formal request that you will be making to your insurance company to demand compensation in the event of a financial loss. Before you receive the claim amount, the insurance company will verify the authenticity of the claim. If your proof of loss is genuine, the company will cut you the check for the decided amount.
- Collision coverage
It is the coverage that pays for damage to your vehicle, irrespective of whether it is your fault or not. When you are driving a car that is exceptionally close to your heart, a brand-new vehicle, or a classic, this is excellent coverage for you to invest in. Also, when you finance your car, this is a compulsory expense. But, if you are riding a two-decade-old vehicle, then this might not be the most suitable plan for you.
- Comprehensive insurance
Comprehensive insurance covers any damage subjected to your car or any vehicle that you may be riding. Overall, this policy will provide for the damage to your vehicle as an outcome of floods, vandalism, tree falling on it, and theft. However, this policy will not cover the damage resulting from incidents. Only the damage inflicted from a collision will be provided for. Typically, the policy will detail what it covers and what it does not. Hence, you must read through the fine print carefully.
- Declarations page
The page lists the coverage summary, comprising the limits, the vehicle covered, the kind of coverage you have, and the cost for each car.
The deductible is the insured’s money to pay to the insurance company before compensating you for the claim. For instance, if you take an auto insurance policy, and you are involved in an accident, which results in $3000 damage, you have to bear a deductible amount of $300. The company will pay the remaining $2700 or up to the capping of the policy.
It is the loss percentage that a vehicle undergoes because of regular wear and tear. As the car gets older, the depreciation rate increases, and the amount you receive from the insurer as the claim goes down.
It implies a change in the policy by modifying or changing a particular coverage. Under this, you can modify, reduce, or add terms, provisions, or coverage in the policy.
- Family car policy
It is an auto insurance policy including one or more than one coverages from the listed categories: Medical expense, Liability, Uninsured motorist, and Physical damage. Coverage is provided solely for the individually-owned private passenger truck or car.
- Full coverage
Even though full coverage is one of the more loosely used terms, in reality, there is no such thing as full coverage in insurance. But, full coverage implies that your insurance policy covers more than the liability coverage. For instance, an insurance policy with rental car reimbursement, collision and comprehensive coverage, roadside assistance, underinsured and uninsured motorist coverage, and the like, might be labeled the full coverage.
- Insurance ID Card
It is an ID issued by your insurance company that contains all the essential information regarding the policy.
Liability is the responsibility or the legal obligation one party has towards the other party for causing loss, injury, or damage. For instance, if you rear-end someone’s vehicle, and the passengers or the driver or both are injured, you will be liable to pay for the damage to the persons or property. In this case, the liability coverage of your auto insurance policy would pay for the damage up to the specified limit.
- Named insured
Like the term insured, the named insured refers to the entity or the individual the insurance policy covers. The name of this organization or person can be seen on the declaration page. However, in some cases, the two might not be the same. For instance, if a company has general liability insurance, in this case, the company will be the ‘named insured,’ and the name of the company will be listed on the declaration page. The employees, too, would be insured in the policy, but only when performing the company’s duties. So, in this case, the employees are the insured, but not the ‘named insured,’
It is the sum of money you (the insured) pay to the insurance company in exchange for the coverage. Depending on your insurance policy, the coverage can be paid in different ways – a single upfront payment or the monthly payment. The amount you pay as a premium depends on several factors and will depend on the deductibles, kind of policy, limits, or whether the insurance is for the entity or the individual.