Purchasing a car insurance policy can be an overwhelming and confusing process. If you take some time to become familiar with some of the common car insurance terms and definitions before you make those initial calls to insurance companies, you will prepared to answer their questions and obtain adequate coverage. Here is a brief a list of car insurance terms and definitions.
When you purchase your insurance policy, the paperwork will include a declarations page or summary of your insurance coverage. The Declarations page will list the cars covered under the policy, the types of coverage, the limits, and the premium or annual cost for the coverages that you have selected. The declarations page will also list covered and excluded drivers on the policy. It will provide the dates of your policy term or period of time your policy is active and in force and will indicate your policy expiration date which is the date the policy expires.
If the insurance policy is issued in your name then you are considered the “Named Insured”. Any other person listed on the policy may be listed as the “Second Named Insured” and will have the same coverage as the “Named Insured”. In the event that you finance your vehicle with a bank or car dealer, you will be required to list the lien holder as an “Additional Interest Insured”. A company or person listed as an “Additional Interest Insured” can be held legally responsible for an accident that involves the insured person or car.
The garaging location for the vehicle or the place where you normally park your car is typically your primary residence. Some insurance companies will want to know if the car is parked on the street, in a driveway or in a secured garage to determine risk more precisely, especially in an urban area. Insurance companies consider a car that is parked on the street a higher insurance risk than one parked in a private driveway or secured garage when not in use so garaging location can affect your premium rate. Having a garage at home that locks or garaging your vehicle in a reserved space always helps.
About the Driver
The person driving the car most often is considered to be the principal driver, but it’s also important to understand other auto insurance terms related to driver status. A rated driver is one who actively drives a vehicle covered on a policy and someone who drives the insured car but is not the principal driver is considered an occasional driver. A listed driver is someone who lives at the primary residence where the car is garaged but does not drive the car whereas excluded drivers are not allowed to drive the insured car and are not covered in the case of an accident.
Other Car Insurance Terms to Know
Insurance coverage limits are the maximum amount a car insurance company will pay for applicable damages or injuries in the event of an accident. The majority of states have laws that indicate minimums for coverages, but always discuss your specific needs with an insurance agent to make certain you have adequate coverage. Sometimes referred to as “gap coverage”, Loan/Lease Payoff is a type of coverage that pays the difference between what you owe on a vehicle loan and the amount paid by insurance if your vehicle is totaled in an accident or is stolen and not returned.
The insurance company will usually ask you some initial questions to provide you with a policy that will include accurate coverage and to help them determine how much of a risk it will be to insure you and your car. It’s important to notify understand car insurance terms and notify your insurance company of any changes to maintain adequate coverage. Hopefully, this information on car insurance terms and definitions can help you to understand auto coverage better.