By June 21, 2007 1 Comments Read More →

I Dont Understand My Car Insurance Policy

Reader question:

I’m sitting here reading over my insurance policy, and I don’t know what half of these words mean. Help?


Help is on the way, Ashton.

Like most businesses, insurance companies have their own special language that they use to confuse the laypeople and talk about specific business things amongst themselves. After a little time in the insurance world, most of us pick up on what the words mean, like ‘policy’ and ‘PIP’. All the same, to a newcomer it can be confusing. Here’s something by way of definition for some of the more common terms.

  • Actual Cash Value: this is how much it will cost to replace something after subtracting the amount it has depreciated since being bought.
  • Benefit: what you get paid when you file a claim.
  • Bodily Injury Liability: coverage for injuries you cause.
  • Claim: when you ask for your money after a loss or crash.
  • Collision: crash or accident
  • Comprehensive: coverage that doesn’t have to do with getting in a wreck. This can apply to theft or natural disasters, among other things.
  • Deductible: What you pay when an accident happens.
  • Endorsements: changes to the original contract, like when you add another driver.
  • Exclusions: what isn’t covered.
  • Extraordinary Medical Coverage: extends your medical coverage if you require long term care once your original coverage has run out.
  • Full coverage: what’s required by state. Does not necessarily ‘fully’ cover.
  • Income Loss Coverage: coverage in case you can’t work due to an injury from a wreck.
  • Indemnity: predetermined amount paid for covered loss.
  • Limits: The max amount you can get after a loss.
  • Medical Payments/Personal Injury Protection: covers injuries for the drivers and passengers of your car
  • No-fault insurance: you can get your claim without having to assign someone the blame
  • Property Damage Liability: pays for the mailbox you knocked over
  • SR-22: proves financial responsibility, usually required if you’ve had a certain kind of traffic violation
  • Tort: requires someone to be responsible in a claim. Allows you to sue for damages.
  • Uninsured/Underinsured Motorist Coverage: this pays to damage to you or your property when the other drive isn’t insured

Hope it helps,

Fashun Guadarrama

Posted in: Auto Insurance

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  • Kazuko Huish

    You guys really know how to write a blog! This was extremely helpful. Thank you vey much.