Glossary Of Insurance Terms

Application — A form you complete with information about you that an insurance company utilizes in determining whether to issue a policy and the premium amount to charge.

Bodily Injury Liability (BI) — A coverage that protects you in the event you cause injury to another person. The minimum Bodily Injury Coverage required by law in Michigan is $20,000 per person and $40,000 per accident. According to Michigan law, an injury must be serious before an injured person can sue, but many states do not have this limitation. Because you may need greater protection, higher limits of coverage are available at an increased cost. Since the liability premium is relatively small, buying additional protection could be a wise decision.

Cancellation — The termination of insurance coverage during the policy period.

Car Rental — Provides financial assistance for temporary transportation while your car is being fixed. This valuable optional coverage can be especially important if there is only one car in your household.

Claim — A policyholder’s request for reimbursement from an insurance company, under an automobile insurance policy for a covered loss.

Collision Coverage — Protects the car up to its market value in case of an accident. Under no-fault, in order to be sure your car is protected, you must insure it on your own policy. Only in limited circumstances can you collect from another negligent person in a moving accident (see Mini-Tort definition). However, if your car is properly parked, the other party is responsible for damages. Generally, there are three types of Collision Coverage available in Michigan:

• Broad Collision — With deductibles generally ranging from $50 to $500, Broad Collision will pay to repair your car regardless of who is at fault. If you are no more than 50 percent at fault in an accident, the deductible will be waived. Broad Collision is the most expensive and is most often selected for late-model vehicles.
• Basic or Standard Collision — This option pays for repairs regardless of who is at fault. However, you must always pay the deductible. Deductibles are available in different amounts.
• Limited Collision — Pays for repairs only when you are no more than 50 percent at fault in an accident (no deductible applies.) Limited Collision is the least expensive and is frequently the choice for a less-valuable vehicle.

Comprehensive Coverage — Protects your vehicle against risks other than collision. These risks include fire, theft, vandalism, flood, hail and wind. Various deductible options are available.

In addition to selecting the most appropriate deductible, you may wish to consider purchasing separate coverage for special non-factory installed sound or custom equipment, which may not be covered under Comprehensive Coverage. This should be equal to the value of the equipment not originally installed in the car by the manufacturer.

Declaration Page — Often referred to as the dec page or declaration certificate. This document shows the name and address of the policyholder, effective date of coverage, a description of the covered vehicle(s), the types and limits of coverage, deductibles and amount of premium.

Deductible — The deductible is the amount you agree to pay on each loss before your insurance company pays. The larger your deductible the lower your premium.

Effective Date — The date on which the insurance policy begins.

Exclusions — Certain losses and conditions listed in the policy, which are not covered.

Expiration Date — The date on which the insurance policy expires.

Garaging Location — The primary place you park your vehicle when you’re not using it. Generally, this is your primary residence.

Insured — The person(s) entitled to coverage benefits in case of a loss.

Limits — An insurance coverage limit is selected by you or in some cases required by law. It is the most the insurance company will pay for damages or injuries that apply to that coverage.

Loss — The dollar amount associated with a claim.

Mini-Tort — This is also known as Michigan Limited Property Damage Liability. It protects you up to $1,000 for damage done to someone else’s vehicle as a result of your driving negligence if that person’s car does not have Collision Coverage or has a deductible that cannot be waived. Your responsibility is limited to $1,000 by law.

Named Insured or Principal Named Insured — The first person in whose name the insurance policy is issued.

Occasional or Secondary Driver — A person who is not the primary or principal driver of the insured vehicle is an occasional driver.

Policy — The written contract of insurance.

Policy Period — The period of time a policy is in force, from the beginning or effective date to the expiration date.

Premium — A premium is the amount of money paid to an insurance company in return for insurance protection.

Primary Use — Primary use is how you mainly use your vehicle. Primary use options include to/from work, business, pleasure or farm use.

Principal or Assigned Driver — The person who drives the car the most is the principal driver.

Property Damage (PD) — Required coverage in Michigan, it provides you loss protection if your car damages someone else’s property (such as light poles, fences, another vehicle, etc.) in another state. The minimum coverage you can buy is $10,000, with higher limits available.

Property Protection Insurance (PPI) — A mandatory no-fault coverage that pays up to $1 million for damage your car does in Michigan to the property of others (such as buildings, light poles, and fences) and to another person’s properly parked vehicle.

Personal Injury Protection (PIP) — A mandatory no-fault coverage, which provides the following benefits to automobile accident victims:

• All reasonable and necessary medical expenses.
• Up to three years of lost wages for the injured person or their survivors. This is subject to an annual cost-of-living adjustment. Higher benefit limits may be purchased.
• Up to $20 per day, for a maximum of three years, for replacement services. This pays for services, which the injured person cannot perform.
• Funeral and burial expense benefits.

Uninsured/Underinsured Motorists — Provides protection for serious injuries you may suffer as a result of the negligent actions of an uninsured or underinsured motorist. This is not to be confused with No-Fault Medical and Work Loss coverage. Uninsured/Underinsured Motorist coverage compensates for pain and suffering as well as economic loss not otherwise payable under your No-Fault coverages. Uninsured/Underinsured Motorist coverage is generally available in a variety of limits above the minimum Bodily Injury Liability limit.