Buying your very first car is both a happy and proud moment. However, once all of the initial excitement starts to wear off, you are faced with the reality that there are plenty of legalities to take care of in terms of car insurance. What's worse is the fact that there are so many different coverage options to choose from, all of which are being explained to you in what can only be Greek. You simply don't understand half of what is being said! Not to worry, though. Here is a list of common vehicle insurance buzzwords that everyone should know before signing on the dotted line.
Firstly, let us simplify the different types of coverage that are available to you:
- Collision Coverage: This one is relatively straightforward. If you have collision coverage, the insurance company will pay out for damages any time you are involved in a collision of any kind – this is true regardless of whether or not the accident was actually your fault. You will still have to pay a deductible, however.
- Comprehensive Coverage: This type of coverage refers to any other damage that might occur aside from collisions and road accidents. For example: theft, hail, fire, vandalism etc.
- Rental Reimbursement Coverage: If your car is in for repairs (and these repairs are being covered by your insurance company), with this coverage option, you will be reimbursed for the amount needed to rent a car in the meantime.
- Third Party-Only: If you are responsible for an accident, your insurance company will cover the cost of damages incurred by any third party involved. It will not, however, cover any costs for repairs to your own vehicle.
- Third Party, Fire and Theft: Similar to the Third Party-Only coverage option, this one will cover you for third party damage, as well as damage to your own car that was caused by fire. It will also cover you if your vehicle is stolen.
Now for a few of the other complicated terms that you might see scattered around your policy:
- Excess: This is a set amount, agreed upon by both the insurance company and the insured, that will be payable in the event of a claim being made. The excess needs to be paid before the insurance company will settle the rest. Excess is also commonly referred to as the 'deductible'.
- Premium: This is the specific amount that the insured needs to pay every month for his/her car insurance.
- Lapse: Your policy will lapse/terminate as a result of a non-payment of premiums.
- Perils: These refer to any particular risks/dangers regarding your vehicle, all of which can result in damage.
- Exclusions: These refer to specific instances/events that will not be covered by your car insurance policy.
After reading this, you are on the fast track to understanding all that there is to know about vehicle insurance. Now you can chat to insurance companies with knowledge and confidence, resulting in you landing yourself the lowest premium possible!
MiWay is a direct, short-term insurance provider offering a range of value-for-money insurance products. As well as motor, household and homeowners insurance, there are also add-on products such as warranty cover and liability cover. For more insurance Buzzwords check out this extract from the new MiWay e-Book A Dummy’s Guide to Owning a Car.