Confused by insurance lingo? These terms help you to understand your auto insurance policy.
Do you know the difference between comprehensive and collision coverage? Perhaps you’re lost on liability and limits. Either way, a policy full of terminology is going to look like nonsense to the average consumer. While most insurance agents are happy to fill in the gaps and decode jargon for those looking for a policy, it’s wise to familiarize yourself with industry jargon before securing an auto insurance policy.
Here are the common terms that you need to know:
Actual Cash Value (ACV) – The value of your property, based on the current cost to replace it, minus depreciation.
Bodily Injury Liability (BI) – When an insured person is legally liable for an accident, BI coverage pays for injuries or death to people involved in the accident other than the insured driver.
Collision Coverage – Damage to your car when you’re involved in an accident with a vehicle or someone’s property. Insurance will pay for the repair or up to the actual cash value of your vehicle, minus your deductible.
Comprehensive Coverage – This is damage to or loss of your vehicle from causes other than an accident such as hail, vandalism, flood, fire, and theft.
Deductible – A pre-determined amount that the insured will pay in a claim before the insurance steps in to handle the costs.
Liability Coverage – Coverage for injuries to the other party and damages to the other vehicle resulting from an accident that you were at fault for.
Limits – An insurance coverage limit is selected by you when purchasing a policy. It is a pre-arranged amount that describes the maximum an insurance company will pay for damage or injuries for a covered loss.
Medical Payments (MedPay) Coverage – MedPay is an optional coverage that pays for necessary medical and funeral expenses for covered people, as a result of an auto accident.
Premium – A premium is the amount of money paid to an insurance company in return for coverage. Depending on how you pay, you may have a monthly or annual premium.
Uninsured/Underinsured Motorist Coverage – If you’re involved in an accident with a driver who has no insurance coverage or too little to cover the costs of the expensive accident, this coverage kicks in to help with the remaining costs for your medical bills and car repair costs.