Car insurance, which is required of drivers in nearly every state or local jurisdiction, helps you meet the costs associated with the unexpected. If your car is ever involved in an accident, theft or damage that requires you to repair or replace the vehicle, having car insurance will provide you with some peace of mind that you will be able to meet your expenses. If you have never owned car insurance in the past or are a first-time driver, you should understand some of the terms that are associated with car insurance.
Below we’ll provide a list of ten basic car insurance terms and what they mean. Although this is not nearly an exhaustive list of the terms associated with this type of protection, they are important terms to know when purchasing car insurance. These terms should provide you with a basic understanding of car insurance.
Coverage limits are set by the car insurance company as a way to limit the amount of out-of-pocket cost the company will be liable for in the event that a loss occurs (see Loss, below). Generally, these limits are established by you as the owner; many states have in place minimum coverage amounts that a car insurance company must provide for its customers.
The deductible can also be referred to as the self-insurance or risk retention amount. What this means is when a loss occurs, the deductible is the “first dollar” you pay toward the loss before the insurance company pays. The higher the deductible, the lower the cost of your car insurance protection.
A car insurance company has an interest in determining which driver within a household is covered in the event of an accident involving the covered vehicle. They can satisfy this interest by determining a status for the drivers, which include rated driver, the person who drives the car and is presumably covered for a loss, excluded driver, who is a person not permitted to drive the car and would not be covered for a loss, and listed driver, who may be any person in the household who does not drive.
The insured can be considered synonymous with the rated driver for the car insurance policy.
Liability in car insurance refers to the type of protection your policy provides for you in the event of a loss. If you are involved in an accident, the car insurance policy will provide payment for the loss up to any limits in coverage prescribed in the policy. The amount of liability the car insurance company is responsible for is reduced by the amount of deductible or risk you are willing to retain.
Loss is defined as a reduction in value. The reduction in value can be caused through damage to your car, theft, natural causes (such as a catastrophic event) or an accident.
An accident that involves injury to any person who is covered under the policy (i.e. driver, passengers, pedestrians or another driver) may result in the payment of medical expenses associated with the accident.
The car insurance policy is the contract between you and the insurance company that provides a benefit when a loss (reduction in value) occurs.
This is a special type of basic auto insurance coverage that is usually mandated by law for a driver who has been convicted of a traffic violation (i.e. DUI) and is required to maintain car insurance protection.
This is an optional type of protection that provides you with a benefit in the case where you are involved in an accident with an uninsured motorist.
This article was written by Vito Sanchez, a car enthusiast who hopes to help you become a better car owner. He writes this on behalf of Cure Auto Insurance, your number one choice when looking for the best car insurance rates! Check out their website at https://www.cure.com/ for more information.