Sometimes reading an insurance policy is like deciphering a foreign language. Sure, there are a few words and phrases you understand, but for the most part it is not completely understandable. As auto insurance is as ubiquitous as (mostly) cars on the road, that particular coverage is especially important to comprehend. If you are a responsible driver, you have at least the minimum auto insurance required by the state.
With the insurance you are most likely to use, there are some basic terms you should be familiar with:
Adjuster – A person who investigates and settles insurance claims.
Binder – A temporary insurance contract that provides proof of coverage until you receive a permanent policy.
Collision coverage – Pays for damage to your car without regard to who caused an accident. The company must pay for the repair or up to the actual cash value of your vehicle, minus your deductible.
Comprehensive coverage (physical damage other than collision) – Pays for damage to or loss of your automobile from causes other than accidents. These include hail, vandalism, flood, fire, and theft.
Liability insurance – Pays for injuries to the other party and damages to the other vehicle resulting from an accident you caused. It also pays if the accident was caused by someone covered by your policy, including a driver operating your car with your permission.
Liability limits – The maximum amount your liability policy will pay. Your policy must pay at least $15,000 for each injured person, up to a total of $30,000 per accident, and $5,000 for property damage per accident (unless you have a Low Cost Auto Policy). This basic coverage is called “15/30/5” coverage.
Medical payments and personal injury protection (PIP) – Both pay limited medical and funeral expenses if you, a family member, or a passenger in your car is injured or killed in a motor vehicle accident. PIP also pays lost-income benefits.
Uninsured/underinsured motorist (UM/UIM) coverage – Pays for your injuries and property damage caused by a hit-and-run driver or a motorist without liability insurance. It will also pay when your medical and car repair bills are higher than the other driver´s liability coverage.
For a complete understanding of your auto policy, as well as any other coverages you may have, your best resource is your insurance professional. Make an appointment to go over your insurance coverage and make sure you have all you need.