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Auto Insurance Policy Terms

Understanding the Details of Auto Insurance Coverage

Having the right Auto Insurance coverage is important. Knowing and understanding your insurance contract details is the first step to insuring that you have the right Auto Insurance coverage. Because there are a number of coverage options in even the most basic policy, we have provided a brief explanation of certain key coverage terms below.

Insurance Terms

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

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Actual Cash Value: The value of property based on the cost of repairing or replacing your property of the same kind and quality. Typically, actual cash value equals the current replacement cost minus depreciation (age, condition, length of time in use, and obsolescence of the automobile).

Applicant: The party applying for an Auto Insurance policy.

Application: A form an Insurance company that includes questions about the prospective insured and the desired Auto Insurance coverage and limits.

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Bodily Injury Liability Coverage: Bodily Injury liability coverage protects you from claims and lawsuits by people who are injured or die as a result of an accident that you cause. It also compensates those people for pain, suffering and other personal hardships and may also pay for some economic damages, such as lost wages.

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Claim: A person's request for payment from an insurer for a loss covered by the insurance policy.

Collision Coverage: Protects you from damage that you cause to your automobile. For example, collision coverage would pay for repairs to your auto if you were at fault in an accident or your auto hit a tree. You can also make a claim under your own collision coverage for damage to your car from an accident in which you were not at fault.

Comprehensive Coverage: Protects you if your auto is stolen and for damage to your auto caused by things not covered under collision coverage, such as vandalism, fire, or wind.

Contract: A legally enforceable agreement between two or more parties.

Covered Auto: Automobiles that are covered under your Auto Insurance policy.

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Deductibles: The portion of the loss that the policyholder agrees to pay out of pocket, before the insurance company pays the amount they are obligated to cover. For example, if the covered claim is $1000 and your deductible is $250, you pay $250 and your company will pay $750. Deductibles help to keep insurance rates reasonable. Raising the amount of the deductible lowers the cost of insurance.

**Caution: Remember, deductibles help keep your insurance rates reasonable; raising the amount of money you are willing to pay out of your pocket for a loss will lower your insurance premium. Deductibles also serve to reduce some minor claims that, if filed, would drive up the general cost of New Jersey Auto Insurance. Collision and Comprehensive insurance coverage is optional.

Depreciation: Reduction in the value of property due to age and use.

DMV (Division of Motor Vehicles): The arm of the Department of Transportation which issues drivers' licenses and motor vehicle registrations, among other things, and regulates the proper issuance and use of these documents.

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Endorsement: Attachment or addendum to an insurance policy; an endorsement changes the contracts original terms.

Eligible Driver: An eligible driver has fewer than 9 insurance points and is guaranteed insurance coverage in the voluntary market.

Experienced Operator/Driver: A driver with more than three years licensed driving experience.

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Inexperienced Operator/Driver: A driver with fewer than three years licensed driving experience.

Insurance Company: An organization that has been chartered by a governmental entity to transact the business of insurance.

Insured: The person whose insurable interest is protected under an insurance policy.

Insurer: See Insurance Company.

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Lapse: Termination of a policy due to nonpayment of premiums.

Lawsuit Options: For the Standard Policy, you must make a choice about the rights you will have if you are injured in an auto accident. The choice you make does affect how much your insurance will cost. The choice you make will apply to you, your spouse, children and other relatives living with you who are not covered under another auto insurance policy. For Basic Policy holders you will not have a choice and will have the limitation on lawsuit option described below.

Limitation on Lawsuit Option: Under the limitation on lawsuit option you agree not to sue the person who caused an accident for your pain and suffering unless you sustain one of the injuries that appears on the following list; death, dismemberment, significant disfigurement or significant scarring, a displaced fracture, loss of fetus, or permanent injury within a reasonable degree of medical probability other than scarring or disfigurement. Any injury shall be considered permanent when the body part or organ, or both, has not healed to function normally with further medical treatment.

No Limitation on Lawsuit Option: Under the no limitation on lawsuit option, you can sue the person at fault in an accident for pain and suffering for any injury, no matter how minor. With a Standard Policy you must choose one of these two options. If you do not make a choice, you will receive the limitation on lawsuit option. The limitation on lawsuit option will decrease your premium. It is also important to remember that these options only cover lawsuits for "pain and suffering" or non-economic losses. Your medical expenses and some economic losses for injury in an auto accident will be paid up to the limits of your PIP coverage and are not affected by the choice you make here.

Liability: A legal obligation to compensate a person harmed by one's acts or omissions.

Liability Rating Class: The rating classification for a particular vehicle. The liability class defines the usage of the vehicle and the operator of the vehicle.

Liability Coverage: Liability coverage pays other people for damages that you cause if you are found to be at fault in an accident.

Loss: A claim either paid or payable due to the insurer's policy obligations.

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Named Driver Exclusion: Normally, the coverage choices you make apply to all persons covered under the policy. However, you can choose to exclude certain drivers on your policy from being covered by collision and/or comprehensive coverage on an automobile. This can lower your premium, but means that if the excluded driver operates the auto and is involved in a loss, you are not insured for certain coverage.

Negligence: Failure to use a generally acceptable level of care and caution.

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Personal Injury Protection Coverage / First Party benefits Coverage: Personal Injury Protection Coverage, or PIP, pays if you or other persons covered under your policy are injured in an auto accident. It is often called NO-FAULT coverage because it pays your own medical expenses no matter who caused the accident. PIP coverage has two parts; medical expense coverage and an extra PIP package coverage.

