Auto Insurance Terms You Should Know

Auto accidents happen in an instant. While no one can fully prepare for a crash, there are a variety of steps that can be taken to ensure that those who own and operate a vehicle are protected in the case of an accident. In the state of Georgia alone, upwards of 1,700 drivers are involved in an auto accident every single day. With about 70 motorists dealing with car crashes every hour, taking the proper strides to protect yourself, your loved ones, and your property is essential. Auto insurance coverage is imperative to helping those involved in an auto accident recover their losses.

While Georgia residents attempt to circumvent collisions, some auto accidents are simply unavoidable. In the case of an auto accident, being well-versed in auto insurance terms is crucial. Following a crash, victims involved will be contacted by an insurance adjuster from either their own insurance company or the provider of the other party involved in the accident. Upon contact, insurance adjusters will utilize auto insurance terms that may sound unfamiliar. In fact, the average driver is unaware of the majority of auto insurance terms frequently used by adjusters.

Prior to signing any documentation, victims involved in an auto accident must fully understand what the insurance adjuster is saying, advising, and claiming. Without adequate knowledge of auto insurance terms, motorists may sign documents which limit their potential compensation, unbeknownst to them.

With this in mind, The Eichholz Law Firm, P.C. has created a glossary of the most common auto insurance terms.


Automobile Liability Insurance

Coverage obtainable if the insured driver is legally responsible or liable for accident damages, including both physical injury and property damage, caused by the motor vehicle accident.

Collision Insurance

Insurance coverage for property damage that is not covered under Comprehensive Insurance.

Comprehensive Coverage

Property damage coverage caused by any event other than a collision, typically theft, fire damage or a cracked windshield.

Deductible

The monetary amount an insured individual must pay before the insurance company may provide any coverage.

Economic Benefits

Calculable out-of-pocket expenditures including but not limited to medical bills, lost wages, future medical expenses, and loss of earning capacity.

Financial Responsibility Law

A law that requires all drivers to carry some form of auto insurance coverage. In Georgia, the minimum amount of liability insurance coverage required to satisfy the law is $25,000/$50,000/$25,000.

Liability Coverage

The type of insurance coverage that pays for the damages triggered by the action of the insured individual.

Medical Payments Coverage (Med Pay or MP)

Coverage specifically for medical expenses and/or funeral expenses for the insured individual and the passengers within the vehicle, regardless of who was at fault in the auto accident.

Monetary Threshold

The cutoff point for which an injury victim can file a lawsuit to recover both economic and non-economic damages linking to the auto accident in relation to damages.

Multi-Car Discounts

A discount available from some insurance providers that is given if more than one vehicle is on the same policy.

No-Fault Benefits

Regardless of who was responsible for the auto accident, no-fault benefits allow insured individuals to recover economic losses from their own insurance provider.

Non-Economic Benefits

While difficult to measure, these are damages relevant to loss of quality of life, including pain and suffering, mental distress and loss of consortium.

Personal Auto Policy (PAP)

Covers the insured individual for personal liability, property damage, medical bills, and uninsured or underinsured motorist coverage. This is the most common type of auto insurance policy.

Premium

The cost of insurance coverage for a precise risk over an exact time frame.

Property Damage Liability (PD)

Coverage for when the insured individual damages another’s property with their car. PD can include damage to another’s vehicle, telephone or utility poles, buildings, fences and garage doors.

Term

Generally six months to a year, a term is the specified length of time that an auto insurance policy is effective.

Umbrella Policy

Coverage in relation to losses that go beyond the monetary limit of an insurance policy.

Underwriting

The procedure involved in either accepting or rejecting an insurance application, this includes risk selection and classification of an applicant’s insurability.

Uninsured or Underinsured Motorist (UM)

Coverage that relates to the damages caused by a motorist who is uninsured or has insufficient coverage necessary to recover losses incurred.

Usage

Considered during underwriting process for auto insurance coverage, this states the purpose for which an individual uses his/her vehicle.

Verbal (Descriptive) Threshold

Similar to monetary threshold, a description of the type of injury a victim must sustain in order to file a lawsuit to collect damages.