Top Ten Insurance Terms You Need To Know

Have you ever wondered what the terms your insurance agent reads to you means? What are you to make of terms like coverage, deductible, liability and comprehensive? We believe every car owner has a minimum of one form of insurance policy laden with key terms that should be fully understood. Well, in the next five minutes, let’s go through EIG’s Top 10 Insurance Terms.

Coverage – Your coverage is the amount of risk or liability covered for you by an insurance company. To break it down, your coverage is everything that your insurance provider is responsible for, in the event of an accident or loss. Insurance coverage helps consumers recover financially from unexpected events, such as car accidents, loss of wages and property damages. Depending on the type of insurance you are getting, there are different types of coverage you can get. Talk to your agent to figure what is the best option for you.

Auto/Car Insurance – This is the most common type of insurance due to the fact that most states demand that you have some form of insurance in order to own and drive a car. It covers cars, trucks, motorcycles and other road vehicles. Auto Insurance pays for your loss in the event your car is crashed, stolen, vandalized, or destroyed by fire. However, the laws that require car insurance are designed to protect other drivers and pedestrians from you. For instance, if you knock down someone on the streets, your car insurance will pay their hospital bill and if it is a collision with another car and you are at fault, this insurance is designed to pay for any costs that the other driver incurred. Auto insurance has different policy types and coverages. We will be addressing some of these policies below.

Full Coverage – You have full coverage when you get the mandatory liability coverage which pays for the damage you inflict on other people and property. It also gets you comprehensive and collision coverage. Comprehensive cover protects you from out of pocket payments due to accidental damages to your car. It covers things like theft, vandalism, glass and windshield damage, fire, and the weather and other acts of nature. Collision, on the other hand, helps pay to repair or replace your car if it’s damaged in an accident with another vehicle or object, such as a fence, tree or animal.

Liability – If you cause an accident or someone is injured on your property, you could find yourself legally liable for the resulting expenses such as medical and legal fees. Liability coverage helps you take care of all these expenses without paying out of your own pocket. Liability coverage only pays for the costs incurred by a third party. For instance, in the case of a car accident where you are at fault, this coverage will only pay for any damages, medical and legal fees the other driver will incur up to your policy’s limits.

Limits of Liability – For every insurance policy, there is a limit of liability. This simply means the maximum amount of money your insurer is liable to pay when an incident occurs or when you make a claim. For each coverage type specified in your policy, your insurance company will indicate the limit of liability which is how much they’re willing to pay you if something happens. It is crucial therefore well, to read your policy to understand what the limits of your policy are in case you need to make a claim in the future.

Gap Insurance – When you buy or lease a new car, it starts to depreciate in value the minute you drive it out of the lot. Guaranteed Asset Protection, commonly known as Gap insurance covers the difference between what a vehicle is currently worth (which your standard insurance will pay) and the amount you actually owe on it. This insurance is recommended for users who buy new vehicles on lease or financial plans or make a down payment of less than 20%.

Homeowners Insurance – Homeowners Insurance as the name implies is an insurance type that protects homeowners from financial ruin due to accidental damages to houses. This package pays for losses and damage to your property if something unexpected happens, like a fire or burglary. Most mortgage lenders require you to have homeowners insurance before they lend you money to cover the purchase of your home.

Renters Insurance – This type of insurance is designed to help protect you and your belongings. Renters Insurance includes liability coverage, protection for your belongings and coverage for additional living expenses, should the home you’re renting become temporarily uninhabitable. It also protects you from being liable when a visitor gets injured in your home. The policy will cover medical and legal fees up to the limits specified in the policy.

Landlord Insurance – This insurance is to protect you from unforeseen losses when you rent out a home you own. This type of insurance typically includes two different types of coverage: property and liability protection. Both coverages are intended to help protect you, the landlord, from financial losses. This policy typically helps cover physical property related to the home you’re renting out. This may include the dwelling itself and any equipment you keep on-site to help maintain it.

