If you are not used to insurance terms, it’s easy to get confused with all those words that are written on your car insurance contract. Sometimes, even just the quotation from an insurance company can have jargon that will surely get your confused. So let me help you with those terms.
Premium pertains to the amount you pay the insurance company for the coverage you signed up for. You’ll have an option whether to pay it all upfront, semi-annually, quarterly, or monthly. Discounts are often given by most insurance companies if the premium is paid in full upfront.
A deductible is a total amount you have to pay out-of-pocket before your insurance pays for any valid claim. Deductibles inversely affect your premium. The lower the premium, the higher your deductible will be.
Named insured or primary driver
This pertains to the people who are insured to drive the insured vehicle. Normally, would list down the family members who can and have the license to drive. You can also include “occasional drivers” on your policy for those who rarely have access to drive your vehicle. This way everyone is insured.
This is also referred to as the policy term. This pertains to the inclusive dates of your coverage. Your contract will indicate a coverage start and end date, that’s your policy period or your term.
At-fault pertains to the person in error during an accident. The person found at fault will pay for damages incurred on all vehicles involved in an accident. If the person has insurance, then his insurance will pay for the damages.
The liability limit pertains to the total amount your insurance will cover. An example of such is 25/50/25 – $25,000 for every person injured, $50,000 each incident/accident, and $25,000 per damaged property. When signing up for the insurance, you’ll be given an option to increase these limits, but this means that your premiums will increase as well.
These are just some of the most common jargons you’ll encounter with car insurance. I suggest going over a glossary of terms of car insurance or talking to a trusted and experienced car insurance agent or broker.