Auto Insurance like most insurance is loaded with jargon. Here are the explanations of some common terms you will come across while searching for an auto insurance plan:
Bodily Liability Coverage
If you are found responsible for an event that has caused bodily harm on another person then you will have to pay. It is important to have minimum bodily liability coverage because in case of a serious accident you might get sued for damages if the liability coverage isn’t there.
Property Liability Coverage
This is a variation of the above scenario. Here the damage inflicted by the policyholder is on a physical structure like a lamp post or a fence.
This coverage covers any damages to your car as a result of a collision with another vehicle, physical object, running into potholes or due to overturning. Collision coverage involves deductibles in the range of $250-$1000. If you are the responsible party for an accident then your insurance company will give you the money for repairs minus the deductibles. If you are not then your insurance company will try and recover the damages from the other party’s insurance company.
Personal Injury Protection
Abbreviated as PIP, this coverage pays for the medical expenses of the policyholder and all passengers in the policyholder’s car at the time of an accident. Additionally, it can also be extended to cover funeral costs, lost wages and service replacement costs.
As the name suggests, this is the most well-rounded damage coverage plan of the lot. It covers theft of the registered automobile and damages in the event of hail, fire, lightning strike, explosion, earthquake, flood, and windstorm. Also damages due to on-road contact with animals, vandalism and grenade/missile attack are included. It normally comes with a $100-$300 deductible.
Uninsured/Underinsured Motorist Coverage
This coverage reimburses you, a designated driver or a member of your family in the event that the car is hit by an uninsured, hit-and-run (unidentified) or underinsured driver. This coverage is also valid if the concerned party is hit as a pedestrian from one of the aforementioned classes of drivers.
This coverage comes into play in the event if your car is totaled and you owe more on the vehicle than its market worth at the time of the accident. In this scenario, the difference between the two values is made up for by your insurance company if you have opted for Gap coverage.
No Fault Auto Insurance
This is basically a state level law that is employed in a handful of US states. In it, compensations are provided to motorists involved in an accident by their respective insurance companies without any determination of who was at fault. This circumvents lengthy reimbursement times and possible litigation scenarios. However, the responsible party as deemed by the insurance company is still charged a higher premium because they have now become a risk for where this law isn’t applicable.
Pay-As-You-Drive Auto Insurance
This is a useful alternative to conventional auto insurance solutions in that here you are charged on the basis of the number of miles you have driven. This type of coverage requires the sending of mileage data in one of the following ways: odometer readings, GPS logs or through a wireless monitoring system.
Towing and Roadside Assistance
In the event of your car’s breakdown during travel, this coverage reimburses you the cost of transporting your car to the nearest service center and the cost of servicing it. This coverage does not include the cost of any required spare parts.
This involves the payback of the charges you incur by using a rental car while your car is being repaired after an accident. There are good-faith limits to this coverage depending upon the company.
This form is filed and sent by your insurance company to your state’s Department of Motor Vehicles (DMV) on your behalf stating that you have purchased the requisite liability coverage. If you cancel your insurance or in the event of its expiration, the insurance company promptly sends a SR-26 to update the DMV of your status.
The easiest way to cut through the jargon is to play insurance companies off against each other. You can do this easily and quickly by using on online auto insurance quote comparison site and comparing the terms and conditions of each policy.