Auto Insurance Definitions Must Knows

August 25th, 2011
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Everyone purchases auto insurance to protect themselves, their families and others in the event of an accident. With so many different auto insurance coverage’s to choose from, it can become quite confusing to differentiate which is which. Educating yourself on the different types of coverage’s offered can potentially help you save time and money.

Below is a breakdown of some car insurance terms that can better help you understand more about your coverage.

Additional Equipment Coverage

This covers theft or damage to certain car accessories that are not factory installed, such as CD players, radios, truck caps, custom wheels, pin striping, special antennas, etc.

At Fault Coverage

This term refers to the degree to which you caused or contributed to an accident, or are “at fault,” determines whose auto insurance company pays what portion of the damages.

Bodily Injury Coverage

If you are “at fault” for an automobile accident, bodily injury coverage on an auto insurance policy pays the medical expenses and additional damages for which you are liable for other individuals injured in the accident.

Collision Coverage

This term refers to coverage that pays for physical damage to your vehicle caused by rolling over or a collision with another vehicle or object, such as a building, fence or telephone pole.

Comprehensive Coverage

This term refers to coverage that pays for damages to your vehicle resulting from a covered loss other than a collision, such as fire, theft, vandalism, animals, or falling objects.

Deductible

The portion of a covered loss for which you are responsible, as opposed to the portion your insurance company pays. Higher deductibles allow your insurance company to offer you lower premiums, as you assume a higher degree of risk.

Full Coverage

This is liability plus physical damage. Additional coverage’s besides these are not automatically included in the price. Some companies throw in towing coverage or rental reimbursement, but there are many that charge extra for these additional coverage’s.

Liability Coverage

This term refers to coverage for damages your auto causes to others and their property

Loan/Lease Gap Coverage

If a vehicle is totaled in an accident or is stolen and not recovered, Gap insurance covers the difference between the value of the vehicle and the amount that is still owed on the vehicle.

Medical Payments Coverage

Pays for reasonable medical expenses or death benefits to yourself or anyone covered under your policy in the event of an auto accident, regardless of fault.

Physical Damage

This coverage compensates you for damages to your vehicle when no one else is liable, or the person who is liable cannot be identified.

Premium

The amount you pay for your insurance coverage; can be paid monthly, quarterly, yearly or according to different payment plans that you select

Rental Reimbursement or Substitute Transportation

If your vehicle is not drivable due to an incident covered by comp or collision, you will be reimbursed for the cost of a rental car up to the limits stated in your policy. If your limits are 20/600, your insurance company will pay no more than $20 per day up to a maximum of $600.

Road service

If purchased, this auto insurance coverage will reimburse you for reasonable towing costs and labor costs at the site of breakdown when a covered vehicle is disabled.

State Minimum Liability

Each state requires that anyone who drives have to carry certain amount of liability insurance. The amounts vary from state to state. To be legal on the road you have to carry liability limits that are equal to or greater than the amounts set by your state.

Total Loss

When the cost of repairing a vehicle is higher than its value, then it is considered a total loss (totaled).

Towing and Labor

This is a roadside assistance program available through most insurance companies. There is a limit per occurrence on the amount that will be paid.

Underinsured motorist coverage

This term refers to coverage that pays for your bodily injury and related medical expenses when you’re injured in an automobile accident and the responsible party (other than yourself) doesn’t have adequate auto insurance.

Uninsured motorist coverage

This term refers to coverage that pays for your bodily injury and related medical expenses when you’re injured in an automobile accident and the responsible party (other than yourself) doesn’t have auto insurance or can’t be located (hit-and-run).

Note: Every state regulates auto insurance differently, and some of these terms and definitions may differ from state to state, or from policy to policy.

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