July 19, 2021
Have you ever tried to read your car insurance policy and stumbled across something that you didn’t understand? You’re not alone. Car insurance lingo can be confusing, which is why SafeAuto is here to help. Here are some commonly used, and sometimes misunderstood, insurance terms and what they really mean.
Comprehensive & Collision Coverage – Comprehensive coverage is coverage for those “freak accidents” that sometimes occur – theft or vandalism to your car, hail or other weather events, animal collisions, fire, or even falling objects. It may pay to repair your vehicle (minus your deductible) if one of these incidents should happen. Collision coverage is coverage for damage to your vehicle due to an accident with another vehicle or object, such as a telephone pole. This coverage may pay to repair your vehicle (minus your deductible) if you are involved in this type of accident.
- Are comprehensive and collision coverage required? No, they are not required, but if you are leasing or financing your vehicle, these coverages may be required under your lease or loan agreement.
- Are comprehensive and collision coverage the same as “full coverage”? Kind of. Technically there is no such thing as “full coverage”. The term “full coverage” refers to a mix of coverages that protect your vehicle and can vary by state. However, typically when someone says “full coverage” they are referring to comprehensive and collision coverage in addition to the required liability.
Declarations Page – The declarations page is a summary page that includes basic information about the policy. Two commonly asked questions regarding the declarations page are, “What information is on the declarations page?” and “Is the declarations page the same as proof of insurance?”. Some of the information included on the page includes the name and address of the policyholder, the vehicles and other drivers covered under the policy, the coverages and deductible amounts, any applied discounts, and the overall policy premium. The declarations page is not the same as proof of insurance. This page is also sometimes referred to as the “Dec Page”.
Deductible – When you file a claim, a deductible is the amount of money you will pay out-of-pocket before your insurance company will pay for any damages. You select your deductibles when purchasing your insurance policy and different coverages can each have their own deductibles. Deductibles can also be changed after your policy has gone into effect. For example, if you select a $1,000 deductible for collision coverage and are involved in an accident with another vehicle that causes $6,000 in damage to your vehicle, you will pay $1,000 first and your insurance may cover the remaining $5,000. It’s important to note that deductibles affect your premium. The lower the deductible, the higher the monthly payment. The higher the deductible, the lower the monthly payment.
Exclusion – An exclusion is something that is not covered under your insurance policy. One example of an exclusion is an Excluded Driver. Let’s say you purchase a policy and list your 17-year-old child as an Excluded Driver. This means that this child is excluded from (not covered under) this policy. If this child drives your car and is involved in an accident, the coverages of your policy would not apply. Even if you have comprehensive and collision coverage on your policy, it would not cover this accident because an Excluded Driver was driving your vehicle. There are other types of exclusions as well.
Gap Coverage – If your car is damaged or stolen, Gap Coverage may cover the difference between what your insurance company pays you for the current value of your car and what you still owe on your car loan. Here’s one scenario: you purchased a brand new car for $30,000. Unfortunately it’s value has depreciated and it is now only worth $20,000. If your car is totaled in an accident, SafeAuto will only value your car at $20,000. However, you may still owe $25,000 on your loan. Gap Coverage will cover the extra $5,000 between what SafeAuto gives you and what you still owe.
Lapse – A lapse is a period of time when someone does not have insurance. If your policy should cancel on December 1st and is reinstated (or a new policy is started) on December 6th then there would be a lapse in coverage of 5 days.
- Will having a lapse in coverage affect your insurance rate? Possibly. Some insurance providers will ask if you have had a lapse in coverage during a specified amount of time. If you have, it may impact your rate. Additionally, some states require insurance companies to notify the Bureau of Motor Vehicles when policies cancel and the lapse could be noted on your driving record.
Liability Coverage – Liability coverage refers to Bodily Injury & Property Damage Liability Coverage, which covers damage that you cause to other people or property. This coverage is required in most states and is available in multiple amounts. For example, according to the Ohio Bureau of Motor Vehicles, the minimum amount required by Ohio law is $25,000 for injury of one person, $50,000 for injury of two or more people, and $25,000 for property damage in an accident. However, you can choose to have higher limits such as $50,000 for injury of one person, $100,000 for injury of two or more people, and $25,000 for property damage, or even $100,000 for injury of one person, $300,000 for injury of two or more people, and $100,000 for property damage. These coverages are sometimes shorted and display as 25/50/25 or 100/300/100.
Named Insured – The term Named Insured refers to the person who is the primary insured person on a policy. For example, if you purchase a policy in your name and also add a spouse and child to the policy, you would be considered the Named Insured because you are the first person listed on the policy.
Premium – Your premium is the amount of money per period that you will pay for your auto insurance. Typically each period or term is 6 months but it can range from monthly to yearly depending on the insurance provider. What factors determine your insurance premium? Each insurance provider is different but at SafeAuto some of the factors are: your date of birth, driving history, marital status, garaging address, the year, make and model of your vehicle(s), the coverages you choose and your credit score.
Proof of Insurance – Most states require that you have proof of insurance while driving a vehicle, but what does proof of insurance mean? How do you know if you have the right information? Simply put, proof of insurance is a document that shows that you have an active auto insurance policy that meets or exceeds the current minimum limits of liability required by your state. Once you buy an auto insurance policy your insurance provider will give you your proof of insurance. In the case of SafeAuto, we can email or fax you a copy so you have it immediately, and it is also accessible through our mobile app.
Uninsured and Underinsured Motorists Coverage – Similar to the liability coverages mentioned above, there are also two kinds of Uninsured and Underinsured coverages: Bodily Injury and Property Damage. Uninsured and Underinsured Bodily Injury Coverage may protect you against drivers that do not have any insurance or do not have enough insurance to pay you for injuries they cause to you. It may pay the difference between the amount you get from the other driver and the amount of the actual damages, up to the limit on your policy. Uninsured and Underinsured Property Damage Coverage may also protect you against drivers that do not have any insurance or do not have enough insurance for damage they cause to your property, up to the limit on your policy.
The coverages and policy limits mentioned above vary state by state. To learn more about these coverages and what is available in your state, get a quote from SafeAuto or call 1-800-SAFEAUTO (1-800-723-3288) to speak to one of our licensed representatives today. In addition to auto insurance we can also help you get your apartment, boat, home, motorcycle, and RV covered too!