Auto Insurance Terms - Navigating in Plain English
Auto insurance terms can cause much confusion, its just not a language we spend much time in.
If you have had a car accident, hopefully these explanations will help you better navigate your auto accident claim:
After Market Parts/Used Parts- Your repair shop may use these auto insurance terms, or a variation of them, when they are telling you about how
they intend to repair your vehicle damage.
After-market parts are typically defined as "parts not manufactured by the original equipment manufacturer that
replace non-mechanical sheet metal parts or plastic parts that constitute part of the exterior of a motor vehicle, including, but not limited to, an inner or outer panel."
Usually after-market parts installed on the vehicle must be clearly identified on the repair estimate. In most states, used parts, as well as after-market parts, are acceptable in the repair of vehicles if certain criteria are met.
At-Fault - This is an auto insurance term the insurance company uses when they are assigning blame and applies to how much they are going to pay. In some accidents
the fault is crystal clear and the insurance company will accept 100% fault, their driver is now called the at-fault driver. However, some accidents the fault will be split by both insurance companies and both you and the other driver will
share some of the blame, thus both drivers share an at-fault status.
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Bodily Injury Liability - Also referred to as Liability coverage, covers injury to people resulting from an accident you are at fault for and covers the medical costs of injury you or members of your
family might cause to other people in an accident, loss of income for the party you injure, as well as the costs of your legal defense if you are found responsible for injury or death and get sued.
Collision insurance covers damage caused by the collision of your car, regardless of who is responsible for the accident. This type of insurance usually includes a deductible. Again, you pay the deductible amount when you have an accident,
and the insurance company pays the rest, up to the limits of your policy.
Comprehensive - You will hear these auto insurance terms for coverage which pays for damages to your car from perils such as fire, theft, explosion, windstorm, hail, vandalism, glass breakage, birds, and animals. Covered perils are listed in your policy
under the insuring agreements section. This coverage may have no deductible, a $100 deductible, a $250 deductible, or more. The deductible is the amount of any loss you must pay before the insurance company will cover damages.
Deductible - The deductible is the amount you have to pay out of your pocket after a car accident, before the insurance will start paying. You may be able to get this back if you were not at fault in the accident.
Diminished value is the difference in fair market value of the auto immediately before the accident and the auto immediately after the accident causing the damage. Diminished value may or may not be recoverable under an auto accident claim depending on the relationship between the injured party and the insurance company.
Maximum Medical Improvement This term is used to bring your treatment to an end. You are said to have reached maximum medical improvement when your medical providers believe that your condition cannot be improved upon by further treatment. Insurance companies will often make you visit their own hired doctor,
called an Independent Medical Examiner (IME)- (this doctor is paid by the insurance company). It is extremely common, and expected, that the IME doctor will rule that you have reached MMI. The insurance company will now stop paying for your medical bills.
Personal Injury Protection (PIP)- This is insurance coverage on YOUR insurance which you pay for. When you are injured in an accident, regardless of whether you are at fault or not, YOUR insurance company pays for your medical bills, and those of your passengers.
If you were not at fault your company will be reimbursed by the drivers insurance who hit you. Understanding How PIP works- getting your medical care paid for
Property Damage Liability (PDL)- Covers you if your car damages someone else's property. This means if you damage their car, or their other property, such as crashing into someone's fence, or you crash into their home. Like Bodily Injury Liability, Property Liability coverage will provide legal protection to you if you are sued after the accident.
Subrogation - You may have heard this auto insurance term if your insurance company paid for your medical care, but you were not at fault in the accident. Your insurance company will attempt to be paid back (subrogate) for these costs from the insurance for the at fault driver, and possibly from the driver themselves if the driver was not insured.
Third-party liability - These auto insurance terms are for when you have a claim against someone else's policy. You are the first party. (If you are making the claim) The driver that hit you is the second party. That driver's insurance company is the Third Party. Your insurance company is the fourth party. Crazy I know!
Totaled/Salvage/Total Loss - States may use either term. Each state will have its own variation on this definition, but it generally means, that the costs to repair your car exceeds 80% of what your car would was valued at before it was damaged.
Underinsured/Uninsured Motorist- Uninsured or underinsured motorist coverage can pay for injuries to you and your passengers, and in some locations damage to your property, when there is an accident and the other driver is both legally
responsible for the accident and considered "uninsured" or "underinsured." A hit-and-run driver also counts as uninsured as it relates to bodily injury.
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