Auto Insurance : Understanding Important Definitions & Coverages
When purchasing a personal auto insurance policy, you should do your best to understand the coverages in evaluating whether your have the correct policy and coverages for your individual insurance needs. In addition, there are many important definitions you should read and understand.
Let's start with the Definitions
The definitions section of the Personal Auto policy is located on the first page of the policy and defines various terms used throughout the policy. Some of the more important terms are listed below.
The Declarations pages of your personal auto insurance policy is the section containing the basic underwriting information, such as the insured's name, address, the coverage provided, limits of liability of those coverages and premiums. It also includes a description of the autos covered by year, make, model , vehicle identification number (VIN#), and garaging address.
A Named Insured is the driver(s) listed on the auto insurance policy Declarations. The named insured drivers should be the individuals who own or lease the vehicles being insured. They also have control over the policies and are the only ones authorized to make changes. A named insured may also include a spouse if the spouse is a resident of the same household. (In New Jersey, or a party who has entered into a legally recognized civil union under NJ law with the "named insured" and is a resident of the same household).
An Insured typically includes the named insured, their spouse, family members living in the same house, and any person using an insured's covered auto with permission.
A Family Member is a person related by blood, marriage, or adoption who is a resident of the household. This includes a ward or foster child.
A Covered Auto is any vehicle shown in the Declarations, a "newly acquired auto" or any "trailer" you own. It also includes any auto or trailer you do not own while used as a Temporary Substitute for any other vehicle described in this definition which is out of normal use because of its : Breakdown, Repair, Servicing, Loss, or Destruction.
A Owned Auto are those eligible vehicles titled by the insured or acquired during the policy period.
Collision is the upset or impact of a covered vehicle or non-owned auto with another vehicle or object.
Other Than Collision (often referred to as Comprehensive) includes losses caused by the following: Fire, Theft or Larceny, Breakage of Glass, Contact with Birds or Animals, Vandalism or Malicious Mischief, Riot or Civil Commotion, Hail or Flood, Water, Windstorm, Explosion or Earthquake, and Falling Objects.
Bodily Injury means bodily harm, sickness or disease, including death that results.
Property Damage means physical injury to, destruction of or loss of use of tangible property.
A Newly Acquired Auto is any of the following types of vehicles that are acquired by the insured during the policy period:
a private passenger auto;
A pickup or van, for which no other insurance policy provides coverage, that:
Has a gross vehicle weight of less than 10,000 lbs
Is not used for the delivery or transportation of goods and materials unless such use is incidental to a business of installing, maintaining or repairing furnishings or equipment; and
Is not sued for farming or ranching
a non-owned temporary substitute vehicle or trailer while an insured vehicle is out of service because of breakdown, loss, destruction, service or repair; and
Any owned trailer designed to be pulled by a private passenger vehicle, pickup or van, including a farm wagon or farm implement while being towed.
* For liability coverage provided in a personal auto policy (except coverage For Damage to Your Auto), a newly acquired auto will have the broadest coverage for any vehicle shown in the Declarations. Coverage begins on the date ownership begins. However, for coverage to apply to a newly acquired auto, which is in addition to any vehicle shown in the declarations, the insured must ask the insurer to provide coverage within 14 days of becoming the owner. Some carriers require the insured to ask the carrier in as little as 3 days, while others, up to 30 days. You must review your policy for the specifics.
Trailer means a vehicle designed to be pulled by a private passenger auto; or pickup or van. It also means a farm wagon or farm implement while towed by a private passenger auto; or pickup or van.
Temporary Substitute : a personal auto policy provides coverage for any auto or trailer not owned by an insured, while used as a temporary substitute is any other vehicle described in the policy that is out of normal use because of breakdown, repair, servicing, loss or destruction.
An Insuring Agreement is the section of an insurance policy containing the insurer's promise to pay. Among other things, the insuring agreement lists the parties to the contract, policy effective and renewal dates, the description of coverage provided, policy conditions and exclusions.
