Often, insureds aren’t up to speed on what all the “insurance-speak” means. While insurance professionals could define commonly used auto insurance terms in their sleep, the average customer has little experience with insurance and its vocabulary.
Often, that insurance jargon needs explaining. Grinnell Mutual provides insureds with some help, with common insurance terms translated into non-insurance language, and it’s a great tool
Providing your customers with a sort of “cheat sheet” like this — maybe even before you meet up — can help establish trust between insured and agent and give them the opportunity to feel more informed and comfortable in an insurance transaction.
Basic Insurance Terms
- Actual cash value: The cost of replacing damaged or destroyed property with comparable new property, minus depreciation and obsolescence.
- Additional insured: A general liability coverage for individuals not named in the policy.
- Adjuster: A person who investigates claims and recommends settlement options based on estimates of damage and insurance policy terms.
- Agent: Someone who sells and services insurance policies.
- Carrier: The company that underwrites the policy (i.e. is responsible for paying claims covered by the policy).
- Claim: A demand made by the insured, or the insured’s beneficiary, for payment of the benefits as outlined by the policy.
- Coverage: The scope of protection provided under an insurance policy.
- Declarations: Also known as a Dec page, usually the first page(s) of your policy, it lists the details and terms of the policy and your coverages.
- Deductible: Amount of money you pay out of pocket. A higher deductible will lower your premium but will cost you more out of pocket.
- Endorsement: An amendment or addition to an existing policy that changes the terms or scope of the policy. It’s sometimes called a “rider.”
- Indemnity: Restoration to the victim by payment, repair, or replacement.
- Policy: The written contract stating the conditions of your insurance coverage.
- Replacement cost (RC): The cost to repair or replace damaged property with materials of like kind and quality without a deduction for depreciation.
Insurance Coverage Definitions
Bodily injury liability coverage is required by law in 48 states and the District of Columbia. Many states also have requirements for property damage liability, personal property, personal injury protection (PIP), and uninsured/underinsured motorist coverage (UM/UIM). Talk to your agent about what you’re required to carry in your state.
- Bodily injury liability: If you’re held liable for a covered accident in which people are injured, this coverage helps pay the injured party(s) costs and for your legal defense.
- Collision: Collision coverage helps pay for damage to your car caused by a covered collision with another car or object. It also helps pay for repairs even when you cause the accident, up to the value of your car at the time of the accident, minus your deductible. Most car loans require you to carry collision coverage.
- Comprehensive physical damage: Sometimes referred to as Other Than Collision (OTC), it covers issues not caused by collision with another vehicle or an object (like bad weather and vandalism).
- Medical payments: Although similar to bodily injury liability, medical payments coverage helps pay for accident injuries for both you and your passengers’ injuries up to the coverage limits.
- Personal injury protection (PIP): A component of car insurance also known as “no-fault insurance,” covers the healthcare expenses associated with a car accident. PIP covers medical expenses for both injured policyholders and passengers.
- Property damage liability: Helps pay for covered claims against you and your legal defense costs if your car damages another person’s vehicle or property.
- Uninsured/underinsured motorist (UM/UIM): If you and/or your passengers are injured by someone without proper coverage, or are the victims of a hit-and-run, this coverage may help protect you.
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