15 Auto Insurance Terms You Must Know

Auto Insurance Terms

Understanding the terminology used within your insurance policy is the best step that you can take to ensure that you are obtaining the best value for your auto insurance policy.

(1) Bodily Injury Liability Coverage (BI)

One of the best auto insurance values is known as bodily injury liability coverage. This pays for bodily injury claims made against you because of an accident caused by you. It pays for pain and suffering, lost wages, and other damages associated with someone else’s bodily injury.

(2) Comprehensive Coverage

Comprehensive coverage is a component of the physical damage portion of your auto insurance policy. Able Auto Insurance, an agency operating in North Carolina and South Carolina, describes this as a coverage that reimburses drivers for flooding, theft and vandalism, and damage from falling objects. This is essentially protection for your car that covers damage other than collision.

(3) Collision Coverage

Another component of physical damage coverage is known as collision coverage. Collision coverage provides protection to you for damage to your own vehicle. This coverage pays you for damages, regardless of who may have been at fault for an accident. Collision coverage will be subject to a deductible.

(4) Declarations Page (Dec Page)

A declarations page is one of the most important documents you should keep available other than an insurance card for your policy. It will provide information on your policy limits, the coverage components you have, and the policy deductible. This document summarizes all the coverage that is available under your policy.

(5) Deductible

A policy deductible is that portion of the claim that an insured is obligated to pay on their own. The size of the deducible is up to the policyholder. Your choice can be made at the time that you purchase your policy. Bear in mind that the higher the deductible the lower the premium. The reason for this is that when you have a higher deductible you agree to absorb more of a loss. In exchange for accepting more of this risk, the insurance company provides you with a discounted total premium.

(6) Limits

There are several different types of coverage in an auto insurance policy. Each of these will have a different limit. The word “limit” means the most that an insurance company will pay for a claim under that section of a policy.

In some cases, the policy limit is not dictated by a set dollar amount but is dictated by the value of an insured vehicle. For example under the physical damage coverage, an insurance company will pay the amount required to repair or replace your damaged vehicle with no mention of any policy limit.

(7) Personal Injury Protection (PIP) Coverage

Most states require personal injury protection coverage and in Texas, PIP coverage must be offered to a policyholder, who can reject the coverage if they wish. If you are seeking auto insurance in Houston, you will be offered PIP under Texas law. Personal injury protection coverage provides payments for medical bills for the driver and passenger of an insured vehicle. Personal injury protection coverage is known as no fault insurance because it pays regardless of who is at fault for the accident.

(8) Policy Term

An auto insurance policy is designed to provide coverage over a defined period. This area has a start date end date did find end date. This is known as the policy term.

(9) Premium

The amount you pay for your auto insurance coverage is known as the premium.

(10) Property Damage Liability Coverage (PD)

If you cause an accident that causes damage to property of others, your property damage liability limit will pay for that damage. In most states, there is a minimum required limit of liability for this coverage.

(11) Rental Reimbursement Coverage

The top auto insurance companies will usually offer this valuable coverage. This will provide you with a rental vehicle in the event that you need a replacement for your vehicle is being repaired.

(12) Roadside Assistance Coverage

Another common coverage offered by many auto insurance companies is known as roadside assistance coverage. Auto Insurance Discounters provides this type of coverage, which is usually bundled with extras such as towing, gap coverage and rental reimbursement.

(13) SR-22

In many states if you fail to maintain the proper amount of insurance coverage you will be required to file an SR-22 form. Policyholders out who are required to file an SR-22 are not considered the most desirable policyholder for an insurance company. Drivers who are required to file this form are considered high-risk drivers. Other high-risk drivers include those with DUI’s or multiple driving violation points. Some insurers have found viable ways to insure those with less than perfect records, such as Workmen’s Auto Insurance.

(14) Uninsured Motorist Coverage (UM)

This coverage pays a policyholder for damages caused by a driver of another vehicle as long as that other driver is operating without valid insurance. Many states require this coverage as mandatory.
Acceptance Auto Insurance provides this coverage in 12 states, but in Illinois, Missouri and South Carolina this is a mandatory coverage.

(15) Underinsured Motorist Coverage (UIM)

This coverage is very similar to uninsured motorist coverage and pays for damages to an insured driver that may exceed the coverage limits of the at-fault party.

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