The general idea behind insurance is to protect your assets against the risk of damage or loss by providing a form of financial protection. And in the case of auto insurance, it is a type of insurance coverage for automobiles. It typically protects the policyholder against financial loss from the damage or destruction of the insured vehicle.
Car insurance is offered by many companies and they all have different policies. However, many people are unfamiliar with certain terminologies that surround the different policies offered by insurance companies. So whether you are a comprehensive or third-party auto insurance policyholder or you are just an auto insurance enthusiast just like us, there are some car insurance terms you need to know.
So let’s get rolling on auto insurance terms as it is important to know not just the basics but other terms that are not as commonplace as others. You’d learn a thing or two in this article as we will discuss five terms that everyone should know when dealing with car insurance. These terms include liability coverage, flood extension, strike, riot & civil commotion extension, excess buy-back as well as deductibles.
1. Liability Coverage: This type of coverage protects you from legal responsibility for injuries or damages caused by your vehicle to others or their property. In other words, it protects you financially if you’re responsible for someone else’s injuries or damages you cause to others in an accident where you’re at fault.
2. Flood extension: One mind throbbing question we addressed in our blog post on what comprehensive car insurance [U1] actually covers, is whether comprehensive insurance covers a vehicle that is damaged by flood. To protect your car against damages caused by flood, you need to opt for the policy known as flood extension. In this case, the insurer agrees to insure your car against damages caused by flood damage. And on your part as the insured, you need to make an additional payment for this extension, which may only be a modest addition to the initial premium.
3. Strike, riot & civil commotion extension: Similar to flood extension, it is also an optional add-on to your comprehensive car insurance that can help you with repair costs in a situation where your car is damaged by any of the foregoing events. This kind of coverage is typically offered as an add-on to your comprehensive insurance policy, and it can save you from spending money on costly repairs. However, if you want this kind of coverage then your premium may increase slightly.
4. Excess buy-back: Have you ever made an auto insurance claim and weren’t given the total amount for the repairs? One of the very common reasons for this kind of shortage is what is known as excess. To put it succinctly, an excess is an amount the policyholder must bear when making a claim, and it may either be a percentage or a fixed amount. To avoid an excess charge on your claim, the insured can buy an excess protection policy called Excess Buy Back. It essentially refunds/reimburses you the paid excess.
5. Deductible: While deductible may seem similar to excess, the two terms should not be confused. A deductible is an amount withheld by the insurer from the claim amount paid to the policyholder. While an excess is an amount you commit to paying out of your pocket as part of fixing your car after an accident while the insurer bears the rest. The main motive behind both of these is to safeguard the insurance company from frequent or frivolous claims. Many people after purchasing an insurance policy become careless, because they know that in case of any incident they will be paid off by the insurance company. So to avoid this either excess or deductible are applied.
How many of these terms do you already know? Or which car insurance terms would you like us to discuss? Tell us in the comments. In the meantime, you can look through our glossary of insurance terms.
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If you have questions relating to your insurance policies and do not understand the technical jargons, we can assist you with a FREE POLICY REVIEW to ascertain the level of cover you have and how to achieve more with your insurance policy. We are just a chat away on WhatsApp.
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