Let’s be honest: insurance can be very confusing. With different coverage options for different needs, it can be overwhelming to try and trudge through the language to figure out what plans you need. This is why we love being independent insurance advisors – we can help explain everything you need to know without bias.
Since the terminology can be complex and confusing, we rounded up ten insurance terms to decode to give you some basic knowledge of the insurance world.
- Actual cash value
This type of coverage pays according to what an item was worth at the time it was damaged — it takes depreciation and wear and tear into account. For example, if you could have sold your car for about $2,000 just before it was damaged, that’s the actual cash value, even if a similar new care would cost $20,000.
The amount you agree to pay out of pocket before your insurance coverage kicks in. For example, if the cost to fix your car is $2,000, but your deductible is $1,000, you would pay $1,000 of the total cost. Typically, a higher deductible means a lower premium.
Your responsibility for injuries or damage to other people or property. You purchase insurance to protect against liability and other risks.
- Med Pay (medical payments)
This pays for medical expenses for those covered by your policy in the event of an auto accident, regardless of fault. It also covers medical expenses for guests if they are injured on your property, but unless it is a car accident, it usually does not cover injuries someone suffers on their own property.
The amount you pay for an insurance policy. For example, it could be a monthly amount, or a bi-annual or annual charge.
When an insurance company pays a claim, and then seeks damages from a third party who was responsible for causing the damage or loss. For example, your insurance company might pay for your car to be fixed even though an accident wasn’t your fault — and then pursue reimbursement from the person who was at fault.
- PIP (personal injury protection)
This pays medical expenses for a policyholder or additional insured, and their passengers, if they are hurt in an auto accident, regardless of fault.
- Comprehensive coverage
If your vehicle is damaged by something you could not control, such as fire or a tree falling, comprehensive coverage applies.
- Scheduled personal property
Separate coverage for high-value items, such as expensive jewelry, that exceed the limits of your policy or are otherwise excluded.
The evaluation process insurance companies use to determine if they will provide coverage to a customer.
When shopping for an insurance policy, never be afraid to ask your agent questions about anything you don’t understand. Insurance is a complex world and speaks its own language, so we can’t expect people to understand it without explanation. If you want some guidance to finding the right insurance policy at the right price, give us a call.