Car owners who hold auto insurance policies should have a working understanding of auto insurance terms. This way they will not be at a loss when reading through their policy. At the same time, they can easily understand their insurance agents. There are many different terms you may encounter when getting auto insurance. Some of these terms and their definitions are found below:
Auto insurance score. This is a score similar to a credit score that is based on the consumer’s credit file. When pricing your insurance policy, the insurance company will consider your auto insurance score. A bad auto insurance score can make your car insurance expensive.
Binder. The insurance company issues a binder as proof of coverage while waiting to receive your permanent auto insurance policy.
Bodily injury liability. This covers expenses like medical fees and loss of earnings in the event that you cause injury to a pedestrian or another driver.
Collision. If there is damage to your car after you collide with another vehicle or any object (think lamp post, fire hydrant, etc.), collision coverage is what is used to pay for your car repairs. The insurance company uses collision insurance in going after the other driver’s insurance company in case the other driver was at fault.
Comprehensive. When something falls on your car or a vandal breaks into your vehicle, the comprehensive insurance is used to cover these types of damages. Payments for damages not caused by collision are usually taken from comprehensive insurance.
Declarations page. The page of the auto insurance policy where you can find the following information: name of insurer, policy number, coverage, coverage cost, deductibles, insured vehicle and the vehicle identification number or VIN
Deductible amount. Before the insurance company releases any payments, the policyholder is required to pay out the deductible amount. The deductible amount can be as low as $100 or it can go beyond $1,000. Your insurance cost is lower if your deductible amount is higher.
Exclusion. In some insurance policies, there are losses, properties, locations and even people that are denied coverage. These fall under the exclusion category.
High-risk driver. A driver with a number of accidents and tickets to his name is usually classified by insurance companies as a high-risk driver. Expect to be charged more for your insurance if you are classified as one.
Liability insurance. This is another one of the auto insurance terms that refer to the part of the policy that covers for damages or injuries caused by you to another driver and his vehicle when you are proven at fault in the accident. Liability insurance is utilized to cover your legal costs if you are sued and taken to court.
Limits. This is the set ceiling amount of benefits indicated in the insurance policy that the insurance company will pay for a particular loss.
Premium. Represents the amount charged by the insurance company for an insurance policy. This amount is based on the kind of insurance coverage as well as the amount of coverage you selected. The insurance premium can be affected by your age, driving record, credit record, type of car, location and even your marital status.
Knowledge of the different auto insurance terms can help you get a clearer understanding of your insurance policy. Before you sign your policy, make sure you understand all the terms that are written in the policy. Seek clarification from your insurance agent for terms that are alien to you.