1. Deductible
Definition: The amount you pay out-of-pocket before your insurance coverage kicks in. For example, if your deductible is $500 and your repair costs are $2,000, you’ll pay $500, and your insurance will cover the remaining $1,500.
Importance: Choosing a higher deductible generally lowers your premium, but it also means paying more out-of-pocket in case of a claim.
2. Actual Cash Value (ACV)
Definition: The current market value of your car, considering depreciation. It’s what your insurer uses to determine the amount payable if your car is declared a total loss.
Importance: ACV is often lower than the car's original cost, so understanding your vehicle’s ACV can help set realistic expectations for claim payouts.
3. Depreciation
Definition: The reduction in your car’s value over time due to wear and tear, age, and mileage.
Importance: Depreciation affects the ACV and can impact the amount your insurance will pay for repairs or replacement.
4. Claim Adjuster
Definition: A representative from the insurance company who assesses the damage, estimates repair costs, and determines the claim payout.
Importance: Cooperating with the adjuster by providing documentation and being transparent about the accident can help speed up the claim process.
5. Estimate
Definition: A written assessment of the repair costs needed to restore your car to its pre-accident condition, typically provided by a repair shop or the insurance adjuster.
Importance: Some insurance companies may require estimates from approved shops, so check with your provider before proceeding.
6. Exclusions
Definition: Specific situations or types of damage not covered by your policy. Common exclusions include wear and tear, intentional damage, and incidents occurring when a driver is unlisted or uninsured.
Importance: Reviewing your policy’s exclusions can help you avoid submitting claims that won’t be covered.
7. Coverage Limit
Definition: The maximum amount an insurer will pay for a claim under your policy. For instance, if you have a $10,000 limit and the damage exceeds that amount, you’d be responsible for the balance.
Importance: Make sure your coverage limit is sufficient to protect against costly repairs, especially for newer vehicles.
8. Collision Coverage
Definition: Insurance that covers repairs to your vehicle if it’s damaged in a collision, regardless of fault.
Importance: Collision coverage is optional but can be valuable if you want coverage for repair costs after an accident.
9. Comprehensive Coverage
Definition: Covers damage to your vehicle from non-collision events, like theft, vandalism, and natural disasters.
Importance: Often required by lenders for financed cars, this coverage can provide peace of mind against unexpected damage.
10. Subrogation
Definition: When your insurance company seeks reimbursement from the at-fault party’s insurer after paying out your claim.
Importance: Subrogation can result in a deductible reimbursement if the at-fault driver’s insurer compensates your insurer.
11. Total Loss
Definition: When the cost to repair the vehicle exceeds its ACV, the insurer may declare it a total loss and pay you the ACV instead of covering repairs.
Importance: Understanding your car’s value and having GAP insurance, if needed, can help cover the difference if your loan balance exceeds the ACV.