Although insurance policies have become easier to
understand through the years, there is still confusion about general insurance
terms. Here are some terms and some basic definitions.
Please remember that these definitions are general in
nature. Please consult your policy for an exact definition of any term about which
you may have a question. These definitions do not modify the terms of your policy.
Auto Insurance Terminology
Liability
Liability pays what you are legally obligated to pay in the
event of an accident. This coverage takes care of the "other guy" when
you cause an accident and will not pay for your car or your injuries.
Liability limits are generally shown in split limits
such as 10/20/10. The first and second numbers indicate coverage for bodily
injury. In our example, the policy would cover up to $10,000 per person
injured to a maximum of $20,000 per accident. The third number is the property
damage limit. In our example coverage is for up to $10,000 in damaged
property such as the other person's car or any other property that might be damaged, such
as a fence or mailbox that was hit.
Drivers in Louisiana are required to carry liability with minimum
limits of 10/20/10, however many drivers feel that it is best to carry higher
limits since the amount of damages over the limit of liability remains the responsibility
of the driver or owner of the vehicle. You should carefully consider your limits of
liability and purchase an adequate amount of coverage.
Uninsured Motorists Bodily Injury (UM
BI)
When you are hit by an uninsured motorist, your UM BI covers
the damages that you would have received from the responsible party if he
had been insured. In Louisiana, UM BI also includes underinsured motorist
coverage that pays the excess if the responsible party does not have enough insurance to
cover all of the injuries. There are two types of UM BI coverage.
Economic and Non-Economic Uninsured Motorists Bodily Injury
This is what has been known as the traditional UM coverage
which pays both actual economic losses, such as loss of wages or medical
expenses, plus non-economic losses, such as pain and suffering.
Economic Only Uninsured Motorists Bodily Injury
Some companies offer this less-expensive coverage that pays only
actual economic losses. Non-economic losses are not covered under this
option.
All auto policies delivered in the state of Louisiana must
include Economic and Non-Economic Uninsured Motorists Bodily Injury at limits equal to the
liability limits of the policy unless the coverage is rejected by the insured. Split
limits are used just as with liability coverage. UM BI coverage of 10/20 pays up to
$10,000 per person injured up to a maximum of $20,000 per accident.
Uninsured Motorists Property Damage
(UM PD)
This coverage will pay actual damages to your
vehicle if it is hit by an uninsured motorist. Coverage is limited to a maximum
of $10,000 and is subject to a $250 deductible. Unlike
uninsured motorists bodily injury coverage, UM PD is not required by state law.
Medical Payments
Medical payments pays actual medical expenses
for people in your vehicle when involved in an accident. Payment is limited to the
actual expenses up to the policy limit for each person injured.
Comprehensive
This pays for damage to your car that is
caused by anything other than collision or overturn of the vehicle. Generally
contact with an animal is also covered under comprehensive. The coverage pays up to
the actual cash value of your car less the deductible. The higher
your deductible, the lower your premium.
Collision
This pays for damage to your car when you hit
something or the car overturns. Payment is for the actual damage to your car less
your deductible up to the actual cash value of the vehicle. You can
control your premium for this coverage by choosing a higher deductible. Many
companies sell comprehensive and collision as a package and do not offer the coverage
separately.
Towing
Towing pays for the actual expense of towing your vehicle
should it be needed, up to the limit shown on your policy.
Rental Reimbursement
This coverage is more properly known as Collision
Rental Reimbursement and covers the expense of renting a car should the insured
vehicle be involved in a collision. Coverage is sold based on a daily amount subject
to a policy maximum, for example $20 per day to a $600 maximum.
No Pay, No Play
This is the recent Louisiana legislation that
says that any driver who is uninsured cannot collect the first $10,000 in damages from a
driver who hits him. For example, an uninsured person is hit by another person who
has insurance. The uninsured person cannot collect the first $10,000 in damages
from the at-fault party even though he was not at fault in the accident. Uninsured
drivers are penalized up to $10,000 because they do not carry insurance on their vehicle.
Omnibus Premium Reduction Act
This combines with the no pay, no play legislation to require
insurance companies in Louisiana to reduce liability rates by 10%. In some
circumstances, this legislation permits police to seize vehicles that are not insured.
Driver Exclusion
A driver exclusion is an endorsement to your insurance
contract that allows you to decline to have certain driver(s) covered by your
policy. Remember if a driver is excluded, there is no coverage for this person under
any circumstances. You should carefully consider the reason and ramifications of any
driver exclusion before you sign the exclusion form and if you have any questions, ask
your customer service representative. In most cases, the registered owner of the
vehicle cannot be excluded.
Liability pays what you are legally obligated to pay in the
event of an accident. This coverage takes care of the "other guy" when
you cause an accident and will not pay for your motorcycle or your injuries. On a
motorcycle policy, guest passenger coverage is automatically included to
cover the injuries of a passenger on your cycle.
Liability limits are generally shown in split limits
such as 10/20/10. The first and second numbers indicate coverage for bodily
injury. In our example the policy would cover up to $10,000 per person
injured to a maximum of $20,000 per accident. The third number is the property
damage limit. In our example coverage is for up to $10,000 in damaged
property such as the other person's car or any other property that might be damaged, such
as a fence or mailbox that was hit.
