Tag Archives: insurance terms

autoaccident1Sometimes 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.

Silhouette-question-markEveryone should be at least semi-familiar with the terms of their insurance policies. After you make a claim (and that claim is possibly denied) is too late to fully understand your coverage. While many insurance terms are used across different policies, some are unique to particular coverages.

Take homeowners insurance for example. There are a few industry/legal terms that apply to that coverage pretty much exclusively. To help you better understand your homeowners policy, here are a few core common ones:

Additional living expenses (ALE) – Reimburses the policyholder for the cost of temporary housing, food, and other essential living expenses, if the home is damaged by a covered peril that makes the home temporarily uninhabitable. Some policies cap the amount of ALE payable to 20 percent of the policy’s dwelling coverage.

Exclusion – A provision in an insurance policy that denies coverage for certain perils, people, property, or locations.

Liability coverage – Covers losses that an insured is legally liable. For homeowners insurance, liability coverage protects you against financial loss if you are sued and found legally responsible for someone else’s injury or property damage.

Loss of use – A provision in homeowners and renters insurance policies that reimburses policyholders for the additional costs (housing, food, and other essentials) of having to live elsewhere while the home is being restored following a disaster.

Peril – A specific risk or cause of loss covered by an insurance policy, such as a fire, windstorm, flood, or theft. A named-peril policy covers the policyholder only for the risks named in the policy. An all-risk policy covers all causes of loss except those specifically excluded.

Personal property – All tangible property (other than land) that is either temporary or movable in some way, such as furniture, jewelry, electronics, etc.

Replacement cost – Pays the dollar amount needed to replace the structure or damaged personal property without deducting for depreciation but limited by the policy’s maximum dollar amount.

The beginning of the year is a perfect time to sit down with your insurance professional to discuss all of your insurance policies and determine if you need any additional coverage. At the very least, you can be sure you understand everything about the policies you currently have.