Auto Insurance Terminology
We all know plain English isn’t a strong point of insurance companies. Some of the terms used don’t make much sense until you know them, which is why we have compiled this short list of the most popular terms we use.
Actual cash value – The current value of the car right now.
Anti-theft device – An alarm, immobilizer or any other approved device that deters theft.
Assigned risk insurance -Insurance issued for high risk drivers in states where insurance is mandatory. Insurance companies operating in these states have to have a given number of these drivers on their books.
Auto replacement coverage – Supplement that allows for your entire vehicle to be completely repaired or replaced, regardless of cost to the insurance company.
Bodily injury liability coverage – Covers third party personal injuries if involved in a crash with you.
Betterment – This is where damage can be repaired using higher specification parts than were present on the vehicle at the time. Usually involves the owner paying the difference in cost.
Collision coverage – The most basic auto insurance. Replaces or repairs your vehicle in the event of a collision.
Comprehensive insurance - The “everything else” coverage. Covers events that collision coverage doesn’t like theft and vandalism.
Deductible – This is a voluntary premium excess you offer to pay before the insurance has to. The higher the deductible, the lower the premium.
Gap car insurance - Mainly for cars under finance. It insures you for the difference between what the car is worth and the amount of finance owed.
Good driver plan – An incentive offered by some insurance companies for being a good driver over a specific time period.
Liability insurance – Another insurance staple. This covers you for losses and claims from third parties through your proven negligence.
Passive restraint system - While not passive, this covers things like seatbelts, airbags, impact protection and other systems that are design to protect the occupants of a vehicle.
No-fault auto insurance – Replaces liability insurance in some states. It covers you and your vehicle regardless of fault. It costs more, but covers more. It does have defined limits though so read the small print.
Total loss – This is where the cost of repairing the car exceeds the nominal value of it. The insurer will pay the insured or current value and will then own the car.
Uninsured motorist coverage – Essential for most people. With premiums rising, more people are going without insurance. This covers you if you have an accident with an uninsured driver.
Now those are just some of the terms used frequently in the insurance industry. So hopefully when dealing with agents, or the companies themselves you will have more of an idea of what they’re talking about.