Drivers in Louisiana are required to carry liability with minimum
limits of 10/20/10, however many drivers feel that it is best to carry higher
limits since the amount of damages over the limit of liability remains the responsibility
of the driver or owner of the vehicle. You should carefully consider your limits of
liability and purchase an adequate amount of coverage.
Uninsured Motorists Bodily Injury (UM
BI)
When you are hit by an uninsured motorist, your UM BI covers
the damages that you would have received from the responsible party if he
had been insured. In Louisiana, UM BI also includes underinsured motorist
coverage that pays the excess if the responsible party does not have enough insurance to
cover all of the injuries. There are two types of UM BI coverage. This
coverage is the same as you would find on an auto policy.
Economic and Non-Economic Uninsured Motorists Bodily Injury
This is what has been known as the traditional UM coverage
which pays both actual economic losses, such as loss of wages or medical
expenses, plus non-economic losses, such as pain and suffering.
Economic Only Uninsured Motorists Bodily Injury
Some companies offer this less-expensive coverage that pays only
actual economic losses. Non-economic losses are not covered under this
option.
All motorcycle policies delivered in the state of Louisiana
must include Economic and Non-Economic Uninsured Motorists Bodily Injury at limits equal
to the liability limits of the policy unless the coverage is rejected by the
insured. Split limits are used just as with liability coverage. UM BI coverage
of 10/20 pays up to $10,000 per person injured up to a maximum of $20,000 per accident.
Uninsured Motorists Property Damage
This coverage will pay actual damages to your
motorcycle if it is hit by an uninsured motorist. Coverage is limited to a maximum
of $10,000 and is subject to a $250 deductible. Unlike
uninsured motorists bodily injury coverage, UM PD is not required by state law.
Medical Payments
Medical payments pays actual medical expenses
for the driver of the insured cycle when involved in an accident. Payment is limited
to the actual expenses up to the policy limit less a deductible. This coverage is
different from an auto policy in that cycle medical payments applies only to the driver
and a deductible applies.
Comprehensive
This pays for damage to your cycle that is
caused by anything other than collision or overturn. Generally contact with an
animal is also covered under comprehensive. The coverage pays up to the actual cash
value of the bike less the deductible. The higher your deductible,
the lower your premium. Theft is covered under comprehensive.
Collision
This pays for damage to your cycle when you
hit something or the bike overturns. Payment is for the actual damage amount less
your deductible up to the actual cash value. You can control your
premium for this coverage by choosing a higher deductible. Many companies sell
comprehensive and collision as a package and do not offer the coverage separately.
Non-Factory Installed Equipment
This is equipment added to your cycle after it left the
manufacturer. Items can be added by a dealer, a previous owner or by you.
Unless declared and a premium paid, no coverage exists for anything not installed at the
manufacturing factory. Some examples are windshields, special light kits, saddle
bags, radio and CB equipment, etc.
Driver Exclusion
A driver exclusion is an endorsement to your insurance
contract that allows you to decline to have certain driver(s) covered by your
policy. Remember if a driver is excluded, there is no coverage for this person under
any circumstances. You should carefully consider the reason and ramifications of any
driver exclusion before you sign the exclusion form and if you have any questions, ask
your customer service representative. In most cases, the registered owner of the
vehicle cannot be excluded.
This is the insurance on the structure of the home
itself. The Dwelling Coverage policy form controls exactly what is covered and what
is not. While there are many different forms that may apply to a home or dwelling
policy, generally you will see forms such as HO-1 (the most restrictive homeowners form),
HO-2, HO-3, or HO-5 (the special form which is the most liberal). Usually HO-1 and
HO-2 are "named perils" policies that provide coverage only for specified causes
of loss. while HO-3 and HO-5 are comprehensive forms with some exclusions.
Dwelling forms, which are more restrictive than homeowners
forms, are usually shown as DWG-1 (more restrictive) or DWG-2 (less restrictive
coverage). Usually dwelling forms provide only fire and extended coverage and are
therefore called "named perils" policies..
Be sure to check with your agent or customer service
representative since many other policy forms are used and some companies do not use
standard definitions. Your policy or your agent is the best source of information
about what is covered and the restrictions on your coverage. Some policies are
written on an actual cash value basis and some are written on replacement cost
basis. Usually the insurance company requires that you insure to at least 80% of the
value of your home for actual cash value policies and insurance to 100% of replacement
cost if that coverage applies. Ask to be sure you understand the terms of your
policy since these provisions are not standardized.
The value of your land or the lot the home is built on is not
included in this value.
Personal Effects Coverage
This is the coverage for the contents of your home.
Generally the personal effects coverage amount is a percentage of the dwelling coverage
amount, but can be raised if desired. Be careful since policies have limits on some
special collections, coins, money and valuable papers, electronic equipment, etc.
Again, check with your agent. Contents is usually written on an actual cash value
basis.
Adjacent Structures
Coverage for "out buildings," storage buildings or
unattached garages. Coverage varies by policy form, so be sure that you have enough
coverage and that you understand the coverage on the policy.
Comprehensive Personal Liability
Liability is generally provided with homeowners policies,
however it can be excluded by some companies. This is an inexpensive coverage that
protects you in the event that someone is hurt on your property or in your home. Coverage
is provided up to policy limits for the amount that you are legally obligated to pay in
the event of a loss.
Medical Payments to Others
Medical Payments covers actual expenses for someone outside of
your household who gets hurt in your home. This coverage is generally written for
up to $500 to $1000 per person.
