Don’t let complex insurance terminology stop you from understanding exactly what is going on with your
car insurance. Increase your vocabulary with these common insurance terms.
An independent agent can sell through multiple insurance carriers. They are not locked into a single insurance carrier. Selling through multiple carriers gives an independent agent options for clients. Independent agents work for themselves and often prefer being independent verses a captive agent.
Your declaration page lists all the information about your insurance policy in an easy to read format. It will list everything including your name and address, vehicle information, coverage, and loss payee information. Declaration pages are usually mailed out in your renewal package and can also be obtained directly from your insurance carrier or agent.
Insurance renewals are the dates in which insurance companies re-evaluate your insurance rate. If you have traffic violations falling off, your rate might go down. Or if you recently received a traffic violation,
you will probably see your rate go up. Other rate updates are also made at the time of renewal. It is a good idea to review your insurance at your renewal. Renewals usually occur every six months or twelve months with the date depending on the date you started the policy. If you are unhappy with your insurance rate, renewals are a good time talk to your agent about changes or shop for a new insurance carrier.
A non-renewal is when your insurance carrier no longer accepts you as a driver risk. Most often non-renewals are due to your driving record,
moving out of state, or
multiple claims filed.
Proof of insurance is usually required to be in your vehicle at all times by state law. Proof of insurance is issued by your insurance carrier once you put liability coverage or more on your vehicle. Proof usually is a smaller piece of paper which verifies your policy effective dates, the vehicle insured, insurance carrier, policy number, and your name and address.
Insurance companies use the term financial stability or insurance credit score in regards to using your credit score as a way to determine your insurance rate. Financial stability discounts are controversial, but at this point insurance carriers have won the right to determine your insurance rate based on credit. Their theory is the better credit you have the less likely you are to file a claim.
Named insured is the person who has ownership over the insurance policy. The named insured is usually the only person allowed to make changes to the policy. Claims will be paid to the named insured. Typically, the named insured also needs to be on the title of the insured vehicle, however some insurance carriers do make exceptions.
If you have a loan on your vehicle, you probably need a loss payee listed on your insurance policy. Loss payee is another entity, usually a bank or credit union, which has a financial interest in your vehicle. A loss payee will be included in the claims process so they are sure to be reimbursed on their loan.
Gap insurance covers the difference between what you owe and what your vehicle is worth. It is especially important for people upside down on their car loans. The loss payee will need to be paid in full after a total loss accident. You could potentially owe more than what the insurance company pays for your vehicle. Gap insurance will pay the difference between what you owe and what the insurance company pays. If you do not have gap insurance, you will be responsible for the difference.
An additional insured is part owner of a vehicle. For example, if your vehicle is co-titled, the other person on the title needs to be listed as additional insured if he or she is not listed as named insured or does not live in the household. Being listed as additional insured protects their liability and investment in the vehicle depending on the coverage purchased.
Every insurance carrier tries to determine your driver risk. Your driver risk is figured based on the likelihood you will file a claim. The three types of driver risk include preferred, standard, and high risk.
The term high risk refers to high risk drivers or high risk insurance. High risk insurance covers high risk drivers. Drivers with a high risk status include bad drivers, young drivers, and drivers who have a lapse in car insurance.
Did you know as a driver you could be held liable in an auto accident even if you do not own the vehicle? A non-owner policy protects your liability for those times you do not own a vehicle. If the vehicle is insured with low liability limits, you could be sued for additional damages if you are the at-fault driver. A non-owner policy also protects you against high risk insurance rates for having a lapse in coverage for the next time you go to purchase a vehicle.
Save time and money with electronic funds transfer. Having your insurance payments automatically taken out of your checking or savings account is quickly becoming the preferred way insurance carriers like you to pay. Many carriers offer discounts and no payment fees as incentives when you sign up for electronic funds transfer.
