Understanding Your Auto Insurance Declarations
How many of you are lost when it comes to reading your insurance policy? You may see certain charges for coverages on your policy, and you have no idea what you’re paying for. Additionally, you may hear of a benefit that other people are covered for, and you wonder why you aren’t. Wouldn’t you like to know? Here, we will explain common terms you will see on your auto declarations sheet.
- ACTUAL CASH VALUE (ACV)– Replacement cost amount minus depreciation.
Ex: Your roof is expected to have a 20-year life. 10 years in, a horrible hailstorm damages the shingles and it needs to be replaced. The replacement cost of the roof is $20,000. It is already halfway through it’s lifespan, so $20,000 (RC) minus $10,000 (RC – 10 years depreciation) = $10,000 ACV. - ACCIDENTAL DEATH BENEFIT – The amount the insurance company will pay in the event that death occurs due to bodily injury sustained while occupying, getting into, or getting out of a private passenger vehicle. The death benefit will be paid to a spouse, child, parent, or estate, whichever applies best to your situation. Coverage is typically $20,000 or $30,000.
- ADDITIONAL EXPENSE COVERAGE – This pays you for loss of use of your vehicle due to theft, total loss, or other covered loss. It is represented on a per day/per occurrence limit.
Ex: You have additional expense coverage limits of 30/900. Your car is totaled in a collision on vacation in California. The insurance company will pay you a maximum of $30 per day to rent a vehicle. They will not pay more than the $900 limit per occurrence. You must also provide receipts. - ADJUSTER – person who investigates a claim and if/how much should be paid out. Hired by the insurance company.
- ALLOWABLE EXPENSES – a.k.a. Personal Injury Protection. This shows the amount of coverage to be paid by the insurance company to the named insured, rated driver or household member on policy for injuries from a vehicle accident.
- BODILY INJURY LIABILITY – this coverage pays third party’s medical expenses for injuries from an accident where you were found at fault. It will also cover legal fees and defense if you are sued for damages.
- COLLISION – This means any impact with anything other than an animal; another car, house, pot hole, tree, fire hydrant, rock, etc. There are 3 different types:
- Regular/Standard: Insurance pays. Deductible always applies regardless of fault.
- Broad: Insurance pays. Deductible only applies when you are at fault.
- Limited: Insurance doesn’t always pay. Company will only pay if you are found less than 50% at fault.
- COMPREHENSIVE – a.k.a. other than collision. This is anything accidental and out of your control including impact with animal.
Ex: Garage collapsing on your car, hail damage, glass breakage, hitting a deer, etc. - DECLARATIONS SHEET – a.k.a. Dec Sheet. This is a sheet(s) that includes the following: Policy number, policy period, insured name(s) and drivers, items insured, their coverages, and deductibles.
- DIMINISHING DEDUCTIBLE – This is an optional endorsement one may purchase to lower the comprehensive or collision deductible. You receive a $100 credit towards the deductible upon purchasing this coverage; And $50 for each renewal for semi-annual policies, $100 for each renewal for annual policies. Cannot exceed $500 of credit.
- LOAN AND LEASE GAP COVERAGE – This is an optional endorsement that provides coverage limits greater than the ACV of your vehicle in order to cover the amount still owed on a loan or lease. If you had a loss and you owed more on the loan than your car is worth, you would want this coverage.
- PERSONAL INJURY PROTECTION – a.k.a. Allowable Expenses. This is what covers your medical expenses in an accident. We’ve had a lot of trouble trying to explain this since the law changed (see our post New Law Effects You). This coverage will pay medical expenses for a named insured or household member on your policy. Even if you are a passenger in someone else’s car, your PIP follows you.
- PROPERTY DAMAGE LIABILITY – Protects you from monetary loss resulting from legal liability of damage to property of another.
- PROPERTY PROTECTION INSURANCE – Protects you from monetary loss resulting from your absolute liability in Michigan for damage caused by your automobile to property of others including others’ parked automobiles. This coverage is mandatory in Michigan.
- ROAD TROUBLE SERVICE – Insurance company will reimburse up to the policy limit for services which make your vehicle unable to operate such as: lock-out, winch, jump-start, flat tire, out of gas, etc.
- UNDERINSURED MOTORIST – Insurance company will pay an injured victim of a car accident for pain and suffering, medical bills, etc. when injuries were caused by a driver who was underinsured.
- Underinsured Driver – A driver who was at-fault in causing an accident that injured or killed someone else; and, a driver whose liability insurance coverage is inadequate to cover the victim’s pain and suffering, excess medical bills, or other monetary damages.
- UNINSURED MOTORIST – Insurance company will pay an injured victim of a car accident for pain and suffering, medical bills, etc. when injuries were caused by a driver who was uninsured. Simply put, the insurance company will “step into the shoes” of the uninsured driver and pay for damages the driver would have been responsible for paying.
- Uninsured Driver – A driver who was at-fault in causing an accident that injured or killed someone else and had no auto insurance.
While this is a quick summary of terms you may see on your declarations page, verbiage may differ from company to company. That is why it’s important to have a good agent so you have a good understanding on what you are or aren’t covered for. We dislike surprises as much as the next guy when it comes to our coverages!
If you have any questions, comments, or would like to speak to a licensed, professional agent, please reach out and we would be more than happy to assist you in finding your insurance needs!