Car Insurance Definitions Every Car Owner Must Know
A lot has been said about car insurance, and most of us if not all, know the importance car insurance holds. We know that car insurance is mandatory and that is probably the biggest reason most of us buy it! Taking things further from here, let us ask you a question- Do you fully understand your car insurance?
You pay your car insurance premiums every year, and if and when the need arises, make a claim or two. But do you really understand the terms mentioned in the policy document of your car insurance?
It is very important for you to know these car insurance terms for two reasons:
First - you must know whether or not you are covered in the way you want.
Second - You should be clear about your car insurance terms simply because you are paying for it.
Understanding these terms associated with car insurance doesn’t have to be a difficult or a lengthy exercise; you just need to be aware of the most commonly used terms within the glossary.
To get you started, here are 15 car insurance definitions that you must be familiar with-
- Insurance Policy: A formal document or contract detailing the policy term, coverage, premiums, and deductibles.
- Premium: The amount paid by the insured to the insurer in order to get covered according to the terms and conditions of the policy.
- Bodily Injury: Any type of injury, sickness, disease or death that is the result of a car accident.
- Insured: Is the person who is covered under an insurance policy.
- Insurer: The insurance company that provides insurance coverage upon payment of premiums.
- Coverage: It is the protection or benefits of an insurance policy.
- Comprehensive coverage: It includes most types of physical damage except collision. A comprehensive policy pays for physical damage or loss of your car from causes like natural calamities, vandalism, fire, and theft.
- Collision Coverage: This coverage provides for repair or replacement of your car if you hit something, which happens due to no one else’s fault but yours.
- Limit: The maximum amount of protection that is offered in a policy term.
- Deductible: It is the amount of the loss that has to be paid by you (insured) before the insurance company pays up. This amount is fixed at the time the policy is purchased.
- Depreciation: The percentage loss in value of the car due to age and wear and tear. As the age of the car increases, the rate of depreciation also increases and the amount offered by the insurer in the event of a claim goes down.
- Claim: If your vehicle gets damaged due to an accident, you can file for a claim. It is the amount of money you ask the insurance company to pay for the accidental damages.
- Insured Declared Value (IDV): IDV of the vehicle is the depreciated value of it agreed upon by the insurer and the insured that is paid on theft or total loss of the vehicle. The IDV of a vehicle reduces with age and the premium is calculated on the basis of it. In simple words, IDV is the current market value of the vehicle.
- No Claim Bonus (NCB): NCB is offered on policy renewals only if you do not make a claim during the policy period. Insurers offer NCB as a discount on the Own Damage Premium. One thing to make note of here is, that you will get the NCB only if you renew the policy within 90 days of the expiry date of the previous policy.M
- Own Damage Premium (OD): In case of an accident, an own damage cover pays up for the expenses incurred to repair /replace parts damaged in the road accident, theft or damage of your vehicle due to fire, earthquake, etc.
Now that you have an overview of the most common car insurance glossary terms, you can go ahead to purchase a car insurance policy with a more conscious outlook and make a well-informed choice.
**To understand exactly about the policy coverage, exclusions etc read the Policy Wordings carefully.**