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 COVERAGES
& TERMS - AUTO INSURANCE |
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A
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Actual Cash Value (ACV) |
Actual cash value is a settlement type. Damage settled on
an ACV basis is subject to depreciation. Technically, ACV=Replacement Cost
- Depreciation. |
| B |
Bodily Injury Liability
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This coverage applies to injuries you, the designated driver
or policyholder cause to someone else. You and family members listed on
the policy are also covered when driving someone else’s car with their
permission.
It’s very important to have enough liability insurance, because
if you are involved in a serious accident, you may be sued for a large
sum of money. Definitely consider buying more than the state-required
minimum to protect assets such as your home and savings.
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C
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Collision
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This coverage pays for damage to your car resulting
from a collision with another car, object or as a result of flipping over.
It also covers damage caused by potholes. Collision coverage is generally
sold with a deductible of $250 to $1,000—the higher your deductible,
the lower your premium. |
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Comprehensive
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This coverage reimburses you for loss due to theft or damage
caused by something other than a collision with another car or object, such
as fire, falling objects, missiles, explosion, earthquake, windstorm, hail,
flood, vandalism, riot, or contact with animals such as birds or deer.
Comprehensive insurance is usually sold with a $100 to $300 deductible,
though you may want to opt for a higher deductible as a way of lowering
your premium.
Comprehensive insurance will also reimburse you if your windshield is
cracked or shattered. Some companies offer glass coverage with or without
a deductible.
States do not require that you purchase collision or comprehensive coverage,
but if you have a car loan, your lender may insist you carry it until
your loan is paid off.
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| D |
Deductible |
The deductible is that portion of the loss that must be paid
for by the policyholder before the insurance company begins to pay. It is
always worth checking the premium difference for various deductible options
before finalizing policy options. |
| E |
Exclusions |
Exclusions are used in policy language to modify a general
coverage description. In an auto policy, almost every coverage has at least
one. Important also to cross reference endorsements to see if they modify
coverage through exclusion. |
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F
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| G |
Gap Coverage |
If you lease your vehicle, this coverage makes sure that in
the event of a total loss, there is enough insurance to pay off the lease
contract. Without it, an ACV settlement could be insufficient. |
| H |
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I
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| J |
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K
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L
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M
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Medical Payments or Personal Injury Protection (PIP)
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This coverage pays for the treatment of injuries to the driver
and passengers of the policyholder's car. At its broadest, PIP can cover
medical payments, lost wages and the cost of replacing services normally
performed by someone injured in an auto accident. It may also cover funeral
costs. |
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N
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O
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P
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Property Damage Liability
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This coverage pays for damage you (or someone driving the
car with your permission) may cause to someone else's property. Usually,
this means damage to someone else’s car, but it also includes damage
to lamp posts, telephone poles, fences, buildings or other structures your
car hit. |
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Q
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R
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Replacement Cost |
Replacement cost will normally be defined in the policy, but
means that, subject to some limitations, losses will be settled using the
amount to repair or replace using NEW materials. |
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Rental Reimbursement |
Optional coverage that reimburses for the cost of a rental
car due to loss from a covered peril, up to the $/day limit shown. |
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S
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T
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Towing & Labor |
An optional coverage that reimburses for emergency towing
and labor up to the limit shown. Usually unnecessary if one carries a AAA
membership. |
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U
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Uninsured and Underinsured Motorist Coverage |
This coverage will reimburse you, a member of your family,
or a designated driver if one of you is hit by an uninsured or hit-and-run
driver.
Underinsured motorist coverage comes into play when an at-fault driver
has insufficient insurance to pay for your total loss. This coverage will
also protect you if you are hit as a pedestrian. |
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V
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W
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X
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Y
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Z
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essential
that you read your policy. Although there are a few organizations that
license insurance companies to use their policy forms, almost all companies
will make variations. If you are insured by a large insurer, most likely
they have developed their own form, and while it may use many similar
terms and coverages, read carefully for the exclusions and definitions.