Not only is having car insurance important to protect yourself, but it is also mandatory in almost all states. But before you purchase any type of auto insurance, you need to be aware of the must-know car insurance terms. This helps reduce a sense of confusion and enables you to save money, purchase the right policy, and easily navigate the claims process.
Let’s begin with a few general must-know car insurance terms
- Insured Declared Value (IDV)
This term refers to the car’s current market price. In case of theft or damage that is beyond repair, the insurance company will pay you this amount to replace your car.
- Voluntary Excess
During a claim settlement, you need to pay a certain amount from your own pocket. However, if wanted, you can pay extra to reduce the premium. This extra amount is known as the voluntary excess.
- No Claim Bonus
You are eligible for a bonus if you haven’t made a claim throughout your policy period. Depending on the number of years, this bonus can be up to 50 percent of the premium amount.
Endorsement refers to the extra terms or provisions added to the policy. So, if you want to add coverage for certain trims or equipment in your car, adding an endorsement is advised.
You must know these terms of policy coverage for your car:
- Collision and Comprehensive Coverage
Collision coverage refers to the coverage provided to your vehicle for any repairs undertaken during an accident where you collide into another vehicle or where your car is damaged in a hit-and-run case. Comprehensive coverage, on the other hand, is for repairing your vehicle from damage caused by weather, theft, vandalism, or anything other than a collision.
When you claim your collision or comprehensive coverage, you are required to pay a portion of the sum. This amount is known as the deductible. Accepting higher deductibles may decrease the rates of your car insurance premium.
The term “third-party liability” is among the essential must-know car insurance terms. It refers to the coverage required to pay damages that are raised against you by a third-party. For example, if you are found responsible for damage to the vehicle or any injury suffered by another driver, they can claim a certain sum from the insurance company. Liability is an important provision in all auto insurance policies.
When it comes to making the claim, the must-know car insurance terms are
- Total Loss
Sometimes, the cost of repairing a vehicle exceeds the value of the vehicle itself. In such cases, the insurance company declares the car as a “total loss.” This determines the current value of the vehicle and pay you this sum while taking ownership of the car.
When an accident occurs, usually one or more parties are considered to be at fault. Insurance companies try to understand which driver it was by considering police reports, eye-witness accounts, traffic camera records, and more evidence. Even if it’s a no-fault scenario, the insurance companies become involved to find a degree of responsibility for the other driver. Sometimes, this dispute escalates into court action.