If you understand your coverages then you will have the upper hand when dealing with the claim adjuster!
Not only you need to know how to read the policy, but you also must understand the insurance coverages put forward in your auto policy. Your insurance coverages are the promises your insurance company is making to you in exchange of a premium (a payment).
This premium is what ensures coverage for you, the policyholder and the insured, in case of an insurance claim.
You must always remember that insurance is a business, and a very profitable one. Insurance is really gambling, just backwards. Yeah, when you gamble you are betting that something good will happen (you will get that lucky number) in order to get a pay out.
With insurance it is just the opposite, you are betting that something bad will happen (a car accident) in order to get a pay out. My point: insurance companies have the odds against you, and just like casinos they are turning record profits (see our chart on which insurance are making real money).
Insurance companies often increase those profits by paying less than they have to by reducing cost in different areas of the auto insurance claim. It is not unusual to see an insurance company trying to nickel and dime you (or your body shop, chiropractor, medical doctor, tow truck driver, rental car provider, etc.) on what is rightfully yours. Therefore, you need to know what are your coverages and insurance terms, and what do they mean. This page will explain in simple terms.
It is important to note that the objective of all insurance coverages is to indemnify the wronged party. Indemnification means “to put the person back in the position they would be if the accident never happened”. Basically make you whole again. This is obviously impossible since no one can make the accident disappear or make a bodily injury go away. The insurance company will try to put that person as close as possible to that position they were before by making monetary payments.
Most insurance coverages are targeted or designed to do that. To put the wronged party back in the position they were before the accident. But insurance companies use this concept against you. In other words, they will use it to tell you "the purpose of insurance is put you back in your place, not to make you better off, therefore we will depreciate everything broken in your car!"
To do this, state legislators have made it a law to carry certain insurance coverages, but your are only required to carry liability insurance. So when there is an insurance claim against you, then your insurance company covers that person (the claimant). Some states also require Personal Injury Protection and Medical Payments. However, remember that these are the bare minimum coverages. Every other coverage is optional.
Some important insurance definitions:
First Party: The person insured (the insured).
Second Party: The insurance carrier (not really referred to it as that).
Third Party: The person making a claim against you to your insurance carrier (the claimant).
Click below for an explanation insurance coverages and terms:
Insurance Clauses and Terms that you need to know about
Your policy will be filled with legal language that can be confusing. Insurance companies have very big underwriting departments (the people that sit and write these policies) so they can control every term of a claim. Also they would know what extra insurance coverages exist, if any.
I have included a list of the most common clauses and explained how they are used. In addition, there is a list of other coverages that are not classified like the ones above, but they are all over your policy. There are some concepts that although they are not in your policy, they will be applied by state law. I will note which ones they are when pertinent. The following is in alphabetical order (not order of importance or how they appear in your policy).
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