Physical Damage Class: Typically used for cars covered by comprehensive and collision coverage. The higher the class the more expensive the Auto Insurance coverage.

PIP Medical Expense Coverage: PIP medical expense coverage pays hospitals, doctors and other medical providers for treatment of injuries from auto accidents. It also pays for medical equipment you may need.

Basic NJ Policy Limits: The medical expense limit is $15,000 per person per accident.

You will be covered for all medically necessary treatment above $15,000 and up to $250,000 for permanent or significant brain injury, spinal cord injury or disfigurement or treatment of other permanent or significant injuries rendered at a trauma center or acute care hospital immediately following the accident and until a doctor says that you no longer require critical care.

Health Insurer for NJ PIP Option (Standard Policy Only): You may choose your health coverage provider to pay medical expenses for injuries you sustain in an auto accident instead of your auto insurer. Before considering this as an option you need to make sure your health insurer will cover injuries from auto accidents.

Policy: The written forms that make up the insurance contract between an insured and insurer. A policy includes the terms and conditions of the coverage, the perils insured or excluded, etc.

Policyholder: The person who buys insurance.

Policy Number: The IFA number assigned to your policy. This number is important if you ever call IFA with questions regarding your policy.

Policy Period: The amount of time an insurance contract or policy lasts.

Policy Limits: There are Policy Limits on your coverage to place a ceiling on the amount an insurance company is required to pay which in turn helps keep your insurance rates affordable. You'll find these limits on the Policy Declaration.

Policy Declaration: The Policy Declarations includes the following information:

  • The policy limits you've chosen,
  • The vehicles you're insuring,
  • Endorsements (amendments) to the base contract, as well as
  • Certain other information you "declare" (specify as fact) on the insurance application.

For example, you might see policy limits of 100/300/100 listed on the Policy Declarations sheet. These figures are in thousands of dollars. The first number is the limit paid per person for bodily injury (in this case $100,000). Subject to the underlying limit per person, the second figure is the total paid per accident for bodily injury ($300,000 here). The third number is the limit paid for property damage you caused ($100,000 total in this scenario).

Pre-existing Condition: A physical illness or disability that existed before the insurance policy effective date and generally which was not disclosed on the New Jersey Auto Insurance application.

Premium: The price for insurance coverage as described in the insurance policy for a specific period of time.

Proof of Loss: A sworn statement that is usually furnished by the insured to an insurer before any loss under a policy may be paid.

Property Damage Liability Coverage: Property Damage liability coverage protects you from claims and lawsuits by people whose property is damaged as a result of an accident you cause. Property Damage liability coverage of $5,000 per accident is required by law for both the standard and basic policies and the minimum limit is $5,000 per accident. Higher Property damage liability limits are available and are listed on the Coverage Selection From.

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Reimbursement: An amount of money paid to the insured for a loss which is covered under their policy.

Reinstatement: The process by which a insurance company puts back in force a policy that has lapsed or has been cancelled for nonpayment of premium.

Risk: The possibility or chance of loss or injury.

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Settlement: An agreement between a claimant or beneficiary to an insurance policy and the insurance company regarding the amount and method of a claim or benefit payment.

Standard and Basic NJ Policies: There are two types of auto insurance policies available in New Jersey. A BASIC policy is a low cost policy that provides a minimum of benefits. A STANDARD policy provides a wide variety of coverage options many of which are not available in a basic policy.

Standard Policy: Bodily Injury liability is required by law for a standard New Jersey Insurance policy. The minimum limits are $15,000 for any one person’s injuries, per accident; $30,000 for more than one persons injuries, per accident. Higher limits of coverage are available and are detailed on the coverage selection form

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Territory: A state is broken into different geographic insurance rating territories. Each territory is assigned a degree of risk. Policies are rated according to these risk factors.

Tier: An additional rating factor assigned to your policy based on driving experience, the number of driving penalty points, and number of years as an IFA policy holder.

Towing and Rental Coverage: An optional coverage that pays for expenses that are incurred if you have to have your auto towed or rent a car when your car is damaged by an accident.

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Uninsured/Underinsured Motorists Coverage: Uninsured motorist coverage protects you if you are in an accident caused by someone who does not have the minimum level of insurance required by law. Claims that you would have made against the driver who was at fault are paid by your own policy up to the limits of your own uninsured motorist coverage. Your uninsured motorist coverage may not have a limit higher than your own bodily injury liability coverage limit. Uninsured motorist coverage does not benefit the uninsured driver. In some states, UM/UIM coverage is optional.

Underinsured motorist coverage protects you if you are in an accident caused by someone who is insured but who has lower liability limits than your underinsured motorist limits. If your damages are greater than the limits of the other driver’s policy, you can make a claim against your own policy for the amount of damages not covered by the other driver’s policy up to the difference between the limits of your underinsured motorist coverage and the other driver’s policy limit.

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Vehicle Identification Number: A unique number that identifies the make, model, year and features of the vehicle.

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The above is a brief description of New Jersey Auto Insurance terms. It is not an insurance contract. Other terms, conditions and exclusions may apply. Please read a complete IFA Insurance Company policy for full details about the coverage.

To help choose which coverage, limits, and deductibles are right for you, contact an IFA Insurance Company Representative.

 
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