Insurance Terminology Everyone Should Know

The insurance industry uses its own language and specific terminology that may be unfamiliar to those shopping for their first policy. Understanding key insurance terms can help you make informed decisions and ensure you’re adequately protected on the road. Let’s break down the essential insurance terminology every driver should know.

Bodily Injury

Bodily injury refers to the physical harm inflicted on a person due to an accident. It makes up one aspect of liability coverage, which helps pay for the injured party’s medical expenses if you’re at fault in an accident.

Claim

When an accident occurs, you file a claim—a formal, written request—with your insurance company to request payment for damages or injuries. Filing a claim involves providing details about the accident and any incurred damages.

Deductible

A deductible is the amount you pay out-of-pocket before your insurance coverage pays for applicable damages mentioned in your policy. For instance, if you have a $500 deductible and $1,500 in damages, you will pay the first $500, and your insurance will cover the remaining $1,000. Choosing a higher deductible can lower your premium, but it also means you’ll pay more upfront in case of an accident.

Exclusion

Exclusions are specific conditions or circumstances not covered by your insurance policy. These can include certain types of damage or specific driving behaviors. It’s important to read your policy thoroughly to understand what is excluded so you’re not caught off guard when filing a claim.

Fault

Fault refers to the responsibility for causing an accident. Determining fault is crucial because it affects whose insurance will cover the damages. In some states, laws determining fault may vary, so understanding local regulations can help you better prepare for potential claims.

Liability

Liability coverage pays for damages and injuries you cause to others in an accident, typically divided into bodily injury liability and property damage liability. It’s crucial to set sufficient liability coverage limits to protect your assets and maintain compliance with state laws.

Policy

An insurance policy is a contract between you and the insurance company outlining the terms of coverage, including what is covered and how much it will cost. Reading your policy carefully ensures you know your coverage details and any responsibilities you have as a policyholder.

Premium

A premium is the amount you pay for your insurance coverage, usually monthly or annually. Several factors influence your premium, including your driving history, the type of car you drive, and your coverage limits.

Property Damage

Property damage liability is the other main component of liability insurance. It pays for damage you cause to someone else’s property in an accident, including vehicles, buildings, and other structures.

Although there is more insurance terminology everyone should know and many types of coverage available, we hope this brief list can make navigating your policy much easier. Start by reviewing your current policy and consider discussing any questions with your insurance agent. If you’re looking for more information on standard, nonowner, or broad form insurance policies, contact Serenity Group for individual guidance and a tailored quote.