Making Sense of Insurance Lingo
When you shop for auto and car insurance, you might come across some insurance jargon that you're not familiar with. Here is a brief glossary of common insurance terms.
- Actual cash value - property's replacement cost less the amount of depreciation since its original purchase date.
- Benefit - the money your insurer pays to you or your beneficiary after a claim is filed.
- Bodily injury liability - the coverage in your auto and car insurance policy that pays for the medical expenses of a party injured by the policyholder.
- Claim - the insured's request for reimbursement after a covered loss.
- Collision - auto and car insurance coverage that pays for damage to the insured's car after a collision. The collision might be with another vehicle or any other object.
- Comprehensive - pays for damage to the policyholder's car that is not caused by a collision. Commonly covered events include theft, falling objects, fire, earthquakes, floods, riots, and explosions.
- Deductible - the portion of the losses for which you are financially responsible. Higher deductibles on an auto and car insurance policy mean you will pay lower premiums.
- Limits - the maximum amount your insurer will pay for losses. Many states have mandatory minimum limits on certain coverages.
- Medical payments - also called personal injury protection (PIP) coverage. Pays for reasonable and necessary medical treatment of injuries sustained by the driver and passengers of the insured's vehicle. Some auto and car insurance policies have PIP coverage that will also cover lost wages and/or pay for the policyholder's injuries if he/she is hit by a vehicle while on foot.
- Property damage liability - pays for the damages the insured does to another party's property.
- Tort - legal term that refers to a situation where a party is deemed legally responsible for damaging another's property or injuring him/her.
If you have any questions, please visit our Frequently Asked Questions page.
