Common Car Insurance Terms You Should Know

Tuesday, December 9, 2014

insurance-word-cloudBuying car insurance that makes sense for you is as important as finding the right car. Understanding these important words will help steer you in the right direction.

 

 

 

Liability Coverage

Also known as ‘Third-Party Liability’ coverage, this coverage is required for every driver by law. Liability coverage pays if you hurt someone or damage someone’s property with your car and they make a claim against you or sue you. For example, if you’re driving on ice, lose control of your vehicle and hit another vehicle.

Accident Benefits Coverage 

This type of coverage is also required by law. If you are in an accident, regardless of whose fault it is, this coverage may cover part of your expenses. For example, another vehicle hits your car and you are injured. Your insurance may cover things like income replacement, medical expenses, and even death benefits.

PLPD

You may hear this fancy acronym being used in discussion around car insurance. It stands for Personal Liability and Property Damage. Basically it is the same as Liability Coverage or Third Party Liability Coverage.

Uninsured Motorist Coverage

This coverage is included in your Accident Benefits Coverage. It covers you in case you are involved in an accident with an uninsured driver or unidentified vehicle causing injury.

No-Fault Insurance

With No-Fault Insurance, both the responsible and non-responsible parties in an accident are entitled to reasonable compensation for damages, injuries, pain, suffering and financial losses. Insurance payouts are made almost immediately, and the determination of who is responsible for the accident takes place later. If you are in an accident that is determined to be the fault of the other driver, his rates will go up, but yours will not. (Is this coverage optional or automatically included in one’s policy?)

Collision Insurance 

This insurance coverage is optional. Collision Insurance pays for losses or damage to your car caused by a collision. If you have an older car, you probably don’t need this coverage since it is normally limited to the cash value of your car.

Comprehensive Insurance

Comprehensive coverage will cover damage for certain perils, such as vandalism, theft, or damage by flooding, fire and animals. This coverage is also optional. To keep your premiums low, select as high a deductible as you feel comfortable paying out of your own pocket.

Deductible

This is the money you agree to pay out-of-pocket before your insurance company pays you for a claim resulting from a loss or damage. For example, if your deductible is $500, and repairs from an auto accident are $800, you’ll be responsible for paying the first $500. Your insurance company pays the remaining $300.

Abstract 

An abstract is a record of your driving offenses. Alberta uses a demerit point system in which all drivers start with a zero balance. As you accumulate traffic and driving offenses, demerit points are added to your abstract. Demerits stay on your file for two years. Insurance companies use your abstract to access your insurance rates, so it’s in your best interest to keep a clean abstract or driving record.

Premiums

Your auto insurance premium is the total cost of maintaining your car insurance policy. You can pay it monthly or annually. Your premium amount is determined by a number of factors, from the type of car you drive, to your age and gender, to your driving history as shown by your abstract.

Buying a car can be daunting enough – but by law the wheels can’t hit the payment until you have car insurance. Understanding these important terms will help you make the right choices in coverage for you and your vehicle. 

Click here for more articles like this.