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Car insurance glossary
One of the most intricate things about car insurance that leaves too many people confused is the insurance glossary. The wording in most policies is usually so complex and coded that the easiest way to get over it is to skip the entire document and just sign it. Well, that's exactly what insurance providers want you to do when giving you those documents to read, and they are fitting the most interesting and controversial provisions exactly in places with the most intricate wording. As a result, you end up misinterpreting important features of the policy and overlooking some nasty exclusions that won't make you very happy when you'll try to get coverage for them. That's why it is crucial to take some time and get accustomed with the car insurance glossary that should become your companion whenever you're trying to read the contents of the insurance policy. It's better to read twice and look up an unknown term rather than rush your decision and end up with an inadequate policy. The following are the most important and intricate terms in car insurance that you will surely see a lot in various policies:
Actual Cash Value (Cash Value) -
The overall cost of completely replacing the vehicle with respect to depreciation.
Additional Interest Insured -
A person other than the actual policyholder that is also mentioned in the policy as being liable in case of an insurance claim.
A person who is responsible for evaluating the damage and losses after the claim has been filed.
The sum of money paid by the insurance company to the policyholder or any other beneficiary after the claim has been processed and satisfied.
Basic types of liability coverage, standing for Bodily Injury and Property damage respectively.
Bodily Injury Liability -
Part of the coverage paid by the insurer for the physical injuries to the other party involved in an accident that was caused by the policyholder.
Claim (Insurance Claim) -
An official inquiry by the policyholder for the insurance provider to reimburse the losses caused by an insurance situation.
Coinsurance (Copay) -
The principle of costs shared between the insurer and the policyholder according to a predefined formula after the deductible has been met.
Collision Coverage -
Coverage paid to the policyholder for repairing or replacing the vehicle if it gets damaged or destroyed in a collision without assuming any fault.
Comprehensive Coverage -
Coverage paid to the policyholder for repairing or replacing the vehicle if it gets damaged or destroyed due to circumstances other than collision such as theft, falling objects, explosions, natural disasters and many others. The list of situations in which the coverage applies varies greatly from company to company.
Continuously Insured -
A notion in the customer's insurance history confirming that there were no lapses in insurance even if it was provided by different companies.
Declarations Page -
Insurance provider's internal document that highlights all the necessary information on a particular policyholder such as types of coverage used, coverage limits, vehicles being insured and so on.
Often linked to coinsurance, it is the amount chosen by the policyholder that he or she agrees to pay before making a claim.
A person who depends on other's financial abilities, such as children to parents.
The general tendency for items to lose their value over time.
Additional changes to a policy as requested by the policyholder, which usually involve higher limits, additional coverage options, higher deductibles and so on.
Specific situations noted in the policy that aren't covered by the insurance company.
Extraordinary Medical Coverage -
Additional financial support by the insurance company to the policyholder in case of a serious injury or long-term medical service that exceeds the chosen limits of bodily injury liability coverage.
Full Coverage -
Denotes whether the policy covers all the minimum coverage requirements in the policyholder's state of residence.
Garaging Location -
The exact location as denoted by ZIP code where the vehicle is kept when not in use.
Good Driver -
A policyholder that had not more than one DMV, minor traffic violation or at-fault accident during the last three years and not more than one vehicle-related crime during the last seven years. A "good" driver is usually considered to be a low risk and is charged with lower premiums.
Group Insurance -
A policy that covers a group of individuals such as credit unions, employers of a specific organizations or members of trade associations.
Income Loss Coverage -
Coverage provided to the policyholder in case he or she is unable to work due to injuries sustained in the course of an accident.
Compensation to be paid out to an individual in case of a covered loss.
An agreement between the provider and the policyholder governing the payout of a predetermined amount of money in case of an insurance situation against a periodic payment.
An individual or a group of individuals that are covered by a valid insurance policy.
Liability Coverage -
Coverage that is paid to the other party in case the accident was caused by the policyholder's negligence or inappropriate actions resulting in injuries or property damage.
The maximum amount of money the insurance company will pay in order to cover the policyholder's losses.
Loan Lease Payoff -
Coverage provided for current model year autos that were financed through a loan.
Damage or theft of the policyholder's or anyone else's property.
Personal Injury Protection (PIP) -
Coverage option that pays for the medical costs related to treatment of the policyholder or the passengers of their vehicle regardless of who was at fault in the accident.
Named Insured -
The main person who is entitled as the policyholder.
No-Fault Insurance -
A type of policy that doesn't require a particular party to be confirmed to be at fault in order to receive coverage.
Occasional Driver -
Individuals who may use the covered vehicle on occasion and are not its primary drivers.
Money paid by the insurance company to the policyholder after settling a claim.
Policy (Insurance Policy) -
Contract ruling out the conditions of insurance between the policyholder and the insurance provider.
The person who owns the insurance policy and usually insured by it.
Policy Expiration Date -
The date when the policy becomes void.
Policy Limit -
The overall maximum amount of coverage a policy may pay out to the beneficiary through all coverage options.
Policy Term -
The period of time during which the policy is in effect.
Periodic payments made by the policyholder in order to be covered by the insurance provider.
Primary Residence -
The place where the policyholder resides most of the time during the policy term.
Primary Use -
The primary purpose of the vehicle being insured.
Principal Driver -
An individual who uses the car most of the time.
Property Damage Liability -
Coverage that pays for the property damage caused by the policyholder to another party in the course of an accident.
A clause ruling out a specific condition of the policy.
Qualification Period -
A period during which the policyholder's ability to make claims is limited in order to discourage fraud.
Rental Reimbursement -
Coverage that pays for the rental of a vehicle for a period of time the insured vehicle is being repaired or repaid for.
The probability of an insurance situation to take place.
Second Named Insured -
An additional individual who is entitled to the same benefits as the principal named insured.
An official document that serves as a proof of an individual's financial responsibility for other individuals with traffic violation convictions.
Legal concept describing situations when an individual is legally responsible for injuring other individuals or causing property damage.
Towing and Labor -
Coverage option that pays for towing services provided by third parties to the policyholder.
Underinsured\Underinsured Motorist Coverage -
Coverage that settles property damage and bodily injury to the insured caused by another party who doesn't have sufficient or any third party liability coverage.
Being short of coverage
The process of assuming risk.
Not having any insurance coverage.
A 17-digit vehicle identification number that is unique to each vehicle.
Waiver of Premium -
A clause that allows the policyholder not to pay the premiums in case of a serious illness or other predefined circumstances.