Car Insurance Glossary

Insurance is a subject full of jargon and it’s easy to get confused when you come across these words and phrases. Below is a list of common car insurance terminology with brief explanations. Remember that when you come across any document containing words you do not understand, ask for clarifications. It’s better to ask a hundred questions and be sure of the policy you are getting than to not ask and be left without the coverage you need.

Accident Forgiveness: This is available only in some states. When a policy holder who has not had an accident for a period of 5 years or more does have an accident that was his fault, the insurance company will not add a surcharge, as is normally done, at the time of the next premium.

Agreed Price: The cost of repairs as agreed to by the claims adjuster and the repair shop where the repairs are to be done.

Basic Collision: Also referred to as Standard Collision, this will pay for damage caused to your car irrespective of whether it was caused by you or the other driver.

Bodily Injury (BI) Liability: This covers you for damages resulting from injuries or death caused by you or the driver of a car owned by you.

Claims Adjuster: The person who investigates the damage and settles the cost of repairs.

Collision Coverage: This is an optional coverage for damage to your car arising out of a collision. It is often mandatory when a car loan is taken.

Combined Single Limit: This combines the total liability coverage for BI and PD (see below).  This makes the issue of deciding on your coverage limits easy as you do not have to break up the coverage into separate heads. Combined Single Limit provides for one umbrella coverage for both types of liability.

Comprehensive: Comprehensive coverage pays for damage caused to your car from causes other than an accident – things such as theft, fire, flood, earthquake, vandalism etc.

Driver Training Discount: This is available in some states for those who have taken an approved drivers training course.

Endorsement: A document added to a policy that modifies the original terms.

Exclusion: The part of a policy that lists all items and situations not covered.

First Party: The person covered by the insurance policy.

Gap Insurance: When a car under lease or finance becomes a total loss, there may be a gap between what you still owe and the market value. This additional insurance will cover you for the difference.

Limited Collision: Limited Collision coverage pays for damage to your car only if the accident was another driver’s fault. There is no coverage if the accident was caused by you.

Multi-car Discount: Some insurance companies offer discounts where more than one car is owned by the same person and they are covered under one policy.

Occasional Driver: A person who is not the primary driver of a car but is covered under the terms of the policy.

Per Person Limit: The maximum the insurance will pay for any one person injured in a single accident.

Personal Auto Policy: This is the most common type of car insurance and is set forth in simple terms and conditions and covers liability, medical costs, uninsured / underinsured drivers and physical damage.

Property Damage (PD) Liability: PD Liability covers you for the damage that you or a person driving a car owned by you causes to property belonging to a third party.

Rental Reimbursement: You are reimbursed up to a specified daily amount (subject to a maximum number of days defined by the policy) for costs incurred for renting a car while yours is being repaired under your insurance policy.

Select Repair Shop: A repair shop designated by an insurance company to carry out repairs without the need for inspection by a claims adjuster. Repair costs are paid directly to the workshop.

Term: The period during which an insurance policy is valid.

Third Party: A person who is not part of the policy but may make claims for damages against the policy holder.

Towing & Labor: Roadside repairs and the cost of towing your car to a repair shop are covered by this. But materials like gas, oil, a new tire etc. are considered as materials and these costs are not covered.

Usage: The primary purpose for which the car is used – i.e. commuting, business, pleasure etc.

Void: When a policy becomes inoperative for any reason.

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