Understanding Automobile Insurance
Trying to understand all the terms used in relation to automobiles, particularly automobile insurance, can be a daunting task. In many cases, terms relating to your automobile insurance may be defined within the policy itself. In other cases, words may come up in conversation with your insurance agent, or after you have been involved in a car accident, which are not defined in the policy. The following glossary of common terms related to automobile insurance may give you a better idea of what is being said. Be warned, however, your particular insurance policy may define these terms in a different manner, which may make a difference if you have to submit a claim.
An individual or entity who is not specifically named as an insured within the policy itself, but for whom attachments, known as endorsements, to the policy provide a degree of protection. In some states, an additional insured can be treated differently from an additional named insured, who is an additional insured who is actually named within the policy itself and to whom all of the rights and responsibilities of the policy apply.
Bodily Injury Liability
Insurance coverage that applies when you are legally liable for injuring other people in an auto accident. Bodily injury liability provides payments to those injured individuals and pays your legal defense costs as well. Such coverage can be combined with property damage liability, as it often is, and be called “liability insurance.”
The request that a policyholder makes to an insurance company to recover losses covered by an insurance policy.
Coverage under a policy that pays for damage to, or loss of, your own automobile from upset or collision with another object or vehicle. Collision insurance does not cover bodily or personal injury, and it may not cover other property damage liability arising out of the collision.
Insurance coverage that reimburses you for damage to your own car from causes other than a collision, upset, or general wear and tear. Comprehensive insurance may provide coverage for hail, flood, theft, mischief, damage from animals, falling objects, explosions, earthquakes, and many other events.
The amount of the loss that you must pay before the insurance company begins to pay under the policy. For example, if you have a $500 deductible and have been in an accident in which $3,500 in damage to your car occurred, you must pay the first $500 before the insurance company pays the remaining $3,000.
Drive-Other-Car Endorsement (DOC)
Sometimes referred to only as an “other-car endorsement,” this addition to the policy allows coverage to be added that will protect individuals named in the endorsement when they are driving cars not owned by those individuals and not named within the policy.
Compensation you receive under your own insurance policy as opposed to receiving payment from someone else’s insurance policy, such as the person who caused an accident. Examples of first-party coverage include collision insurance and comprehensive insurance, in which your own insurance company pays you for losses to your own car.
Insurance coverage that pays others who sustain bodily injury or experience property damage caused by you or someone else covered under your policy.
The root of an insurance claim. In order to have a claim, there must first be a loss, such as damage to a vehicle. Insurers may also refer to a loss as a payment made on behalf of an insured to cover such damage.
Motor Vehicle Record (MVR)
The written record of a particular driver’s accidents and traffic violations. An MVR may be reviewed when an insurance agent is giving a quote for automobile insurance rates: the more accidents and violations you have in your MVR, the higher your premiums are likely to be.
Coverage available in many states that pays you, or those people covered under your policy, for medical expenses or injuries that occur as the result of an accident, regardless of who was at fault in causing the accident.
Personal Injury Protection (PIP)
That part of an insurance policy, in many cases a no-fault policy, which provides protection against personal injury and related losses, as opposed to damage to your vehicle, up to a specific per-person dollar amount. PIP may include benefits for medical expenses, loss of work income, and accidental death and funeral expenses.
The amount of money you pay, either monthly, quarterly, or yearly, to maintain your automobile insurance. If you fail to pay your premiums, your insurance policy can be cancelled.
Property Damage Liability
Insurance that protects you, and pays on your behalf, for automobile-related damage that you cause to another persons’ property. If offered jointly with bodily injury liability, as it often is, it may be called “liability insurance.”
Shorthand for “underinsured motorist,” or those fellow motorists whose automobile insurance maximum is insufficient to cover a specific loss. UIM pays you, or those people covered under your policy, for bodily injury losses if the other driver is liable and has coverage that does not fully compensate you for your losses. The maximum of a UIM recovery is your policy limit.
Shorthand for “uninsured motorist,” or those motorists who do not have any automobile insurance. UM coverage protects insureds, up to the limit of their policies, against bodily injury losses caused by a negligent motorist who has not obtained insurance coverage.
A term commonly used in conjunction with a modified no-fault plan. Most no-fault plans set a point at which the insured may bring a legal action to recover for losses such as pain and suffering. Before the threshold is reached, tort actions are not allowed. Typically the threshold will be reached if medical bills reach a certain expense level, or if disfigurement or death occurs.
Shorthand for “vehicle identification number.” Your VIN is also relevant to areas other than insurance, but may come up in the insurance field if there is a question as to the ownership of your car. A car’s VIN is a unique number assigned to the car. The VIN can be found, usually, engraved on a metal plate affixed to the dashboard that is visible through the windshield.