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All the Auto Insurance Terms You Need to Know

If you own a car or are planning on buying one, don’t forget to factor in the cost of auto insurance. All states require you to have some form of auto insurance, but the auto insurance terms they use may be confusing. After all, what do they mean by 25/50/15 coverage?

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Auto insurance definitions

Going without the right coverage can land you in legal and financial trouble, so it’s best to read up on the most common auto insurance definitions so you understand what kind of car insurance you need, what you’re buying and what type of coverage you’re getting.

Auto insurance terms: the basics

Premium: The cost of the policy, often quoted as an annual or six-month amount.

Deductible:  The amount you must pay out of pocket before the insurer covers the rest. Some common deductible amounts are $500 or $1,000. If you’re in an accident with $10,000 in damage, you’ll need to pay the deductible of $500 or $1,000 before the insurance pays the remaining cost.

Coverage: What the car insurance will pay for. The car insurance term of coverage could refer to the type of protection, such as collision coverage, as well as the amount, such as liability coverage of $50,000.

Policy: The policy outlines the contract between you and the car insurance company, including the types of coverage you have, premium amount, deductible and any exclusions.

[Read: 9 Things You Didn’t Know About Car Insurance (But Should)]

Coverage definitions

Liability: Part of a standard auto insurance policy and covers property damage, injuries and financial losses caused to others.

Collision: An insurance add-on that pays for damages to your vehicle from a car crash.

Comprehensive: An add-on that pays for damages that aren’t caused by a collision, such as natural disasters including wind, hail or flooding. Comprehensive also protects your vehicle against theft, fire or striking an animal.

Medical: The portion of your policy that addresses bodily injury and medical bills.

Personal liability/injury: Required by most states, it’s part of a standard insurance policy. It will pay for losses if you destroy or damage another individual’s personal property.

Additional insured: Adds other individuals to your car insurance policy so they’re also covered if they get in an accident while driving your vehicle.

Gap coverage: Often required for new or financed vehicles, it covers the difference in cost between the car’s value and how much you still owe on it if the car is totaled.

Uninsured motorist: Often part of a standard policy, it pays for your injuries and losses if the at-fault driver doesn’t have insurance to cover your damages.

Underinsured motorist: As with uninsured motorist coverage, it pays for your injuries and losses if the at-fault driver’s insurance coverage isn’t enough to cover damages.

State-required minimum: The minimum amount of car insurance your state requires. Most states require a minimum of liability insurance, although the amount varies. You’ll often see it as three numbers, such as 25/50/15. They represent the required liability insurance minimums (in thousands of dollars). The first number is for bodily injury per person. The second number refers to the bodily injury limit for all parties per accident and the last number refers to the property damage amount.

Full auto insurance coverage: A policy that covers more than the state-required minimum of liability. Full auto insurance covers damages and injuries to others, as well as to you and your vehicle.

Medical payments coverage: Part of a standard policy to cover medical expenses of parties injured in an accident.

[Related: How Much Does Car Insurance Go Up After an Accident?]

Policy definitions

Limit: The maximum dollar amount your car insurance policy will pay for certain events, such as liability or medical.

Exclusion: Items your policy will not pay for. Some typical exclusions include the cost of wear and tear, damages caused from using your car for deliveries or replacing/repairing unapproved modifications to your car.

Auto insurance quote: The insurance premium price offered to you by a car insurer. You’re under no commitment to agree to the quote.

Auto insurance claim: A request to your car insurer to pay for a loss or damages.

Underwriting: The process in which the car insurer decides if they’re willing to approve you as a customer and take you on as a risk.

Effective date: The first day the coverage on your car insurance policy starts.

Declarations page: The summary page of your car insurance policy containing your name, address, insured vehicle(s), additional insured individuals, effective date of the policy, how long it’s in force, the types of coverages and amounts for each, as well as the amount of your premium.

Primary use: How the vehicle will be mainly used, such as for commuting, recreational weekend use or for business purposes.

SR-22 insurance form: Also known as a certificate of financial responsibility, it’s a form your insurer files with the state on your behalf. It’s usually required if you’ve had a serious traffic offense such as driving with a suspended license, a DUI conviction or were in an accident while uninsured and need to reinstate your driving privileges.

Too long, didn’t read?

Now that you have a general idea of the most commonly used auto insurance definitions, you can determine how much auto insurance you need and what to look out for when shopping for car insurance. Be sure to get at least three auto insurance quotes and compare them closely to find the best price and policy.

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We welcome your feedback on this article. Contact us at [email protected] with comments or questions.

The post All the Auto Insurance Terms You Need to Know appeared first on The Simple Dollar.

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How to File an Insurance Claim in 7 Steps

One of the most stressful things that can happen to you is a car accident. Even if there are no injuries, you’ll be shaken up and will probably have to deal with a damaged vehicle. What do you do next? How do you negotiate the auto insurance claims process? If you have a car insurance policy with a reputable, financially solid company, it shouldn’t be hard. In this article, we’ll look at the most common scenarios and show you how to best handle the situation.

