Auto insurance is a legal requirement and a very important level of protection for motorist and vehicle alike. It is vital to understand your car insurance policy to know that you will be protected if an accident or loss occurs.
AutoInsurance-Quote.net has produced a jargon-busting glossary to unpack the meaning behind the most common terms and coverage levels found in auto insurance policies.
Some of the terms you will find in your policy documents and their meanings are:
BODILY INJURY INSURANCE: This protects you against injuries sustained by you or others due to your negligence when driving. It covers any injured parties’ claims for medical costs, lost earnings and damages for any pain and suffering.
COLLISION COVER: This extends to paying to repair any physical harm or damage sustained by your car following a collision with an object like a tree, fire hydrant or another vehicle.
COMPREHENSIVE COVER: This covers paying to repair damage to your vehicle from all other scenarios that are not the result of a collision or crash. Included within comprehensive cover are losses from fire, theft, inclement weather, flood damage, falling objects, damage caused by animals, accidental breakage or vandalism.
DEDUCTIBLE: This is the amount of money that an insured party pays to the insurance company before it pays out for any losses. The figures differ from state to state and company to company, but are usually in the range of $250 – $1000.
MEDICAL PAYMENT COVERAGE (MPC): This will pay for any medical and funeral expenses for the policy holder and any other persons that are injured or killed in an accident while driving or being a passenger in your vehicle.
PERSONAL INJURY PROTECTION (PIP): This will pay a set amount of money to the policy holder and a passenger in the car regardless of whom is at fault for the injury. Each state offers differing levels of benefits. Typical coverage extends to medical expenses.
PROPERTY DAMAGE LIABILITY: This level of auto insurance coverage will pay for damage caused to third-party property by your vehicle. For example, someone else’s car, house, fence or even a tree that is damaged by a collision.
RENTAL REIMBURSEMENT COVERAGE: This pays for alternative transportation expenses (i.e. car rental) following damage caused to a vehicle that make it unable to be driven. The level of cover can be set at a daily amount and total amount per day for the total cost of the rental vehicle. For example, $25 a day or $3,000 in total.
RESIDUAL BODILY INJURY LIABILITY COVERAGE: This extends to protecting the passengers that are in the vehicle with the permission of the driver/owner should you be sued sue to injuries sustained.
UNDERINSURED MOTORIST COVERAGE: This protects the policy holder in the event that the other driver is at fault for the collision or damage and they hold an insufficient level of insurance coverage to account for the damage. It pays the policy holder an additional amount up to the limits of the policy, covering bodily injury and/or property damage that “tops off” the other driver’s cover.
UNINSURED MOTORIST COVERAGE: This protects the policy holder in the event of being injured in a hit-and-run by a driver without car liability insurance. This insurance effectively becomes the insurance cover of the other driver that is missing a policy of their own due to failure to purchase it.