Auto Insurance Terminology In Plain
English
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Bodily
Injury and Property Damage Liability: Limits of
liability means there is a limit on the amount your
insurance company will pay for accidents for which you are
liable. If you are liable for an amount of damage
that is greater than the limits in your insurance policy, then
you could be held responsible for the difference. For example,
if your property damage liability limit is $50,000 and you are
liable for an accident that causes $75,000 in property damage,
you could be responsible for paying $25,000.
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State Minimum
Liability: Each state requires that anyone who drives
has to carry certain amount of liability insurance. The amounts vary
from state to state. To be legal on the road you have to carry
liability limits that are equal to or greater than the amounts set
by your state.
Uninsured and
Underinsured Motorists Coverage: Protects you
if you sustain bodiliy injuries or property damage caused by a
driver who is liable for the accident and either has no insurance or
doesn't have enough insurance to cover the damages.
Physical
Damage: This coverage compensates you for
damages to your vehicle when no one else is liable, or the person
who is liable can not be identified. Collision + Comp = Physical
Damage.
Collision covers
damages caused by an accident.
Comprehensive
(Comp for short) covers fire, theft, and vandalism. It
also covers damages caused from hitting an animal.
There is usually a
Deductible associated with comp and collision. If
you file a physical damage claim, you pay the amount of your
deductible toward repairs and the insurance company picks up the
rest.
Full
Coverage: This is liability plus physical damage.
Additional coverages besides these are not automatically included in
the price. Some companies throw in towing coverage or rental
reimbursement, but there are many that charge extra for these
additional coverages.
Total
Loss: When the cost of repairing a vehicle is higher
than its value, then it is considered a total loss
(totaled).
Loan/Lease Gap
Coverage: If a vehicle is totaled in an accident or is
stolen and not recovered, Gap insurance covers the difference
between the value of the vehicle and the amount that is still owed
on the vehicle.
Towing and
Labor: This is a roadside assistance program available
through most insurance companies. There is a limit per
occurrence on the amount that will be paid.
Rental
Reimbursement or Substitute Transportation: If your
vehicle is not driveable due to an incident covered by comp or
collision, you will be reimbursed for the cost of a rental car up to
the limits stated in your policy. If your limits are 20/600, your
insurance company will pay no more than $20 per day up to a maximum
of $600.
Additional
Equipment Coverage: This covers theft or damage to
certain car accessories that are not factory installed, such as CD
players, radios, truck caps, custom wheels, pinstriping, and special
antennas.
The preceeding is a
general overview. Some coverages may be available in your state that
aren't listed here. Some of the coverages listed here may not be
available in your state or through your insurance company. Review
your coverage with your agent so there will be no unpleasant
surprises should you need to file a
claim.
