Have you ever reviewed your auto insurance policy and come across some terms you’ve never heard before? Don’t worry, you are not alone. Understanding auto insurance can sometimes feel like learning a new language. The terminology can be confusing, but understanding the meanings of these words is essential for making informed decisions about your policy. We’ve provided a beginner-friendly list of car insurance terms explained for your benefit.
What is a Premium or Auto Insurance Premium?
An auto insurance premium is the amount a policyholder pays to the insurance company to obtain insurance coverage. For auto insurance, a premium is the amount that you pay either monthly or annually to maintain your coverage. Your premium cost depends on various factors, including age, location, driving record, vehicle type, and market conditions.
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Deductible: What is a deductible in Ontario auto insurance?
This common auto insurance term refers to the amount you pay for a covered claim before the insurance company covers the rest, up to the policy limits. It is a cost-sharing agreement that makes you (the policyholder) responsible for a portion of the claim.
What does OPCF (Ontario Policy Change Form) mean?
An OPCF is an Ontario Policy Change Form. This form is a type of insurance endorsement to an auto insurance policy. This type of optional coverage enables policyholders to add, modify, or reduce coverage under specific circumstances.
What happens when a car is a total loss in Ontario?
A total loss refers to a vehicle that is damaged to the extent that the cost to repair exceeds its actual cash value (ACV) or the car would be unsafe to fix due to the damage. When a vehicle is declared a total loss, it will be “written off” and the policyholder will receive a settlement from the insurance company based on its ACV, not replacement cost.
Depreciation: What Does This Mean for my Car?
Depreciation is a car insurance term that many are confused by. It refers to the extent to which a vehicle’s value has decreased over time. This decrease can be attributed to various factors; however, it is typically due to everyday wear and tear.
Policy Limit in an Insurance Policy: What Is it?
A policy limit is an amount defined in the policy that is the maximum an insurance company will pay for a covered claim. When considering the level of coverage you need for your policy, also consider the amount you are willing to pay for it.
Endorsement / Rider
Next, these common car insurance terms are commonly used in the insurance industry. An insurance rider or endorsement is an entirely optional add-on to a standard insurance policy. These provide additional coverage for an extra fee.
What is Third-Party Liability in car insurance?
Third-party liability is a type of insurance that financially protects you if you are held responsible for causing property damage/injury while driving. This includes expenses such as medical bills, repair costs, and legal defence costs.
Driving Record: How Can I Check It?
A driving record is a document issued by the government that contains information about a driver, their license, and their driving history. This will include any violations, tickets, or accidents in which a driver has been involved within a specified period.
Accident Benefits: What Are They in Ontario?
Accident Benefits are the expenses covered in the event of an accident, regardless of who is at fault. This will generally cover things such as medical care or income replacement if someone is unable to work due to a work-related injury or illness.
Do I Need Collision Coverage?
Collision coverage is specifically designed to protect you in the event of a collision or if your car comes into contact with another object. With this coverage, your insurer will cover the cost of repairs to fix your vehicle, minus the amount you pay as your deductible.
Comprehensive Coverage: What Is It?
Comprehensive auto coverage is for more specific situations and is an insurance term you will often hear. This is a type of coverage package that takes on specific perils, such as hail, flood, theft, or fire, and will compensate you according to the terms outlined in your insurance policy.
What is DCPD (Direct Compensation Property Damage) in Ontario?
Direct Compensation Property Damage (or DCPD) is the most general and straightforward type of coverage. It provides you with compensation for your car and its contents if another person is deemed at fault during an accident. You will collect this directly from your own insurer!
What is a Claims-Free Discount?
A claims-free discount is a reduction that is earned by not making a claim each year. More simply, it’s a reward for having a clean driving record. This discount stacks, as the longer you go without having to file a claim, the larger the discount may become.
Do I Need Usage-Based Insurance (Telematics)?
Telematics, also known as usage-based insurance, is a type of auto insurance that rewards safe driving habits by adjusting premiums accordingly. If you would like to learn more about telematics, read our blog about the benefits of pay-as-you-go insurance.
What Does Accident Forgiveness Do?
Accident forgiveness is a benefit to your policy that prevents your premiums from increasing if you are at fault for an auto accident. This coverage means your first accident may not result in higher insurance rates, which is often the case after an accident. Please always make sure you’re covered by double-checking your policy inclusions with your isure broker.
Am I the Primary Driver on my Policy?
A primary driver is the person whose name is on the policy and who drives the car most frequently.
Additional/Secondary/Occasional Drivers Insurance
Also known as occasional or secondary driver insurance, this coverage option allows you to add another person to your policy. This insurance coverage protects you and the additional driver without requiring the payment of two separate plans. For example, a teenager driving a parent’s car is a great contender for this coverage.
What is an Insurance Adjustor?
An insurance adjustor is someone who professionally investigates insurance claims on behalf of the insurer. Their role is to investigate insurance claims, identify the extent of the insurer’s liability, and negotiate settlements with policyholders.
Excluded Driver: What Does This Mean?
An excluded driver is explicitly not covered by an auto insurance policy, regardless of whether they drive the insured vehicle or not. The excluded driver and the vehicle owner must sign an Excluded Driver Form (OPCF 28A) to confirm they understand the driver is not insured under that specific auto policy.
Am I the Registered Owner of My Own Vehicle?
The registered owner of a vehicle is the person whose name appears on the vehicle permit and is the official owner of the vehicle. This person is legally responsible for the vehicle’s use, registration, and any penalties or fines related to it.
What is Uninsured Motorist Coverage?
This type of coverage protects you, your vehicle, and passengers if a driver with no insurance hits you or cannot be identified. This is automatically included in every standard auto policy. It helps to cover any injuries, lost income, or vehicle damage because of the crash.
What is Salvage Value?
This refers to the value of a damaged or stolen vehicle covered by your policy. After the insurance company has paid a claim for the total loss, the salvage value is the amount the insurer can recover by selling the remaining damaged property.
Car Insurance Terms Explained: Concluding Thoughts
Knowing the basics can make navigating your auto insurance much easier. Understanding these key terms can help you make informed decisions and maximize the benefits of your auto insurance. If you have any questions about your auto insurance, please don’t hesitate to contact us or request a quote today.
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