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Demystifying Auto Insurance Speak. A Glossary of Terms

Car accidents

Looking for the best buy in auto insurance requires a basic knowledge of insurance policies. But the language is often confusing, and can leave you guessing about what exactly you're getting. Here are a few frequently used terms in plain English that will help you make an educated decision:

Basic limits of liability: The lowest amount of liability coverage you can legally buy in your area.

Collision coverage: This coverage reimburses you for damage done to your vehicle during a collision with another car or object.

Comprehensive coverage: Covers your car in case of damage from an event other than a collision, such as fire, theft, vandalism, etc.

Earned premium: Portion of your premium used up by any given point of the life of your policy.  For example: after six months of your 12-month policy, half of your premium will have been earned.

Gap insurance: A policy that insures your car for the difference between what you owe on it, and what your insurer says its worth. This is usually required if you're buying or leasing a new car.

Liability insurance: Covers you for damages, injuries or death resulting from an accident. The two main types of liability coverage are bodily injury and property damage.

No fault insurance: Covers you for medical costs, loss of wages, funeral expenses and other costs regardless of who is found responsible in an accident. In exchange for these benefits, the right to sue for damages is limited.

Pro-rata cancellation. If you cancel your policy before it expires, it is called pro-rata. The term pro-rata refers to the amount of money you may be refunded based on the amount of time left in your policy.

Threshold level: The point at which the insured may bring tort action under a no-fault auto plan.

 

 

 

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