Uninsured/Underinsured Motorist Coverage – Sometimes we are in an accident where the driver who hit or caused the accident has a very low liability coverage or just simply takes off without stopping. This is where this type of coverage comes in handy, Uninsured/underinsured motorist coverage is there to protect you from irresponsible drivers. This type of coverage protects you if you’re in an accident with an at-fault driver who, either doesn’t carry liability insurance or if they do, their limits are too low to cover medical expenses. This is usually an add-on to your auto insurance to ensure that you are covered in every scenario and that no peril sets your pocket back.

So there you have it for our top ten insurance terms. We will be taking each of these terms and dive deeper in our upcoming posts. Which one do you want us to tackle first? Do you have a suggestion for us? Let us know!

Understanding Full Coverage and Liability Coverage in Auto Insurance

Mike Johnson
Mike Johnson, Insurance Broker at EIG

With auto insurance, it is easy to ignore the nuance involved and go for the required minimum per State when it comes to auto insurance. But spending the minimum could come at a cost because the different insurance packages have different coverage and limits spelled out in the terms. We should pay attention to these terms before making an important decision. Our producer, Mike Johnson, breaks down what the coverage and limits of the term are and how auto insurance shoppers can make informed decisions when picking a policy.

Mike starts his conversations with a client or potential client by trying to understand the policy which would best suit them; be it full coverage or liability coverage, he goes ahead to explain the differences. “Often, the clients are unaware of the differences with the coverage types, and so I simplify the language to help them make the right choice.”

As stated earlier, there are two types of Auto Insurance; full coverage and liability coverage. Each type comes with different tiers and premiums.  

“Full coverage” is when you get the mandatory liability coverage which pays for the damage you inflict on other people and property plus comprehensive and collision. Comprehensive cover takes care of damages to your car caused by events that are out of your control. It covers things like theft, vandalism, glass and windshield damage, fire, weather/acts of nature. Collision, on the other hand, helps pay to repair or replace your car if it’s damaged in an accident with another vehicle or object, such as a fence, tree or animal. Ideally, full coverage means you have insurance in the types and amounts that are appropriate for your income, assets and risk profile. The point of all types of car insurance is to keep you from being financially setback by an accident or incident. Making the right choice may be one of the most crucial decisions you would make in your life.

To explain further, Mike added that “full coverage pays for the damage you do to others, up to your liability limit. It also pays for your car, up to its fair market value, minus your deductible in case of a total loss, if you are at fault or if the car is destroyed by a natural disaster or is stolen.”

Full coverage also pays for your injuries as well as your passengers’ injuries, if you are at fault, up to the amount of your bodily injury limits. It also covers these injured people if you are hit by an uninsured motorist, up to the limits of your uninsured motorist coverage.

Liability coverage, on the other hand, is meant to protect you from having to pay huge amounts to people in case you are sued for an accident which was your fault. According to Mike, your policy and coverage depends on the value of your assets, or what your combined savings and property are worth.

 Liability covers bodily injury liability protection and helps to pay for the medical expenses of the other party if you are found at fault in the accident. In some circumstances, it may even cover lost wages and/or legal fees if the injured party files a lawsuit depending on the policy limits.

It also pays for damages to property resulting from a covered accident in which you’re at fault. It covers the other party’s vehicle repair or replacement costs, as well as other property that may have been damaged in the accident, such as fences, structures, phone poles and other types of property.

“Liability insurance is highly dependent on your financial situation and the property being insured, so be wary of generic liability coverage recommendations you might see. The more you own, the more liability insurance you should have.”

For Mike, it is not just about selling policies, it is about making sure the client is getting the best value that fits their specific needs. “Every client is unique, some of them know what they want. Others don’t, and it is up to me to assess their needs and recommend the best policy for them. For us at Everett Insurance Group, the needs of our customers come first!”