When buying auto insurance, it would be great if the buyer is aware of all the terms that are familiar in the auto insurance. It would help the buyer to understand the pros and cons, if he understands all the terminology used in relation to the business of auto insurance. Let us look into the various terms used in the auto insurance field.
I. Actual cash value: This means the actual value of the car as on date. It depends upon the make model, year of making and the vehicle’s present condition etc.
II. Assigned risk insurance: Most states require insurance coverage for its drivers and there is a law that requires insurance companies to accept certain number of high-risk drivers onto their policies. This kind of policies would cost more, however they are available in the auto insurance market.
III. Auto replacement coverage: Under this coverage the policy allows the vehicle to be replaced, regardless of cost to the insurance company.
IV. Bodily injury liability coverage: This coverage takes care of another party's personal injuries if you caused the accident.
V. Binder: This is the temporary auto insurance cover that protects your auto until you get your new policy.
VI. Collision coverage: By having this coverage, which pays for the damages or the replacement of your car in the event of an accident. If your car is leased or bought on auto loan, the car lenders would require you to have collision coverage to cover their financial risk.
VII. Comprehensive insurance: This type of coverage helps in the events not covered by collision insurance. The losses caused by natural disasters, theft, and vandalism are covered under the comprehensive policy.
VIII. Deductible: The amount you would pay for the vehicle repair bills before your auto insurance company pays your claim. A higher deductible gets you the lower rate on your policy.
IX. Gap car insurance: Covers the difference between what you still owe on your car and its actual cash value if your car is totaled in a wreck.
X. Good driver plan: It is an incentive offered by most of the insurance companies for maintaining a good driving record over a designated time period. This will help you get a good discount, while buying the auto insurance.
XI. Lien: A claim on the property kept as security for an owed debt.
XII. Liability insurance: Liability Insurance gives coverage to the lives and properties of others in the event of an auto accident. It is mandatory in many states.
XIII. No-fault auto insurance: In many states, this type of policy replaces the liability insurance. It covers your personal injuries and damages to your own auto, regardless of who was at fault. It allows for more expedient accident-related health care. Sometimes no-fault insurance comes with a limit to claims.
XIV. SR-22 auto insurance: If your license has been suspended or revoked, you will need an SR-22 auto insurance certificate to get it reinstated. SR-22 is proof of a liability auto insurance policy. It is actually a form filled out by the auto insurance company and submitted to the DMV of your state.
XV. Subrogation: Subrogation is process insurance companies resort to when you are injured in an accident; your medical insurance company will pay your claims and then recover the amount on your behalf from the insurance company of the other person involved who caused the accident.
XVI. Uninsured motorist coverage: This coverage gives you the benefits when the other party in an accident doesn't have liability insurance coverage to pay for damages to your car or your personal injury up to the limit allowed by the policy.