• Top 12 Auto Insurance Terms You Should Know

    Being informed about auto insurance terms can not only save you money, but can also make the claims and policy configuration process much easier and less intimidating. Here are twelve terms that range from common everyday insurance terms to not so common verbiage that might have less emphasis on your policy documents. Insurance laws and available features vary from state to state, so it is important to address any questions with your agent. 

    Actual Cash Value: The fair market value of your vehicle. It is usually computed by taking the replacement cost of the vehicle, minus depreciation.

    Collision Insurance: Pays for damage to an insured vehicle when it hits or is hit by another car or object, or if the car overturns.

    Comprehensive Insurance: An auto insurance policy that covers damage to the policy holder’s vehicle that was not sustained in a motor vehicle collision, such as acts of God, impacts with an animal, fire, theft or other damage.

    Declarations: The part of your policy that includes your name and address; the property that is being insured, its location and description; the policy period; the amount of insurance coverage and the applicable premiums. The first page of your policy is usually referred to as your “dec sheet” or “dec page.”

    Deductible: The amount the policy holder will pay when they make a claim on their collision or comprehensive insurance policy. Generally, a highger deductible will result in a lower priced policy and a lower deductible will result in a higher priced policy.

    Depreciation: The decrease in value of any property due to wear, tear, and/or time. Generally, depreciation is not insurable.

    Gap Insurance: pays the difference between the actual cash value of the vehicle and the current outstanding balance on your loan or lease. This type of coverage is generally only available at the time of purchase.

    Liability Insurance: The part of your insurance policy that provides protection from claims and pays for the damages done to other people and their property. This extends to cover medical expenses, death benefits in the event of a fatality and reparation costs on vehicles and buildings as well as other property. 

    No-fault Insurance: May pay for your medical treatment, lost wages, or other accident-related expenses regardless of who caused the accident. This coverage is not available in all states.

    Subrogation: If your car is damaged because of another driver’s negligence and you ask your insurance company to settle the claim for damage to your car, they will seek payment recovery (including deductible) from the other party. This process of payment recovery is called subrogation.

    Third-party Claim: Claims for injury or damage to property of a third party alleged to have been caused by the insured.

    Tort: A private or civil wrong or injury, other than breach of contract, which violates a person’s legally protected right(s), and for which the law may permit a remedy in the form of money damages. Full Tort coverage allows a motorist and policyholder to retain unrestricted rights to bring a lawsuit against the negligent party in an automobile accident. Limited Tort allows drivers to save on their premiums by waiving their right to recover certain damages, such as payments for pain and suffering.

    References:

    http://www.geico.com/information/insurance-terms

    http://www.compuquotes.com/glossary-terms-auto-insurance.html

    http://www.carinsurance.com/kb/content15478.aspx

    http://insurance.freeadvice.com/information/auto/article/50

    http://ridewithmcgraw.com/net.data/ride.ndm/Info?page=Lingo&thisSection=marine