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Car Insurance Lingo
Reading your Auto Insurance policy often resembles reading Greek. Many specific terms and odd wording can lead you astray. Though learning Greek is optional, understanding your Auto Insurance policy is necessary. Since in forty-seven states it is a requirement to have some kind of Auto Insurance, being perfectly aware of what law requires is essential for all law-abiding citizens.
Here are some major commonly used terms and definitions you will come across while studying your Car Insurance policy. Recognizing what these terms mean makes it a lot easier to decipher this complicated document and feel assertive when you have to deal with the insured situations.
Deductible is the amount of money one agrees to pay for losses as part of a claim in the event of an accident. This is the payment that a person makes before the insurer pays the remaining cost associated with an accident. To set an example, your car may be subject to $1,000 of damage in an accident and your deductible sum could be $250. Accordingly, you would pay the first $250 and your insurer would pay the remaining $750.
Premium is the amount of money you as an insured person pay to protect your vehicle against certain risks. In other words, it is the cost of the insurance policy.
Covered Person is the term, which refers to the individuals who are insured under a policy contract and are eligible to benefits under their policy terms.
Benefit is the amount of money an insurance company pays to you or your beneficiary when you file a claim in case of an insured event.
Claim is the policyholder's request for the reimbursement of a loss which is covered by their insurance policy. It is necessary to keep your policy updated to avoid unpleasant surprises when you actually file a claim.
Endorsements are special changes to the original insurance contract, attached to your policy to modify the terms of the insurance contract. Endorsement is also an amendment to the policy written to cover unique items for the policyholder. It can be a different deductible or an additional car or driver.
Exclusions are the descriptions of the situations under which you and your car are not covered by an insurance policy; they are usually listed on your insurance policy document.
Indemnity means a sum of money (compensation to the victim of a loss) paid for a covered loss.
Limits mean the maximum amount of money your insurance company will pay out for a specific insurance coverage for your losses. Many states specify the minimum limits an insured person must purchase.
Tort is a term used to describe the case when someone is found liable for injuring another person or damaging his/her property. It is a private or civil wrong leading to a lawsuit.
Lapse in Coverage (Policy Lapse) is a break in insurance coverage when a policy has been canceled or terminated due to nonpayment of premium.
Claims Adjuster is a person whose duties are to investigate the claim, i.e. evaluate the damage caused to property or people when an insurance-related accident occurs and then make recommendations to the Insurance Company.
Comprehensive is one of Car Insurance types, which offers protection against damage to the insured car caused by fire, theft, earthquake, flood, falling objects, missiles, explosion, riot and civil commotion. In other words, Comprehensive coverage pays for loss or damage to your covered car caused by any event other than collision.
Bodily Injury Liability is a type of Car Insurance which covers medical and rehabilitation expenses for injuries the policyholder causes to another party.
Property Damage Liability is the type of Car Insurance coverage which pays for the insured person's financial loss if they are found responsible for damages to a third party in the event of an accident (someone not covered by the insurance policy).
Collision is one of the Car Insurance types, which protects against damage or loss resulting from any collision with another car or some object, no matter whether it was the insured person's fault or not.
Gap Insurance is a type of Auto Insurance policy that offers coverage for the difference (gap) between a car's actual cash value that your insurance company pays when your car is totaled or stolen and the amount the insured person owes the finance company.
Medical Payments is the type of Car Insurance which covers hospital and doctor bills, and may also cover funeral expenses resulting from an accident. Medical Payments may often overlap with your health insurance. Thus, it is important to check it prior to a new insurance coverage policy purchase.
Personal Injury Protection (PIP) is the type of Car Insurance which covers the cost of treatments for injuries not covered by the Medical Payments Insurance. They are lost wages, child care, etc.
Uninsured/Underinsured Motorist Coverage covers the cost of damages, repairs, or injuries caused to the policyholder or passengers in his/her vehicle in the event of a collision with an uninsured or inadequately insured driver.
"No Fault" coverage means that if you are injured in an accident or your car is damaged, you can make a claim, regardless of who is at-fault for the accident.
Towing Costs is a Car Insurance coverage that pays for the cost of towing of a disabled car.
Fleet Policy is a type of Auto policy which covers a multiple number of cars, often 5 or more.