Auto Insurance Terms You Need to Know

May 24, 2019

24 May
2019
Auto Insurance, Understanding Insurance

Auto Insurance Terms You Need to Know

by James Elliot

Shopping for auto insurance? Don’t get put off by industry jargon. Here are some of the terms you’re going to come across and what they mean.

At Fault

Person or persons determined to be the cause of an accident. The at-fault party, and their insurance company, is most often responsible for paying the damages.

Collision Coverage

Collision coverage covers your vehicle for damage caused by a collision or your vehicle overturning. Your policy can also be extended to cover you in rental vehicles and when driving someone else’s vehicle.

Comprehensive Coverage or Full Coverage

This type of protection covers you from damage caused by outside elements, such as weather events, fire, vandalism, and theft.

Deductible

The deductible is the amount you will have to pay out-of-pocket for any damages you claim before the insurance company begins paying. You will usually have several options to choose from. Usually, higher deductibles result in lower monthly premiums. The reverse is also true.

Liability Insurance

This coverage is required, and it covers property damage and injuries to another person from an accident where you are at fault.

Liability Limits

The limit your policy sets on the amount of money the insurer will pay for damages and injuries.

Medical Payments Coverage (MedPay)

Coverage for limited medical and funeral expenses that are incurred after a car accident.

Named Insured or Primary Driver

The person or persons who are covered under the insurance policy to drive the vehicle. It most often includes all members of the household who are old enough to drive.

Occasional Drivers

Those covered under the policy who only drive the vehicle occasionally.

Personal Injury Protection (PIP)

This policy covers the costs of medical and funeral expenses for the insured driver, passengers in the vehicle, or pedestrians struck by the insured.

Policy Period or Term

Period of time the insurance policy is valid.

Premium

The fee you pay to the insurance company for the coverage they are providing you. It is usually quoted by the cost of coverage for six months. You can make payments monthly, quarterly, or bi-yearly. Some companies will offer you a discount if you pay the year upfront.

Uninsured Motorist Coverage (UM) or Underinsured Motorist Coverage (UIM)

Coverage for injuries or death from an accident that was caused by an uninsured or underinsured motorist. In most cases, coverage will extend to you, your passengers, and relatives living with you.

Uninsured or Underinsured Motorist Property Damage Coverage (UMPD)

Coverage if an uninsured or underinsured driver damages your vehicle.  

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