The car insurance industry is very elusive to the everyday driver. How do they calculate premiums? Why do we have so many different coverage options? What’s the difference between them? Where do you get the best car insurance quote online in South Africa?
Knowing and understanding the terminology used in the insurance industry can be very beneficial. This can help you to seek out the best policy and coverage available. If you’ve ever found yourself stuck staring at the fine print, understanding very little about it, this post is for you.
Here’s a list of the most commonly used car insurance terms and what they mean.
What Is Auto Insurance?
Before we dive into the T’s and C’s of car insurance, let’s start with the basics.
Insurance is the most important part of purchasing a new car. Having the right insurance policy and company by your side will protect you when things get sticky. Getting into an accident, hitting someone else’s bumper or even cracking a window is a nightmare situation, especially when you have no insurance.
Having insurance coverage will make the ordeal much easier on your bank account. There are many different coverage options to choose from. And they all have unique benefits.
This kind of coverage will assist you during unforeseen circumstances, like theft, fire, vandalism, or weather-based damage.
Comprehensive coverage will assist in the replacement or remuneration of the car and is usually mandatory when purchasing a brand new vehicle.
This type of coverage is set in place for another party’s property or medical fees when you are the one who is liable to pay.
Liability cover often has two parts:
- Property Damage Cover
This is for the property damage of another party, like a bumper replacement.
2. Injury Liability Cover
When an injury has been inflicted on another party in the case of an accident, Injury Liability Cover will assist. This type of coverage will ensure that the medical needs of the other party have been taken care of when you are the one who is liable to pay for them.
Uninsured and Underinsured Coverage
This kind of coverage will assist in the event of damage caused by a driver who is either uninsured or underinsured. This policy will cover both collision costs and liability costs.
Collision coverage will take care of the costs associated with accidents. This kind of policy will cover both liability and nonliability accidents.
Personal Injury Protection
This kind of coverage is similar to personal medical assistance but more comprehensive. It covers all costs associated with injury and not only medical bills.
This may include job loss and child care.
Auto Insurance Terms and Definitions
One very common problem consumers face is not fully understanding the insurance policy and fine print. Here are some typical phrases and their meanings.
This term refers to the legal obligation to pay for damages and medical fees by the guilty party. If you are held legally liable, the obligation to reimburse the other party falls on you.
This refers to the amount payable by the consumer in the event of a claim. When the client opts to bear a part of the fees, the monthly premium might be lower.
This is the exact limit of your policy. The maximum amount that the insurance company is willing to pay in the event of a claim.
Medical Payments Coverage
This policy will cover all medical fees for the main insuree and any passengers, regardless of who might be held liable for the collision. It may be best to also look for primary medical coverage.
This type of coverage will assist in the event of the car being stolen or written off. It will cover the remainder of the amount due on the vehicle. This kind of coverage does have a limit that might have to be topped up by the consumer.
What will the primary use of the vehicle be? Private commuting, ride-sharing, or even business vehicles will all have a unique insurance policy.
This is the exact date of the start of the coverage. The consumer will only be covered from this date onwards. No claims can be made before this date.
Whether this kind of coverage is truly “full and complete” is debatable. This term only implies that the policy is more comprehensive than others and may include Third-Party Insurance Coverage, Liability Cover, and more. But at no stage will the policy be “complete coverage of all fees”.
This term refers to other household members who might be covered under the insuree. This could be all license-holding family members, excluding the primary policyholder.
The agreed-upon value of the vehicle by both the insurer and insuree is known as the Agreed Value. This is a fixed amount that will remain in place until the renewal of the policy.
This device will be fitted onto your vehicle to help deter theft. These devices are commonly known as immobilizers, alarm systems, keyless entry, and tracking devices.
Car Hire Coverage
This kind of coverage will help with the payments of a temporary replacement vehicle. When the primary vehicle has been written off, stolen or in for repairs, the car insurance company will cover a percentage of the payments for a rental.
The Market Value is the value of the vehicle as determined by market prices. Factors such as age, condition, and model will be taken into consideration when determining the market value of a car.
No Claim Bonus/Payout
This is an amount payable to the insuree when a full year has passed with no claims. This can be settled in a lump sum or even a premium reduction.
Final Thoughts on Auto Insurance Explained
The primary idea of car insurance is protection. Although not a requirement, car insurance is an important responsibility carried by all car owners. Not having vehicle coverage in place will significantly increase the cost of insurance for other motorists.
All insurance companies have different terms and conditions that need to be understood. Being educated may not only save you time and money but will also help you obtain sufficient coverage that will prevent future headaches.