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When to file an auto insurance claim

How you file a claim and whose insurance you file it with (yours or the other party’s) depends on what type of accident you’re in and who is at fault. Occasionally, if you can afford to pay for the damage out of pocket and the accident is your fault, it’s better to avoid filing a claim to prevent a rise in premiums. But in most other cases you’ll want to make sure to file a claim so you have your damage covered and be reimbursed for medical expenses, etc.

Let’s look at the three most common outcomes of a car accident and the best way to deal with them.

What if there is minor damage to my car?

  • If the accident was caused by the other driver: You’ll file a claim with that driver’s property liability insurance for damage to your car. Since the accident wasn’t your fault, you will not have to pay a deductible.
  • If you caused the accident: You’ll want to assess the damage to your car. If the damage doesn’t impact your ability to drive the car, consider not filing a claim. First, because the damage might not be more than your deductible, so you’ll be stuck with the cost anyway, and second, because your insurer is likely to raise your rates following a claim on an accident that you were responsible for.

What if there is major damage to my car?

  • If the other driver is at fault: File an insurance claim with their insurer, to be paid by their liability coverage. In addition to the amount you are paid for repairs to your car, you may also be eligible for a Diminished Value Claim. This is an amount that will be paid to you based on the fact that even after your repairs, your car is worth less than it was before the accident.
  • If you’re at fault: File an insurance claim with your company if you have collision insurance. If not, you may have to foot the bill for repairs yourself.
  • If the other driver is at fault but they have no or not enough insurance: In this case, your own insurer will cover repairs if you have uninsured/underinsured coverage.
  • If fault is not clear: Try your best to get clarity from the police, but if cause is undetermined, file claims with both your own and the other driver’s insurance, so you’re covering all your bases.
  • If damage is caused by something other than an accident: If your car was damaged by vandals, bad weather, falling objects or anything else that did not happen through an accident, file a claim with your insurer if you have comprehensive insurance. If not, you may need to shoulder the cost of repairs yourself.

What if I am injured?

  • If it’s the other driver’s fault: File a claim through their bodily injury liability coverage.
  • If you have Personal Injury Protection (PIP) or Medical Payments coverage: Whether or not the accident is your fault, if you have PIP or MedPay as part of your own coverage, file a claim on it. It’s also a good idea to contact your health insurer to let them know you’ve been injured.
  • The other driver is under- or uninsured: File a claim to be paid through your uninsured/underinsured coverage, if you have it.

Steps to take to file an auto insurance claim

1. Remain calm, and call the police

The first step may be the hardest: Don’t panic. Even if there are injuries, remain calm, retreat to a safe place if you’re still on the road and allow others to help as needed. If the accident was minor, it’s still a good idea to call in police assistance. They can listen to both drivers and write up a detailed and unbiased report that will be invaluable to your insurance company. If the other driver is confrontational, they will be there to keep you safe.

While you’re waiting for the police, do the following if you can: First, refrain from admitting to any guilt related to the accident. If it’s safe to do so, take some quick cell phone photos of the damage to both cars or any other property damage. Write down notes in a generic accident report form if you have one tucked away in your glove compartment (which we recommend). And, if they’re willing, take down contact info for any bystanders or witnesses.

2. Contact your insurance company

If possible, contact your insurance company before you leave the site of the accident or first thing when you get home. They will have questions for you, so it will help if you have a copy of the police report. If you’re not able to get it at the accident site, you should be able to stop by your local police office within a day or two to get one once it’s been filed.

You’ll need to know the details of your own car, such as the VIN number, as well as details on the other car and driver, and be able to clearly outline what happened during the accident. Be sure to note the name and contact information of the person you speak with at your insurance company.

3. Work with your insurance adjuster

The way auto insurance claims processing works, your insurer will assign a claims adjuster or claims management expert to your case once a file has been opened following your initial call. The adjuster will contact you to inspect the car or have it inspected at an approved repair shop. If it was not determined in the police report, the adjuster will assign fault for the accident.

Note that it is possible for fault to be shared by both drivers, which may impact which insurer pays out on your claim and how much you are able to claim for. Note, as well, that you may contact a lawyer if you feel the insurer or the other driver’s insurer is not representing your interests appropriately, especially if a lawsuit results from the accident.

4. Repair your car

If you have rental car coverage as part of your auto insurance, you will have worked with your company to procure a car for your short-term use. Do not authorize any repairs to your car, however, until your adjuster has inspected it and approved those repairs. Take photos before and after the repair for your records.

If you don’t have a preferred shop for your repairs, your insurer may recommend one that they have worked with before. Working with a preferred vendor may make it simpler for work to be authorized and the shop to be paid directly by your insurance company.

5. Finish up the claims process

Once your car is repaired, touch base with your insurance company so that they know you are satisfied and they can close your claim. If your car was totaled, let them know when you’ve purchased its replacement, especially if you will be staying with the same company for the new car’s policy.

6. Troubleshooting

If you are not happy with the resolution of your case, you have recourse to further action.

Your first step would be to talk to your insurance agent. It’s in their interest to make sure you are satisfied with the whole process so as not to lose your business.

