How to Read Your Car Insurance Policy
Additional insured - a person is covered by an insurance policy that is different from the policyholder, typically all household members with driver licenses apart from the primary driver.
At-fault accident - An accident that you cause, either through an act of your own or by failing to take an action. In this case, your auto insurance pays out up to the chosen limits for other people's injury and property damage bills, plus your legal defense costs if you're sued.
Auto insurance claim - A request for payment from your car insurer to cover vehicle repairs, injury treatment, or other costs.
Bodily Injury Liability Coverage -Part of an auto insurance policy that pays in case you cause an accident for medical expenses and compensation for lost wages and income to other drivers, pedestrians, and passengers for which you are legally at fault. Legal fees if you are taken to court as a result of the accident are also covered.
Car insurance quote - An estimate of how much an insurance policy will cost. Request a free car insurance quote from the Selection Insurance Agency now!
Collision coverage - This covers damages to your vehicle as a result of a collision with another vehicle or objects, regardless of who is at fault. It pays to repair or replace your vehicle. It includes a deductible.
Combined Single Limit - Combined single limit auto insurance policies have a single limit for both bodily and property damage. In comparison, a split limit policy has separate limits for bodily injury per person, bodily injury per accident, and property damage per accident.
Comprehensive coverage - Pays for damage caused by hazards other than collision e.g. animal, car theft, falling objects and fire, explosion, windstorm, hail, water. It includes a deductible.
Covered incident (or covered accident or covered risk) - Something your policy will pay for.
Declarations page - A page in your policy listing its most important details, including your car’s VIN, the name and address of the policyholders; the period for which the policy is in force; premiums payable; and the amount of coverage, your address, drivers insured on the policy, liability limits and included coverage.
Deductible - Your auto insurance deductible is the amount of money that you yourself are responsible to pay before the insurance coverage kicks in and the insurance provider starts paying you. A deductible applies to Collision and Comprehensive coverages. If your car repair amounts to $5,000 and your deductible is $500, you will get a claim check for $4,500. A higher deductible means cheaper premium, but your insurer pays less if a claim occurs.
Effective date - The date from which the insurance policy starts protecting you against the covered risks.
Exclusion - Risks that your policy won't cover for. For example, most auto insurance policies won’t pay for normal wear and tear street racing and intentionally caused accidents.
Full coverage car insurance - An insurance policy that includes collision, comprehensive, and liability coverage.
Gap coverage - Covers the difference between the compensation you receive in case your car is totaled and the amount you owe on an auto loan or a lease agreement. Sometimes required with vehicle financing agreements.
Liability insurance - Provides the insured with protection against claims resulting from injuries and damage to people or property. If you are liable for an accident, liability coverage helps pay for the other person's expenses, as well as your legal defense costs if you're sued. You can encounter liability limits like this 100/300/50 which means you have $100,000 bodily injury coverage limit per each injured person, $300,000 bodily injury coverage limit per accident, and $50,000 property damage coverage limit per accident.
Limit - The maximum amount your policy will pay per accident. Each coverage type has its own limits.
Medical payments coverage (MedPay) - Pays for medical and funeral expenses when a covered person (the policyholder, a passenger, the policy holder’s family member) is hurt in an auto accident no matter who caused the crash. Usually comes without a deductible.
Personal injury protection (PIP) - Like MedPay but also covers for some costs that MedPay won't, such as lost income and loss of essential services. Usually comes with a deductible. Not available in Nevada.
Primary use - What you most commonly use your vehicle for, such as for commuting, pleasure, or business.
Premium - The price to be paid for your auto insurance, either per monthly, yearly or per six-month period.
Property Damage Liability Coverage - Part of a standard auto insurance policy that pays to repair the damage you cause to another person's vehicle or property. This is required coverage in most states.
SR-22 insurance form - Official document some states require to prove you have sufficient car insurance. The SR-22, issued and filed by your insurance company, allows you to keep or reinstate your driving privileges after serious or repeated traffic-related offenses, such as DUIs or driving without insurance.
State-required minimum – The types of auto insurance coverages that states require their residents to carry and their respective minimum limits.
Subrogation - The process by which you assign your insurance company the legal right to collect the amount of the insurance loss from another party who is legally liable. For example, if someone damages your car, but has no insurance, your own insurance company will first pay you for the loss, and then the insurer will legally pursue the uninsured driver to recover this money.
Underwriting - The insurance company's process of assessing how risky you are, based on factors such as your vehicle, location, accident history, credit, and age. The underwriting findings are used to calculate your rates.
Uninsured or underinsured motorist coverage – This coverage pays for medical and repair costs of you and your passengers in case of an accident in which the other driver is at fault and either does not have insurance (uninsured) or does not have enough insurance (underinsured) to pay all of your loss.
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