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.