Conditions is the section of an insurance policy that indicates the general rules or procedures that the insurer and insured agree to follow under the terms of the policy.
Exclusions is the section of a policy that details what is not covered under the auto insurance policy and what persons are not insured.
Liability coverage protects the insured against loss arising from legal liability when an auto that the insured owns, operates or maintains is involved in an accident. Under liability coverage, the policy will pay for bodily injury and property damage due to an accident for which the insured is legally responsible.
The maximum amount that the policy will pay is the policy limit. These limits are per accident and are automatically restored for each separate accident.
Bodily injury liability:
If someone is injured as a result of an auto accident you caused, this coverage could help pay for your legal fees, as well as the person's medical bills and lost wages. This coverage often includes two separate limits: one that applies to each injured person ($1 0,000, for instance) and a second one that applies to each accident (for instance, $100,000).
Property damage liability:
For the most part, this relates to damage caused to another persons vehicle in a collision. However, it also covers damage to another person's property with your vehicle, such as a fence.
COVERAGE for YOU IF YOU'RE HURT
Personal Injury Protection (PIP):
If you're injured in a car accident, PIP coverage helps cover injury-related expenses. This may include medical costs that exceed your health insurance limits. The coverage also helps pay for your incidental things , such as lost wages and "loss of services," such as child care or lawn services, while you recover.
You can choose to have PIP Primary or PIP Secondary Coverage. If you choose PIP Primary, you auto insurance will cover your injury-related medical expenses up to the limit you choose (from $15,000 to $250,000) minus the deductible.
Medical payments: Like PIP, this coverage may help pay for your medical bills related to a car accident. However, depending on your state, the maximum limit is usually must lower, a $10,000 maximum limit is an example. This usually helps pay for things like your health insurance deductible.
Uninsured/underinsured motorist: This coverage can help protect you if you're hit by a driver who either has no auto insurance; or whose policy limits are too low and will not be high enough to cover accident's full costs. It can help pay for your medical bills and possibly for damage to your vehicle.
COVERAGE for YOUR VEHICLE
This coverage helps to repair or replace your vehicle after a collision with another car or object. Collision coverage has a deductible. The standard deductible is $500, however it can go as low as $0 and as high as $2500. Usually the lower your deductible, the higher the premium will be.
Other Than Collision (Comprehensive):
This coverage can help pay for damage to your car that is a result of an incidents and not related to an auto accident or collision. Some examples include theft, damage by animals, fire or falling objects. Like collision, comprehensive coverage comes with a deductible.
Rental Reimbursement Coverage
This coverage will provide you with a rental car in the event your car is damaged in an accident or stolen. There is a per day max and total max, an example would be up to $30 a day and $900 total for the rental period. This coverage would provide you with a rental car for about a month, and any days after that would fall on you to pay out of pocket. Note, Rental Reimbursement is not the same as rental car coverage, example, renting a car for leisure while on vacation.
Towing and Labor Coverage
This coverage will help pay for the cost of a tow in the event that your car breaks down or cannot be driven as a result of an accident. It often includes other services, such as a battery jump, fixing a flat tire, and sometimes refueling. There is usually a set maximum limit of how much coverage it will provide, such as up to $100.
Guaranteed Asset Protection (GAP): If your vehicle is totaled in an accident or stolen, you insurance company typically will pay you market or actual cash value for your car. However, if you have a remaining balance you owe on the car is higher than what the car is worth, GAP coverage can help reimburse you for the cost difference. This coverage, like the others, is not automatically included and you must ask your agent to add it.
Hope This Helps!
"Disclaimer: The content contained in this blog is for informational purposes only. It should not be considered insurance advice since every client's needs and circumstances are different.. Bergen Insurance Group, LLC makes no representation as to accuracy, completeness, currentness, suitability, or validity of any information on this site and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. All statements represent the sole opinion of the author and is provided on an as-is basis. For an actual description of all coverages, terms and conditions, refer to your insurance policy.”