If you're like most people on the verge of making their first vehicle purchase, you probably already know that you'll be required to carry auto insurance — and if you've been looking at potential policies, you may feel somewhat lost at sea with all the jargon you're trying to navigate. Fortunately, by taking the time to familiarize yourself with key insurance terms and concepts, you can gain a clearer understanding of what your policy covers and what obligations you may have.
Here's what you need to know about common car insurance terms.
Dig into Policy Details
As you delve deeper into your policy, you'll encounter terms related to specific aspects of coverage. Liability coverage refers to insurance that helps cover costs if you're held responsible for an accident. It often comprises two components: bodily injury liability, which covers costs associated with another person's physical injuries, and property damage liability, covering costs to repair damage to another person's property.
Comprehensive coverage protects against damages not caused by collisions, such as theft, fire, or natural disasters. Collision coverage helps pay for damage to your car due to an accident with another vehicle or object. Uninsured or underinsured motorist coverage steps in when you're involved in an accident with a driver who doesn't carry adequate insurance, if any.
Understand Claims and Settlements
Upon filing a claim, your insurance company may assign you an adjuster. This is a professional who assesses the damage to your vehicle and determines how much the insurance company should pay for the repairs. The actual cash value (ACV) is the amount your car is worth right before it was damaged, and it's often used to determine how much your insurance company should pay if your vehicle is totaled.
Delve into Discounts and Deductibles
Insurance companies often offer discounts based on certain criteria. For example, a safe driver discount may be given to those with a clean driving record, while a multi-policy discount may be awarded if you have more than one type of policy with the same company.
The term deductible is also pivotal in understanding car insurance. It's the amount you agree to pay out-of-pocket towards a covered claim before your insurance coverage kicks in. Opting for a higher deductible typically means a lower premium, but it also means you'll pay more if you ever need to file a claim.
Get to Know the Legalese
Finally, terms like 'exclusion' and 'endorsement' are also important. An exclusion is something your policy does not cover, and understanding these can save you unpleasant surprises down the line. An endorsement, on the other hand, is a modification to your policy that changes your coverage.
Share17 July 2023
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