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.
