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Financial Website Directory Ireland

Car Insurance Terms Glossary

Author: Biljana Dimovska
Category: Regional: Australia: Insurance AU
Date Added: June 26, 2012 11:00:57 AM
Page Views: 3898

Automobile insurance policies are comprised of various coverage types that are applicable to the policyholder's situation. This "cafeteria style" approach allows the driver to tailor the auto insurance to provide the correct combination of coverage without unnecessary insurance. Common insurance terms can be confusing for people who are unaccustomed to the language used inside the auto insurance industry.


* Liability Coverage: The liability component is required for all drivers. This part of the auto insurance policy will pay for damages incurred by third parties. Lawsuit proceeds are provided through this component. Sufficient coverage is essential to prevent outstanding obligations from serious accidents that cause significant property damage and injuries to other people.


* Property Damage: The property damage liability coverage is one sub-component of the liability insurance. Damages that are caused to property belonging to others, including public property, are covered under this insurance subcomponent. Any amount above the policy limit will become the legal obligation of the policyholder.


* Bodily Injury: Physical injuries that are sustained by passengers in an automobile accident will be covered under this liability sub-component. Bills that exceed the policy limit are the legal responsibility of the policyholder.


* Personal Injury: protection Injuries sustained in an auto accident by the policyholder are paid from this optional component. Anyone without major medical insurance should consider adding this component to the auto insurance policy.


* Collision Coverage: Damage to the policyholder's vehicle sustained in a collision with another vehicle or a stationary object will be covered under the collision component. Insurance companies price insurance according to the make and model of the vehicle. Policy limits are not set for this component. Auto insurance adjusters determine the cost of repairs, or vehicle replacement, based on actual accident statistics from previous years.


* Comprehensive Coverage: Vehicle damages sustained when the vehicle is not in motion are covered under the comprehensive component of the auto insurance policy. Theft, storm damage and vandalism are examples of non-collision-related damage. Some drivers choose not to carry this component because the cost of the annual premium exceeds the value of the vehicle.


* No-fault: Some states have adopted the "no-fault” auto insurance model to limit the litigation, or lawsuit, award amounts. Set amounts are written into the law to prevent exorbitant payouts from insurance carriers. The no-fault insurance model restrains insurance costs.


* Replacement Value: Insurance companies commit to paying claims to repair or replace the vehicle at the current market price without deductions for depreciation. A clause in the policy documentation will indicate if the insurance company is committed to pay claims at the replacement value.


* Tort Harm or wrong committed against another person, which results in legal liability for the damages sustained. Liability auto insurance is required, by law, to pay for the unintentional torts involved in automobile accidents.


* Deductible: An amount of money the policyholder will pay for each claim before the insurance company will incur expenses. The remainder of the claim is paid by the insurance company up to the policy limits. Policyholders can reduce the annual premium by setting a higher deductible. An amount equivalent to the deductible should be saved ahead of time to prevent financial hardship.


* Umbrella policy: Liability insurance policies that offer additional coverage above the liability components on the auto and homeowners insurance are called umbrella liability insurance policies. Anyone with substantial personal property is wise to carry an umbrella policy to reduce the personal liability that can be sustained for lawsuit filed by third parties.


* Discount: Insurance companies offer to reduce the annual auto insurance premium when policyholders embrace risk-reducing behaviors. Clean driving records indicate healthy driving habits that prevent accidents from occurring. Drivers with good credit scores demonstrate responsible behavior in financial matters. Insurance companies offer discounts to win new customers through reduced auto insurance premiums.


* Fraud:  Any attempt to extract money in a false manner is considered insurance fraud. If proven, the insurance company can file suit against the policyholder for the amount of money that was paid. Inaccurate information on insurance applications is considered fraudulent and can result in the cancellation of auto insurance coverage and denial of claims.


* Coverage Lapse: Late premium payments can cause the auto insurance to cease to exist. Drivers are not insured if the policy is not in force. An accident that occurs during this period of time will not be covered by the insurance company. Claims will be denied. The policyholder will be required to pay for all expenses out of pocket. Reinstatement of the policy requires additional fees to be paid in advance.


* Loss Payee: A financial institution carrying a car loan will be named as the recipient of the collision and comprehensive payments from the insurance company. The vehicle is the loan collateral, which qualifies the bank to receive payment for the loss. Some insurance companies issue the payment check with the policyholder's name and the bank's name on the check. This action requires the policyholder to seek the endorsement of the bank prior to cashing the check.


Article by Australian car insurance provider, RealInsurance