Financial Planning WTFinance: What are these insurance terms? Read the Article Open Share Drawer Share this:Click to share on Twitter (Opens in new window)Click to share on Facebook (Opens in new window)Click to share on Tumblr (Opens in new window)Click to share on Pinterest (Opens in new window)Click to share on LinkedIn (Opens in new window) Written by Eric Madia Modified Jul 26, 2018 5 min read Advertising Disclosure The views expressed on this blog are those of the bloggers, and not necessarily those of Intuit. Third-party blogger may have received compensation for their time and services. Click here to read full disclosure on third-party bloggers. This blog does not provide legal, financial, accounting or tax advice. The content on this blog is "as is" and carries no warranties. Intuit does not warrant or guarantee the accuracy, reliability, and completeness of the content on this blog. After 20 days, comments are closed on posts. Intuit may, but has no obligation to, monitor comments. Comments that include profanity or abusive language will not be posted. Click here to read full Terms of Service. Save more, spend smarter, and make your money go further Sign up for Free Finding an insurance policy can be a tedious process, especially dealing with the jargon involved. Insurance policies are, after all, legal contracts between you and your insurer. These contracts have to navigate the conditions of a wide range of claims, for a wide range of scenarios. They tell you who is and isn’t covered, and what is and isn’t covered. Insurance policies become so abstract that even everyday words we take for granted — like “you” and “we” — need to be clearly defined. Doing so leaves no ambiguity, no snags. At least, that’s the idea. But because you have a life, you probably don’t speak insurance. That’s not a problem. We’ll outline car insurance terms that don’t usually come up during family dinners or on a first date. And “we’ll” do so (meaning, I’ll do so) in plain English. That way “you” (as in you, the reader) can be a savvier shopper. Deductibles Your deductible is what you pay out of pocket before coverage kicks in. Say someone careens into your car while it’s parked. They cause $3,000 worth of damage and your deductible is $500. You’d first pay the deductible toward repairs, and your insurer would pay the remaining $2,500. Whether you choose a higher or lower deductible is up to you. Higher deductibles usually mean lower premiums because you’re taking on more of the financial risk. A lower deductible means a higher premium, but you’d pay less out of pocket for a claim. Binder To put it simply, a binder is a temporary insurance policy. It can come in handy when you need proof of insurance on-the-spot. If, for example, you’re getting a car loan, your loan company will likely ask for proof of insurance. Your insurer can provide you with an insurance binder so that you’re not waiting for your insurance policy to be processed. A binder is typically good for 30 or 60 days and falls off once your formal insurance policy is produced. Full Coverage Car Insurance It’s a phrase used frequently, but truth be told, there’s actually no such thing as “full coverage.” When people use this term, they’re likely referring to comprehensive and collision. Together, these guard your ride against an array of perils. Comprehensive helps cover you for most damages not caused by collisions. That means vandalism, falling trees, theft, fires and mudslides, to name a few. Collision coverage helps pay for damages caused by — you guessed it — collisions, be they with another car or an object. In order to add collision to your policy, many insurers require you to have comprehensive coverage, too. Gap Insurance Financing or leasing a car? This coverage could help pay the difference — or the gap — between what you owe on it and how much it’s worth when you have an accident. Especially if you’re leasing, your contract will likely require you to have gap coverage. What’s more, it might be included automatically. If it isn’t, however, you may want to seriously consider adding it ASAP. There’s a good chance the gap will be there for at least a couple years. You’d be responsible for the difference, and it could save you from being thousands of dollars in the red. It’s also important to note that comprehensive and collision are typically required in order to add gap insurance. If you’re unsure about that, you can always check the declaration page on your policy. What’s the declaration page, you ask? Perfect segue. Declaration Page Also simply called “dec,” this is typically the first page of an auto insurance policy. It provides the who, what, where and when of your insurance plan. You’ll find pertinent info like: The names of everyone listed on your policy Excluded drivers Your policy number The start and end dates of your policy term Your address Your insurer’s address You’ll also find info on your coverages, limits and deductibles, which can be especially helpful. The dec doesn’t provide all-encompassing detail, but it is an easy-to-read summary. Loss Payees You might notice another individual listed on the dec page — the loss payee. This is either a person or an institution that has a stake in your vehicle. So if you’ve just financed a car, say, then the lender would be listed as the loss payee. Because they’re loaning you money for the purchase, they have an “insurable interest” in it and want to protect their investment. By being listed on your policy, the loss payee can stay up to speed with its status and have peace of mind — just like you — knowing that coverage is still in effect. You’ll also find your loss payee’s name, address and contact info on the dec page. Anything Amiss? Ask. If anything’s ever unclear, don’t hesitate to ask your insurer. That’s what they’re there for, after all. Besides, asking questions can be a skillful way to gauge just how top-notch and transparent an insurance company is. Familiarizing yourself with the basic nomenclature of insurance can not only help remove its otherwise ominous-sounding tone. It can help you fully understand what you’re looking at when it comes time to evaluate your insurance needs — without having to make a day of it. You have better things to do. Eric Madia is Vice President of Product Design at Esurance, where he is responsible for designing the company’s personal lines products. Eric has 23 years of experience in the insurance industry, focused primarily on underwriting, pricing, and product innovation. You can learn more about Esurance home and auto insurance policies by visiting their website. *This blog post does not constitute, and should not be considered a substitute for legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation. Save more, spend smarter, and make your money go further Sign up for Free Previous Post What to Know About Collecting Social Security and How to… Next Post How to Calculate Your Debt-to-Income Ratio (and What It Means) Written by Eric Madia More from Eric Madia 3 responses to “WTFinance: What are these insurance terms?” […] post WTFinance: What are these insurance terms? appeared first on MintLife […] […] post WTFinance: What are these insurance terms? appeared first on MintLife […] Thanks Eric for such nice and easy explanation. Leave a ReplyYour email address will not be published. Required fields are marked *Comment * Name * Email * Website Δ Browse Related Articles Housing Finances What Is and Isn’t Covered by Homeowners Insurance Housing Finances 3 Halloween Accidents Your Homeowners Insurance Might N… Financial Planning Think You Don’t Need Extra Insurance While Travel… Financial Planning 5 Different Types of Insurance Policies & Coverage… WTFinance WTFinance is Cyberbullying Insurance? Financial Planning How to Choose an Insurance Plan for Your New Smartphone Financial Planning Common Questions About Renters Insurance How To Rethinking Insurance: What You Really Need; What You Do… Insurance Is Pet Insurance Worth It? Insurance What is Life Insurance?