Car Insurance Terms To Know
Car insurance importance cannot be over-emphasized. This type of insurance is one that safeguards you financially by covering you and your car in cases of theft or accidents. If you are in search of peace of mind, car insurance is one of the essential things you should consider.
However, if you are the right ‘Gee’ and are about to sign up for a car insurance policy, you should learn and know all the car insurance terms that are important.
Understanding these auto insurance terms will help you make the right decision when signing up for a policy and save you from scammers and fraudsters.
This is why in this article, you will be exposed to the key auto insurance terms that you need to know. To start with, let’s take a quick review of some car insurance definitions and why it is important to learn these car insurance terminologies.
Car Insurance Overview
Car insurance which is otherwise known as auto insurance is an insurance policy that covers the expenses for damages caused to your car due to unforeseen circumstances such as theft, accidents, etc.
Basically, car insurance protects you from paying for repairs and other damages whenever your car is involved in an accident or is carted away.
There are many types of car insurance. Some protect you from paying for another driver’s injuries and repairing their cars after causing a collision. Others cover the total cost of replacing your car when it was stolen and many other situations.
To sign up for a car insurance policy, it is crucial to know the major terms in insurance, particularly the ones related to car or auto insurance. After all, if you sign an insurance policy without fully understanding what it is, it could pose a danger and great disadvantage in the future – hence, the need to know these terms.
Important Car Insurance Terms
- Third-Party Liability Cover: This is one of the commonly used car insurance terms. It is also called the “liability-only” policy or an “act-only” policy. Third-party liability cover is part of a car insurance policy that compensates a third party in the case of an accident-related injury, fatality, or property damage.
- Comprehensive Policy: Offers complete protection against a variety of incidents for both the insured vehicle and the owner. The following are covered by the plan: explosion, fire, theft, housebreaking, earthquakes, external accident, etc. It also covers terrorist acts, malicious activities, hurricanes, and floods among others.
- Collision Coverage: This is another car insurance terminology that covers a situation where your car sustains damage after striking another item, like a brick wall or rolling over. It may also be relevant if you hit a pothole that seriously harms your car. Only your car is covered by this insurance.
It doesn’t pay for anything the automobile hit; that’s covered by your property damage responsibility. 72% of insured drivers have this coverage, according to data from the National Association of Insurance Commissioners in 2004.
4. Endorsement: this is an amendment to a car insurance policy’s coverage made after it was first issued. The endorsement comes in two ways; it can be premium-bearing or non-premium-bearing updates.
The premium bearing is made for correction of the car’s ex-showroom price, the addition of a CNG/LPG kit, removal of anti-device, etc. On the other hand, non-premium bearing endorsements are made when there is a change in the customer’s address, nominee details, registration number, customer details, etc.
5. Break-In Insurance: This is also a popular car insurance term. It is a situation that you experience when you forget to pay your insurance fees on time. After the policy lapses, your insurance provider will only renew coverage for your car following a thorough vehicle inspection. After the premium is paid, the coverage will start.
6. Personal Accident Cover: This car insurance term is a part of the comprehensive car insurance package that protects the driver of the insured car from accidental disabilities and death.
This coverage is also provided by some insurance providers in addition to the third-party liability insurance policy. The insured might decide to get personal accident insurance for the named passengers if necessary by paying an additional premium.
7. Add-On Covers: These are insurance plans that you can opt for separately for paying an extra rider premium. If you have a comprehensive car insurance policy, you can increase the policy’s coverage by choosing the right add-on covers.
8. Personal Accident Cover: This car insurance terminology is a component of comprehensive car insurance that protects the owner and driver of the insured vehicle from accidental injuries and death.
9. Non-Economic Benefits: these are benefits that cannot be quantified such as discomfort, emotional stress, diminished quality of life, loss of companionship, etc.
10. Rate: This is the cost of a unit of insurance (usually $1,000 worth). Insurance is based on the history of loss experience for similar risks. What a driver pays for auto insurance is based in part on past experience by that company with drivers categorized by similar factors such as age, gender, marital status, driving record, and make and model of car.
11. Auto Cash Value: there are a few ways your insurance policy can be set up that influence the amount you are paid when you file a claim. Actual cash value is one of those few ways and it is calculated by deducting the amount of depreciation from the initial cost of the property. In most cases, actual cash value coverage is a cheaper insurance option.
12. Agent: This is a famously used car insurance terminology. An agent, also known as an insurance agent, sells or markets insurance policies for an insurance company.
13. Asset.: these are the things you own that have a substantial amount of financial value or can generate financial value in the nearest future. For instance, your house, car, savings, and investments are your assets. They are often taken into consideration when buying specific insurance policies like liability or life insurance.
14. Claim: Any request for compensation made within the parameters of an insurance policy is referred to as a claim.
15. Damage: Any damage to a person or piece of property, like a house or car, is referred to as damage. For instance, “damage” might exist if an attempted theft resulted in the windows of your car being damaged.
16. Damages: this is one of the most confusing car insurance terms. This refers to the exact money you are legally required to pay to another individual.
17. Declarations Page: This page essentially serves as a snapshot of the key details of your insurance policy. Along with the coverages, limitations, premiums, deductibles, and dates of coverage, it will also include information about the policyholder, including name, address, and policy number.
18. Deductible: The sum of money that you, the insured, must pay before the insurance company assumes responsibility is referred to as a deductible. For instance, if your auto insurance policy has a $500 deductible and you are in an accident that causes $5,000 in damages, you would pay $500 and the policy would pay the remaining $4,500 or up to the policy limit.
19. Exclusion: An exclusion is occasionally a predetermined scenario or incident that an insurance policy does not cover. Exclusions can be used by an insurance company to better define the scope of a policy’s coverage, but they can also be used by a policyholder to tailor their own protection. For instance, an insurer may in some circumstances use an exclusion to eliminate coverages from a policy that would not be applicable to their circumstances.
20. Limits. This refers to the maximum protection for a particular coverage that the insurance company will agree to pay for in the event of a claim. This sum is specified on your policy declaration page and is agreed upon prior to the issuance of the policy.
For instance, Your car insurance coverage might contain a limit of $60,000 per accident. This means that when the insurance company has paid up to that maximum, the policyholder is then liable for covering any additional costs.