The laws of many countries demand that every automobile owner should take automobile insurance. The kinds of coverage which need to be compulsorily taken and the minimum limits of the insurance amount are specified. The automobile owner can take other coverage also, depending on his need. A person taking automobile insurance needs to be familiar with various automobile insurance terms.
Adjuster – The person who evaluates the damage caused due to any reason including an accident and who determines the amount to be paid by the insurance company to the insured party.
Agent – The insurance policies of an insurance company can be sold and serviced by a person or organization called the agent who is licensed to do so.
Automobile insurance – This is a type of insurance which offers protection against losses caused due to incidents involving an automobile.
Binder – When a person has applied for automobile insurance, it will take some time for the actual policy to be issued. A binder is a short term agreement that offers temporary insurance coverage.
Claim – It is a notice which is sent by the person who has taken the automobile insurance policy to the insurance company that it has to pay for a loss covered under the policy.
Collision – This is an automobile insurance coverage which covers for any damage caused to the car due to colliding with another vehicle, object or person.
Commission – The automobile insurance company rewards the insurance agent by paying him commission which is a percentage of the premium for the policies he brings in.
Comprehensive coverage – Opting for this automobile insurance coverage means that you will be covered for any loss caused to your car due to a reason other than collision like theft, vandalism, fire etc.
Deductible – It is that part of the loss which has to be first borne by the insured party only after which the insurance company will provide compensation.
First party – This automobile insurance term stands for the policyholder of the automobile insurance contract.
Insured – This term again stands for the policyholder who will be compensated by the insurance company in case of loss.
Insurer – The insurance company which issues the policy agreeing to compensate the insured in case of loss is called the insurer.
Liability insurance – When a person takes this kind of automobile insurance, he is covered for any liability arising from claims made by third parties for any injury or damage to property. The automobile insurance terms, ‘liability insurance’ and ‘third party insurance’ can be used interchangeably.
Medical payments coverage – If you have opted for this coverage, you will be compensated by the insurance company for medical expenses up to a specified limit, incurred for treating any injury caused to you, your family members and any uninsured occupants of your car. ‘Personal injury protection’ coverage or ‘no fault’ coverage is the other automobile insurance terms used for the same.
Policy – This is a contract between the insured party and the insurer which states the rights and duties of each party.
Premium – This is the regular payment made by the insured party to the insurer as the price for providing insurance.
Quotation – Based on the information you give to your agent or insurance company, you will be given an estimate of the cost of automobile insurance. This is called quotation.
Second party – The insurer in the insurance contract is referred to as the second party.
Third party – A person who suffers loss due to some act of the policyholder and who can claim compensation under the policy is called the third party.
Underinsured and Uninsured Motorist Coverage – An automobile insurance policy holder will be compensated by the insurance company if he collides with a motorist who is either uninsured or whose insurance is not sufficient to compensate for the damage caused. However, he should have taken the underinsured and uninsured motorist coverage under the various automobile insurance terms.
Understanding the various automobile insurance terms will help you to decide on the right kind of automobile insurance policy.