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November 26, 2012

10 Commonly Used Terms in Automobile Insurance

You don’t necessarily have to be a new driver to realize that you might not be entirely familiar with all the terms used in automobile insurance. Here’s a simple breakdown of commonly used terms to help you get acquainted with them.

Replacement Cost (RC):

Replacement cost is the cost to repair or replace an insured automobile. This will pay the full cost to repair an automobile or buy a new one to replace the damaged automobile at the time of loss.

Actual Cash Value (ACV)

Actual cash value is the amount paid to a policyholder following the loss or damage to an insured vehicle. In case of an automobile accident, for instance, the insurance company pays the actual cash value after determining its replacement cost and subtracting factors such as wear and tear and depreciation from it.

First accident forgiveness

The thing about accidents is that they can happen anytime; sometimes for no fault of your own. Being involved in a car accident usually results in an increase in the premium you pay. First accident forgiveness is now offered by a few insurance companies in select states across America. It is an insurance coverage you buy along to help avoid having a surcharge added to your premium following your first accident. Only customers who have not had an at-fault accident in the previous five years qualify for this program. When getting automobile insurance quotes, enquire if the company also offers first accident forgiveness coverage.

Agreed value

Agreed value is a policy offered to owners of collectible, antique, vintage or custom automobiles that do not depreciate in value as an average car does. Before your policy kicks in, you and your insurance provider come to an understanding about the value for your vehicle (or “agreed value”). This is what will be paid to you should your car be totaled in the event of an accident instead of actual cash value.

Deductible

Deductible is the amount of money the customer agrees to pay upfront towards damages in the event of an automobile accident. The remainder is paid by the insurance company up to the policy limit.

Defensive driver discount

These are classes offered by the local Department of Motor Vehicles (DMV) to promote safe and cautious driving. Takers of this course might be eligible for a discount on their premiums through their insurance providers.

Personal injury protection

Personal Injury Protection (PIP), sometimes also referred to as “no-fault” coverage can be bought as an additional coverage to your auto insurance policy and applies no matter who is at fault (although there ARE some cases where it doesn’t apply). Personal Injury Protection usually pays for medical expenses, loss of income from work, essential services, accidental death, funeral expenses and other expenses associated with accidents.

Property damage liability

As the name suggest, property damage liability pays for damage caused to someone else’s property or car resulting from an accident for which you are at fault. It covers all costs related to car repair, right from labor to replacing damaged parts and anything else that might have been hit in the accident. It’s always a good idea to invest in property damage liability because you never know when you might be involved in an accident and this coverage can help you pay for your mistake.

Underwriting

The process an insurance provider goes through to determine whether or not it will provide coverage to an applicant.

Uninsured/underinsured motorist coverage

Uninsured motorist coverage pays for damages caused to your car in the event that you’re involved in a car accident with a driver who does not have insurance, up to your policy limit.

Getting yourself familiarized with the terms associated with auto insurance helps you make a well-informed, sound decision about getting a policy that will work well to suit your requirements; and hopefully this article will help you do just that!

Article Source: http://EzineArticles.com/7252553