Car insurance terminology is mind boggling to the average consumer. Every time I look at my auto insurance renewal paperwork, my mind glazes over. For the most part, I had to search around high and low searching for definitions of car insurance terminology written in every day English. Here is a list of the most important car insurance terminology definitions that you should be concerned with.
Car Insurance Terminology: Property Damage
Property damage specifies what the auto insurance company will pay someone else if you hit them. Your car is not covered by the property damage coverage. Car insurance policies specify the amount they will pay using something that looks like a fraction. An example is the state minimum required auto insurance coverage in Arkansas of 25/50. This means the insurance company will pay $25,000 per PERSON and $50,000 per INCIDENT.
Car Insurance Terminology: Bodily Injury
Bodily injury specifies what the car insurance company will pay someone else for medical bills, lost wages, and pain and suffering should you injure them with your motor vehicle. Your injuries are not covered by the bodily injury policy. Like property damage, bodily injury coverage is stated in your policy using a value that looks like a fraction.
Car Insurance Terminology: Deductible
The deductible is the amount of money you will have to pay towards any damages you cause. For instance, if you cause $1,000 worth of damage to your car and you have a $500 deductible, the insurance company will give you $500.
Car Insurance Terminology: Acts of God
Acts of God are incidences that are natural in occurrence and cannot be stopped or prevented by the insured. Examples of Acts of God are theft, fire, flood, vandalism, a tree falling on your car, and damage caused by animals.
Car Insurance Terminology: Actual Cash Value (ACV)
Actual cash value is the amount of money you will receive from the insurance company should you suffer a total loss. This is the depreciated value of your car.
Car Insurance Terminology: Collision Coverage
Collision coverage covers your vehicle should you damage it while driving. If you are struck by anther car, their property damage coverage will cover your vehicle. Collision coverage is only for incidences where you are at fault. The insurance company will take a look at your vehicle and specify the amount they will cover. They will deduct your deductible from their payment.
Car Insurance Terminology: Comprehensive Coverage
Comprehensive coverage covers your vehicle against Acts of God. Like collision coverage, your deductible will be taken from the final insurance settlement amount.
Car Insurance Terminology: Uninsured Motorist Coverage
Uninsured motorist coverage covers you up to your property damage and bodily injury limits should a person without car insurance cause injury to yourself or your vehicle. In most cases the insurance company will sue the uninsured motorist to recover the money they give you. Uninsured motorists that cause bodily injury can also be charged with felony offenses in certain states.
Car Insurance Terminology: Underinsured Motorist Coverage
Underinsured motorist coverage covers you in the event someone doesn’t have enough insurance to pay for all your damages. For instance, if you have a 100/300 limit for property damage and bodily injury and someone hits your $70,000 BMW and causes you $30,000 in medical bills and their insurance is only 25/50, your insurance company will cover the rest of your loss.
Car Insurance Terminology: MedPay
MedPay coverage pays a certain amount of your medical bills, regardless of fault. Typical coverage ranges from $1,000 to $10,000. Most policies carry $1,000 or $5,000 in coverage.
Car insurance terminology doesn’t need to be confusing. Grasping a basic understanding of these auto insurance terms used, you should be able to better understand your car insurance needs and plan accordingly.
