Insurance Definitions

Insurance terms can sometimes seem like they’re written in coded language. Let Al Vincent’s Network of Agencies spell out the murkier terms of your coverage, clear and simple, from A to Z.

Actual Cash Value

Calculate your car’s actual cash value by starting with its original value, then subtracting the depreciation. It’s a good idea to keep this appraisal in mind when signing up for a policy, as this is what your auto insurance will reimburse you for.

Bodily Injury Liability Coverage

Bodily Injury Liability and Property Damage This is required coverage. Liability coverage pays for your legal responsibility to others for bodily injury or property damage. Virginia requires $25,000 per person/ $50,000 per accident coverage for bodily injury and $20,000 for property damage.

It is very important that you have enough liability insurance. If you are involved in a serious accident, you may be sued for a large sum of money. Definitely consider buying more than the state required minimum to protect assets such as your home and savings.

Business/Commercial Use

Classifying your car for business use usually only applies to employers who pay for commercial insurance for their tow trucks, vans, etc. If you use your own vehicle for routine errands, deliveries, etc., you could classify your car for business use under your insurance policy. Commuting, however, does not apply to this classification.

Cancellation

When one cancels their insurance before its scheduled expiration.

Claim

A request to your insurance company to reimburse you for an accident or other damage, including bodily injury, according to the conditions of your auto insurance policy.

Collision Coverage

This pays for damage to your car when your car hits (or gets hit by) another object. You can opt for a higher deductible in order to lower your premium.  

Comprehensive Coverage (Other than Collision)

This coverage will pay for damage to your car if it is stolen or damaged by flood, fire, animals, or other covered perils.

Declarations Page

Drivers receive declarations page whenever there’s a change to their policy, or occasionally after routine insurance renewal. The Declarations page summarizes your premiums and coverage.

Deductible

Before the insurance company starts paying your claim, you’re required to pay a deductible sum. It is not unlike health insurance deductibles.

Endorsement

Any added change to the policy, such as purchasing 24-hour roadside assistance, or t dispelling excessive coverage.

Income Loss Coverage

Income loss coverage protects you if you're unable to work due to accident-related injuries. This auto insurance coverage helps you recover portions of your lost salary and other expenses you may incur as you try to return to work.

Insured

The policyholder or person(s) protected in case of a loss/claim.

Insurer

The insurance company.

Liability

Used to describe your legal responsibility, liability means you can be financially in charge of repaying damage to another person’s car. Erratic driving, speeding, etc. can render you liable in a collison. In many states, if both drivers were at fault, you can be a certain percent liable and still be compensated by the other driver—40% liable is the cut-off for drivers who can still win compensation.

Medical Payments Coverage

This usually pays for the medical expenses of the driver and passengers in your car.

Motor Vehicle Report

A Motor Vehicle Report summarizes your driving record. Your insurance company acquires these from your state, and uses it to determine your premiums.

Non-renewal

A notice that your insurance company will not renew your policy once it expires, usually due to outrageous claims or a spotty driving record.

Policy

The contract form issued by the company to explain the coverage provided. It is a legal document.

Premium

The price charged for insurance.

Property Damage Liability Coverage

Covers damage to fences, houses, buildings, poles, trees, etc.

Rental Coverage

Pays up to the agreed upon amount towards the use of a rental car while your car is being repaired due to loss or accident.

SR-22

SR22 documents are ordered to drivers who could not show proof of insurance when asked by law enforcement, or ordered after a traffic violation like a DUI, or when your license plates are expired, etc. This document must be filed with an insurance agent and Secretary of State within an express time period or your license will be revoked.

Total Loss

When the cost to repair a vehicle approaches or exceeds the vehicle's actual cash value.

Towing Coverage

Pays up to the agreed amount of a service call or towing when your car is disabled.

Underinsured Motorist

This will pay for your injuries caused by an uninsured driver or a hit-and-run driver in an accident that is not your fault.