Car insurance might seem like a bit of a foreign language. There are a lot of different terms and words that get thrown around, and sometimes it can sound like gibberish. To help you decode the sometimes-mystifying language that is auto insurance, we’ve got a list of ten words you need to know. Buckle your seatbelts – this is Car Insurance 101!
10 car insurance terms you need to know (a.k.a. Car Insurance 101)
What does at fault mean?
Fault is how responsible someone is for an accident. It’s kind of the whodunit of car insurance – if you’re at fault, you’re probably the one who caused the accident. Fault is kind of a big deal because it determines whose insurance company is going to pay out for an accident. (Or whose auto insurance is going to pay for what part of the damage.)
What is a covered loss?
This is something you need to pay attention to when you read through your policy or buy your auto insurance.
A covered loss is something your insurance will pay for if it happens to you. It could be damage to you, your vehicle, another person, or another person’s property. Basically, your policy outlines which losses (or causes of damage) will be covered by your insurance. Believe it or not, not everything is covered by your car insurance. And what’s covered can depend on what coverages you choose to purchase.
What is a declaration page?
The declaration page of your policy gives you a handy little snapshot of what your insurance policy looks like. It gives you a nifty summary of the coverages you have for the cars on your policy.
For example, the “dec page” (it needed a nickname, right?) usually includes:
The coverages you chose
The limits for each coverage (more on this later)
How much each coverage costs
Which vehicles are covered by the policy and what coverages they have
So, if you’re just looking to see what kind of coverage you have, you can take a look at your dec page. It’ll give you a high-level overview of your insurance. Helpful, right?
What’s a deductible?
The deductible is the not-so-fun part of our Car Insurance 101 guide. Your deductible is the amount that you agree to pay out of pocket if you have a claim. Basically, you have your portion of the claim and insurance has theirs (if it makes you feel better, their portion will probably be way more than yours.)
Here’s an example:
You have a $500 deductible for your comprehensive insurance. A tree falls on your car and causes $4,000 of damage. You would pay $500 and insurance would pay $3,500.
What is the limit of coverage?
Your insurance will come with a limit of coverage, meaning the maximum amount that insurance will pay for specific coverages. It’s essentially how much insurance you’ve bought. Each state has its own requirements for the “minimum limits” of insurance that a driver has to carry to legally drive. It’s really important to make sure you pay attention to your limits of coverage and get enough insurance to truly protect you if you have a serious accident – and you might want to carry more than the state minimum level of car insurance. Not that we want to sound all doom-and-gloom or anything, but a severe accident can happen in the blink of an eye. Car insurance is a financial safety net (another point we felt compelled to make in our Car Insurance 101 guide!)
What is an MVR?
An MVR (Motor Vehicle Report) is a record held by the state that details your driving history from the past few years. It can include your license status, traffic violations, license suspensions, and accidents. Many insurance companies use them when they’re setting car insurance premiums because it gives them an idea of how risky you are to insure. Safe drivers tend to get lower insurance rates (a fundamental Car Insurance 101 concept.)
Who is the named insured?
The named insured is just the primary person that the insurance policy is issued to. It’s who the policy covers.
What is primary use?
This is what you use the car for most of the time. Are you using it to commute to work? Are you using it to run errands and drive around town (using the car for pleasure?) Are you using it for business? (You’ll need to talk to your agent to make sure you have the proper coverage for a business vehicle.) Or are you using the vehicle on a farm?
What is a car insurance premium?
Premium isn’t just a fancy type of gas for your car.
Your premium is the amount of money you pay for your car insurance. It’s the price tag of your car insurance policy. Your premium depends on many different factors, including:
Your driving history
Where you live
What car you drive
What you’re using your car for
The coverages/deductible you choose
There are a lot of factors that affect your car insurance rates, and the best way to find out how much your car insurance is to get a quote. You can compare car insurance coverages and pricing by filling out our quote form or giving us a call today.
Who is the principal driver?
The principal driver is the person who drives the insured vehicle the most. If the car’s on the road, who’s most likely to be behind the wheel?
So, there are ten handy car insurance terms to know, broken down into bite-sized pieces. Car insurance might seem like a strange language where words don’t always mean what you think they do. Hopefully, the above terms in this Car Insurance 101 guide help as you venture into the world of getting auto insurance.
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