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CAR INSURANCE TERMS
Below are some definitions of important terms related to auto insurance coverage.

Auto Insurance Score
Based on your credit history; similar to how a credit report score works. Auto insurance companies use your auto insurance score as an indicator for determining policy prices. If you have a poor score, your cost is going to be higher.

Binder
A provisional contract that gives verification of auto insurance coverage until a permanent policy can be produced.

Bodily Injury Liability
Provides compensation for injuries caused to another person. This includes medical costs and any money lost as a result of loss of work.

Collision
Provides payment for car repairs as a result of an accident. This also includes your insurance company 'going after' another insurance company to pay for your repairs if they are the party at fault. Most insurance companies will have a deductible for collision coverage.

Comprehensive
Provides compensation for damage that occurs as a result of anything other than a crash. This will include flood damage, break in, etc.. Most insurance companies will have a deductible for comprehensive coverage.

Deductible
Amount a policyholder has to pay prior to having their insurance company start paying for a claim. For example, if you have a $500 deductible, and you have $2000 worth of damage to your car, the insurance company will pay $1500 and you pay $500. There are all different amounts of deductibles ranging from $100 - $1000.

Discount
A variable that will result in the cost of your auto insurance to be lower. An alarm system and/or good driving record are two examples of items that will result in discounts.

Emergency Road Service
An option in coverage that covers the cost of a tow truck if your car breaks down.

Gap Insurance
This type of insurance if offered to customers that owe more their auto loan than what their vehicle is actually worth. Gap insurance covers the difference between what you owe and what the actual worth of your car is.

High-Risk Driver
Someone that has a large amount of accidents and/or driving tickets. If you are labeled high-risk, you are going to pay more for your insurance.

Liability Insurance:
Compensates people that you are involved in accident with when you are at fault. Covers the court costs as well.

Limits
The maximum amount your carrier will pay for a claim.

Medical Payments Coverage
Compensates medical costs and lost wages to the insured or any other passengers in the insured's vehicle after an accident. Also known as Personal Injury Protection.

No-Fault Insurance
This is when your insurance company will pay for your injuries whether you are the guilty party of an accident or not. Not all states offer no-fault insurance. If you live in a state with no-fault insurance regulations, your auto insurance policy pays for your injuries no matter who caused an accident. No-fault insurance states include Florida, Colorado Hawaii, Pennsylvania, Kentucky, Kansas, Utah, Massachusetts, New Jersey, Michigan, Minnesota, North Dakota, and New York.

Personal Property Liability
Compensates for damages you cause to another person's car or property.

Personal Injury Protection (PIP)
Compensates medical costs and lost wages to the insured or any other passengers in the insured's vehicle after an accident. Also known as medical payments coverage.

Premium:
The cost of your auto insurance policy.

Rental Reimbursement
Compensation for the cost of a rental car that is needed while your car is being repaired.

Surcharge
Additional charges to your auto insurance policy that incur after your are at fault in an accident.

More Glossary's Featured!
Auto Loan Glossary
Credit Card Glossary


 

 

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