Insurance 101: Commonly used terms in Car Insurance

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Common Used Insurance Terms

Insurance is a topic that surprisingly many people have very little understanding of. This is due to the unfamiliar terms and the unique language used.

Car insurance is an integral part of owning a car or should be in case you are planning to purchase one.

Knowledge of the basics shows you know what you want. It also gives you confidence when talking to your insurance agents. In the long run, you might also avoid being duped. 

We have broken down several terms that are commonly used by insurance agents or used on a day-to-day basis in insurance companies.

Claim

Claim this is a formal request that you make to your insurance company. It will help pay for any damages to your car or in case of any incident.

You should submit all required papers which include:

  • An abstract acquired from the police
  • A filled motor accident claim form
  • Copy of driver’s driving license

All these are submitted to your insurance company to help in facilitating the handling of the claim. 

The insurance company may decide to do its own investigation. The waiting period is 30 days after the incident or accident.

Policy Holder

This refers to the person that has signed a contract with the insurance company and has paid for the cover.

The policyholder is also legally liable for payments. These include all payments to be made during the given amount of time proposed by both parties.

Cover 

This is protection given by an insurance company. The company legally agrees to pay fully the amount of money if something were to happen to your car. 

Comprehensive Car Insurance 

This type of insurance covers the widest range of risks to your car. It covers any damage that your car inflicts on a third party i.e. if your car caused physical injuries to pedestrians.

Secondly, it also covers any physical damage to your car i.e. in case of an accident, natural disasters like floods, fires that break out, or, in case your car is stolen among other risks.

Therefore, the cover is more pricey than other covers.

Third-Party-Only

Commonly referred to as TPO, this is the basic minimum coverage that one can insure their car with. Should anything happen to your car, it will cover only the people that are injured by your car. 

Insuring your car with this cover may be the cheapest, but you might end up paying way more if this happens. ie the total damages to your car may be more than what you pay on average for this type of coverage in a month.

Premium

This is the amount of money agreed by both the insurer and the policyholder to cover the car.

The payments are either made annually, after six months, or monthly depending on each company.

Failure to pay as agreed may result in the cancellation of coverage by the company. 

No Claims Discounts

These discounts are given to your premium. Usually, they are given if you do not make any claims for a period of time.

 Companies increase the percentage the more time passes. i.e If you have not claimed anything in a year you get a twenty percent discount. In two years it will increase to 30%.

In the case of second-hand cars, the points earned usually are passed down to the new owner of the car. Make sure to get good offers for this by doing your research on different insurers. 

Deductible 

This is the money you pay from your pocket in case of an accident or incident before the insurer begins to pay for the rest of the damages incurred. 

For example, if total damages are Ksh 90,000. Assuming your deductible is up to Ksh 30,000. You can pay any amount between Ksh 10,000 to Ksh 30,000 and the Insurer pays the remaining Ksh 80,000 (assuming your deductible is Ksh 10,000).

 Policy 

This is the contract drafted containing all the information of what covers you have paid for and those you have not.

A policy contains an outline of limits, details of the deductibles and premiums among other things.

Conclusion

Most people fall under these two categories:

  1. They are not car owners, hence don’t see the need to learn about car insurance.
  2. Second, are the car owners. They purchase only the basic required insurance by the government to avoid arrest or harassment by traffic officers.

These terms are just some of many that are commonly used.

Hopefully, they will help you maneuver and have a better understanding of the car insurance world. You will end up making the right decisions and get the right, affordable car Insurer.

Lilian Muhami