Common Insurance Terms
In order to fully understand your insurance policy, it’s important that you have an accurate understanding of some of the more commonly-used insurance terms and their meanings. This will enable you to assess policy provisions and more fully understand the coverage that you might consider purchasing.
Claim – The process of submitting a notice of loss to your insurance company with supporting documents that will allow your insurance company to compensate you according to the terms of your policy.
Collision coverage – Coverage that will compensate you for damages incurred to your vehicle in a covered accident.
Comprehensive coverage – Coverage that will compensate you for non-accident damages to your vehicle. Examples of items that might be included under the terms of comprehensive coverage include fire, flood, storm damage or vandalism.
Deductible – An amount determined by your auto insurance policy that must be paid before any claim will be paid.
Full coverage insurance – Insurance coverage beyond the legal minimum coverage. Examples would be collision and comprehensive insurance coverage.
Insurance agent – An individual that sells insurance policies to the general public. In most cases, these individuals are employed by a single insurance company for whom the agent markets insurance policies.
Insurance broker – An individual that markets insurance policies for a number of different companies. This arrangement can be beneficial to consumers because the broker is able to locate multiple policies from a variety of companies, which will give the consumer the ability to select the policy that they like best.
Liability coverage – Insurance coverage that compensates the victims of an auto accident for which you are responsible. The legal minimums are set by law. Legal requirements for liability coverage are in place so that motorists can demonstrate financial responsibility. Liability coverage typically comes in two components: Bodily Injury (covering the occupants of the other vehicle) and Property Damage (covering the other vehicle and any associated property damage arising from an accident that is your fault).
Limit – The maximum amount to be paid by the insurance company for an individual claim as determined by the terms of the policy.
Policyholder – The person or people named as the covered party in an insurance policy. In most cases, the policyholder is the owner of the vehicle.
Premium – The amount of money paid by the policyholder to the insurance company in exchange for the promise of the insurance company to pay all covered claims as determined by the provisions of the policy.
Uninsured/underinsured motorist coverage – Insurance coverage that will pay for your medical expenses if you are injured in an auto accident and the other party either has no insurance coverage or inadequate insurance coverage to pay for your medical expenses arising from the accident.
Uninsured/underinsured property damage coverage – Insurance coverage that will pay for your vehicle repair expenses from an auto accident and the other party either has no insurance coverage or inadequate insurance coverage to pay for your vehicle repair expenses arising from an accident.
These are some of the more commonly seen insurance terms; there are many, many more. By understanding the meanings of these terms you will be on more solid footing when navigating the sometimes-tricky waters of auto insurance.