See if your insurance company offers any service to allow you to appeal a decision on your claim. Some companies will reconsider your payout if you can provide solid evidence that shows why they should do so.

If the above two steps don’t work to your satisfaction, your state’s department of insurance should accept complaints. You can often file one online, which they will review and help arbitrate.

If, after all of the above, you still feel that you have not had your claim handled fairly, it is your right to hire a lawyer to look into it for you. Be aware, however, that legal costs can be high and you could be left paying them yourself.

7. Moving on

Whether your car was able to be repaired or was a total loss, the claim process should have been fairly painless, especially if you’ve followed our suggested steps above. Once it’s all over, it’s a good idea to review the process to ensure that you are satisfied with your claims payout. If not, this is an ideal time to consider switching to another auto insurance company. Most insurers offer free quotes — sometimes this can be done online — so it costs you nothing to compare your rate and see if you can do better elsewhere.

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Does Car Insurance Cover Theft?

Nearly 750,000 cars were stolen in the United States in 2018. This might sound like an extremely high number, but your chance of having a car stolen is still just 0.23%. Regardless, getting a theft insurance plan for your car is a necessity if you plan to drive in the U.S.

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Does car insurance cover theft? The answer is both yes and no, depending on what exactly is stolen. We’ll go over what types of theft are covered by your auto insurance policy and how to make sure all your belongings are sufficiently insured in case they’re stolen.

Does car insurance cover a stolen car?

Whether or not your car insurance covers theft depends on what type of policy you have with your insurance provider. Theft insurance for stolen cars falls under the comprehensive insurance part of your auto insurance policy.

Comprehensive coverage includes types of damage that aren’t caused by a collision, like vandalism, fire and natural disasters. Theft of your vehicle falls into this category. If your car is stolen, your insurance provider will pay for a new one up to your comprehensive coverage limit, which is why it’s important to make sure that the limit on your policy covers the full cash value of your vehicle.

However, even if your policy limit is high enough to replace a stolen car, you’ll still be responsible for paying your deductible.

Whether or not you have comprehensive coverage to replace a stolen vehicle depends on your policy. This type of auto insurance isn’t legally required by any state; many only require you to carry bodily injury and property damage liability.

If you have financing on your vehicle, though, it’s likely that the lender requires proof of comprehensive insurance. Even if you own your vehicle outright, you might still want to carry comprehensive coverage. Theft insurance is much more affordable than being out of pocket for the full cost of a new vehicle.

Does car insurance cover theft of personal items?

Some drivers assume that if their auto insurance policy covers a stolen car, it will cover everything in the car that was stolen too. Unfortunately, this isn’t usually the case.

Believe it or not, the best way to insure personal items from theft – even if they’re stolen from your car – is through a homeowners or renters insurance policy.

Personal property coverage is a part of your property insurance policy that covers the cost of replacing your belongings both in and out of your home. There are two options for calculating personal property coverage: actual cash value, which covers the cost of the items at the time they are stolen (taking depreciation into consideration), and replacement cost coverage, which covers the cost of purchasing entirely new items of the same quality (without taking depreciation into consideration).

All homeowners and renters insurance policies set a limit on personal property coverage that might not pay for some high-value items like fine jewelry or high-end electronics. Consider purchasing additional coverage for items that wouldn’t be fully paid for if they were stolen from your car. This is called scheduled personal property coverage and can usually be added easily to your property insurance policy.

If you rent your home, personal property coverage included in the landlord’s insurance policy won’t cover your items. You’ll need a separate renters insurance policy if you want theft insurance for the personal items in your vehicle.

What do you do if your car is stolen?

If your car is stolen, try not to panic. Instead, take swift action to minimize the impact and protect your finances. Follow these steps to begin an insurance claim and start the process of recouping the cost of your car and personal property.

  1. File a police report As soon as you’ve discovered your vehicle was stolen, call the police to report the theft. Provide identifying information such as the make, model, color and license plate number. If your car (or any personal item left in the car, such as a smartphone) has a GPS tracking system, provide that information as well.
  2. Make a list of the items in your car: While your memory is still fresh, write down everything that was left in your vehicle at the time that it was stolen. For high-value items like laptops or other electronics, gather as much documentation as possible, such as original receipts and/or serial numbers of the devices.
  3. File an auto insurance claim: Be prepared with several documents to claim a stolen vehicle. Most auto insurers won’t accept a claim involving theft without a police report. You’ll also need to include a list of the personal items that were in the car when it was stolen. Some insurers will also want to know who had access to the car and where any extra copies of the keys were kept.
  4. Contact your property insurer: If personal items were stolen with your vehicle, you should first see what – if any – will be covered by your auto insurance policy. Then, let your homeowners or renters insurance policy cover the rest. This will involve filing a separate claim with your property insurer. However, if you’ve bundled property and auto policies through the same provider, this process may be streamlined.

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The bottom line

Does car insurance cover theft? It depends. Make sure you have comprehensive coverage against theft of your vehicle with a limit high enough to cover the car’s value. Then, check with your homeowners or renters insurance provider to check that you have theft insurance for your personal items. Between these two policies, you can rest assured that you’ll be financially protected if your car is stolen.

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