Whether you are new to the world of insurance or a bit more experienced, the world of car insurance terms can be confusing. Whether you’re submitting a claim or reading through your policy’s terms and conditions, it’s normal to be scratching your head at a few terms. Though these words are commonly used among insurance and legal professionals, they may not be regular in your everyday life. In order to fully understand your insurance policy, knowing these words can be crucial. Luckily, here’s our list of what we believe are the most common tricky car insurance terms, and what they mean.
1. Absolute Liability
Absolute Liability is an interesting circumstance that sometimes occurs as a result of an accident. The wrongdoer’s insurer must pay someone harmed, even if the wrongdoer has violated their insurance policy. This can happen if the wrongdoer has an expired or suspended licence.
2. Actuary
An actuary is an insurance professional that looks at stats and data to determine risk. They take that information to create a premium that you’ll pay.
3. Binder
A binder is a temporary insurance contract that says your policy is in effect. It’s important to have this until you have the permanent policy issued to you. This is especially true if you are driving and need to have proof of insurance.
4. Branding
After an accident, your car will be labeled with one of four branding:
- Salvage: It costs more to repair than its cash value.
- Irreparable: The car cannot be fixed and its only value is in parts.
- Rebuilt: Where a car has received extensive damage, but has been repaired and inspected.
- Stolen: As the name says, this marks the vehicle as stolen from the owner. But, only police can use or remove this term from the car.
5. Deductible
This is the amount of a claim you must pay upfront, regardless of who is at fault in the situation. This amount may be refunded if you are found to be not at fault in the accident and the other party involved meets the necessary criteria.
6. Depreciation
Depreciation is the decrease in the value of one of your items or access as time passes. When it comes to your vehicle, depreciation begins as soon as it leaves the dealership, and will continue to depreciate as it ages.
7. Drive-in
While most drive-in theaters in Ontario have closed, an insurance drive-in is where you bring your vehicle after an accident. There, your insurance provider will do a damage inspection and provide you with an estimate.
8. Endorsement
This refers to changes made to your car insurance policy where both parties have agreed to the change. This can include things like raising or lowering your deductible and adding more people or other cars to the policy. There are many auto endorsements available.
9. First Party
This is a term that describes the person who is insured by the policy. Other terms for First Party include ‘insured’ or ‘policyholder’. It can be a person or an organization.
10. Good Faith
Car insurance contracts are generally made in good faith. This means that a standard of honesty is greater than other types of contracts.
11. Lessee
This is the person that’s leasing a car. Any accidents may result in an impact on the lessee from both an insurance premium and liability standpoint.
12. Lessor
The company or car dealership that is leasing the car to the lessee.
13. Occasional Operator
An occasional operator is someone insured on a car insurance policy but is not the primary driver. This is most commonly used for new drivers, such as teenagers.
14. Subrogation
This is the process of getting back the money you paid because of an accident, but the other party was found at fault. As such, you have the right to recover your losses from the at-fault party.
15. Tort
A tort is a legal term that comes up to describe when someone causes a loss or harm to someone else. Torts enable the harmed party to recover their losses from the other party.
16. Umbrella
An umbrella or umbrella liability policy is one that covers the liability losses that exceed your auto insurance coverage. You can learn more about umbrella and excess liability insurance here.
At the end of the day, knowing these tricky insurance terms will help you better understand your car insurance from all angles. Contact us or request a quote today!
