When it’s time to go over your new insurance policy, it’s very easy to quickly become confused with all the terms you immediately need to know and understand. It’s well worth your time to learn about some of these in detail, as they are important in preparing for the various details that make for a smooth claim. Whether you have been looking to add a brand-new car this year or just need to brush up on the policy you already have, here are some of the vital tips to be up to speed on:
Accident Forgiveness: this is additional coverage to your insurance policy that allows for your rate to not skyrocket because of claims that are your fault. You can qualify for this additional coverage if there are five years of clean driving on your record.
Actual Cash Value (ACV): This represents the amount that it costs to fully replace damaged or stolen property, less the depreciation overhead. This could be technically defined as “replacement cost less depreciation.” ACV does not actually replace your goods but reimburses you for the value after the incident occurs.
Amendment: This is any change to your basic policy contract. An amendment will immediately alter your policy, and is not the same as an endorsement, which exists as an addition.
Anti-Theft Device: This is anything added inside your car that will decrease the chances of it being stolen. This term is so vital to understand as you may be able to get a discount on your insurance premiums after installing one in your vehicle.
Assigned Risk Plan (AIP): If a provider comes to the conclusions that you are very high-risk, you will need to get coverage through a risk plan specifically provided by your state. The harsh reality of this is that these plans cost much more than standard coverage in most cases.
Assured: this is the term for someone who is covered under insurance policy. It means the same as the policyholder or insured individual.
Binder: This is the term for a temporary agreement policy officially in effect. It is used to protect the policyholder when the issuer is closed for the weekend, or the policy can’t be endorsed immediately.
Collision Coverage: When a vehicle is severely damaged, this will pay no matter who is at fault. It’s a wise move and even mandatory for a new car, especially if it is being financed. If you are driving a car ten+ years old, it may not be a necessity as much as a luxury for peace of mind.
Comprehensive Coverage is the coverage that pays for damage to your car that occurs from any event besides a collision. Stormy weather, fire, animal encounters, or electrical faults during hailstorms could all be included. This is not an actual description of the policy category, but rather an option for a coverage type within existing coverage.
Comparative Negligence is the official statement that when an accident takes place, each party’s responsibility is measured against the others to finalize whether or not distribution is equitable. This will allow insurers to pay claims with slightly more concrete evidence and dictation as to how to proceed.
Deductible is the amount that you will have to pay out of pocket on a claim before the insurance kicks in and take care of the rest. The higher your deductible is, you will notice a bit of breathing room regarding your monthly payment cost.
Declarations Page is the document that summarizes and allocated your coverage type. It is a bit different than your proof of insurance to carry with you but is often included with your initial startup insurance, whether digitally or in the mail.
Full Coverage is the technical description for the policy that combines comprehensive, collision, and liability coverages. If you are “fully covered”, you are not just driving with the bare legal minimum Missouri requires to operate a vehicle on the road.
Gap Insurance: This valuable type of insurance will cover the difference between what a vehicle is currently worth, and the amount still owed. The essential thing to remember is that the overall value of the car starts to decline as soon as you drive it off the dealer lot. Your policy will only cover a lower than the brand-new worth when it was initially purchased. While you are making payments on a car, gap insurance is a smart choice because of how fast a ride depreciates.
Liability Insurance: This is the type of coverage that will cover injuries and damages to the other party if you are deemed at fault in an accident. It will not actually pay for what your medical injuries are or damage to your vehicle, and there are two types of liability insurance. You can choose either property damage liability or bodily injury liability when selecting your policy.
Material Damage: This term refers to property-related damage losses and physical damage that your policy will cover.
No-Fault Insurance: The task of determining who is to blame is one of the toughest parts of the insurance game. No-fault insurance makes things much simpler by clearly defining that each party’s benefits will be paid to the policy owner, no matter who was technically at fault. This type of coverage will pay out for physical damage to property.
Personal Injury Protection: If you are driving in a no-fault state, this is the basic coverage required. The details vary state by state. PIP will usually cover wages lost, medical bills, and other expenses directly related to any accident, no matter who caused it.
SR-22, Certificate of Financial Responsibility: An SR-22 is a certificate that the state mandates to verify that a previously affected driver is covered. If you have been caught without insurance or a suspended license in the past, this is what the state mandates on you for a hefty cost, to keep a more watchful eye on the binding fact that you are covered.
Subrogation: This is also known as “payment recovery”. After it has been determined who the insurance company believes is at fault, this is the junction of time when your insurance company requests reimbursement due for causing said damages and/or incident.
Total Loss: This refers to the post-accident state of a vehicle that is not worth repairing at all, a “casualty” and not worth the effort.
Umbrella Insurance: Umbrella insurance is a very sensible upper layer of coverage that goes beyond the existing limits of other policies held.
Underwriting: This is when an insurance provider is considering various factors to see whether they will approve a prospective applicant for coverage.
It’s not just the terminology you need to be aware of: all of us here at the Alexander Agency of St Charles can assist you with securing the policy that best meets your needs, the means to be out on the road every single day safely, and a staff of caring individuals that are always responsive and resilient!