Common Terms Related To Personal Automobile Insurance

The following terms are important to know when shopping for automobile insurance:

Bodily Injury/Property Damage Liability – Nevada law requires that you carry liability insurance. These coverages protect you if you injure someone else or damage someone else’s property while operating your vehicle. This coverage would pay damages on your behalf to the injured party. To activate these coverages, you must be legally liable for the injuries or damages.

Collision – This coverage protects against damage to your vehicle resulting from a collision, regardless of who is at fault. It provides for repair of the damage to your vehicle or a monetary payment to indemnify you for your loss. If the other driver is at fault, your insurance company may have a legal right to seek reimbursement from the other driver or the other driver’s insurance company for payments made to you under this coverage.

Comprehensive – This insures you against theft or other damage to your vehicle resulting from causes other than collision. This can include wind damage, falling objects, fire, flood and vandalism. Collision and comprehensive coverages are subject to a deductible that you, as the insured, would select. Other coverages that may be sold include towing, rental/reimbursement and mechanical breakdown.

Credit-Based Insurance Scores – A credit-based insurance score, sometimes known simply as an insurance score, is a number, based on certain aspects of your credit history that is used by some insurance companies to help determine your insurance premium.

The credit-based insurance score has no relationship to credit scores used by lenders (such as the FICO credit score) that are typically used to evaluate the credit-worthiness of a borrower. Many insurers use their own methods to determine your credit-based insurance score, which means there can be a wide variation in the impact of a credit-based insurance score on your premium from insurer to insurer. Other insurers use credit-based insurance scoring models developed by third-party vendors, such as Fair Isaac Corporation, LexisNexis and TransUnion.

Deductible – A deductible is a portion of a covered loss that is not paid by the insurer. The deductible is subtracted from the amount the insurer would otherwise be obligated to pay you as the insured. The deductible amount is selected by you. Generally, a higher premium is charged for a lower deductible and lower premium for a higher deductible.

Some insurers in Nevada offer a “vanishing deductible.” For each year you stay claim-free, the insurer will reduce your deductible amount without increasing your premium. Effectively, the insurer, and not you, will pay the “vanished” deductible if a loss occurs in future.

Diminution in Value – This refers to the possible reduced value of your vehicle as measured before a loss to the vehicle and after the repair of that vehicle. The idea is, all other things being equal, that a vehicle that has never been in an accident may, in some cases, be considered more valuable than a fully repaired vehicle. If your insurance policy provides for collision or comprehensive coverage under which your vehicle is being repaired, the loss to your vehicle will be measured by the language in the policy, and may not include any diminution in value. For claims against the negligent parties’ property damage liability policy, such loss of value may be compensable under some circumstances.

Indemnify – To indemnify means to restore a party who has had a covered loss to the same financial position that party held before the loss occurred.

Medical Payments – This coverage pays for reasonable and necessary medical expenses, without regard to legal liability, resulting from accidental bodily injury while operating or occupying an insured vehicle or being struck as a pedestrian by a motor vehicle. This “MedPay” coverage is often purchased in nominal amounts, such as $1,000, to provide a means for quick payment of minor medical bills without having to deal with the courts or other insurance companies. An insurance company must offer this coverage because of Nevada Revised Statutes (NRS) 687B.145 (3), but you are not required by law to purchase this coverage.

Uninsured/Underinsured Motorist – This covers you, your resident relatives and occupants in your insured vehicle if you or they get injured in an accident in which the owner or operator of another motor vehicle is legally liable and does not have insurance (uninsured) or does not have enough insurance (underinsured) to pay all of your loss. By law, your insurance company must offer this coverage to you in an amount equal to your own liability limits (NRS 687B.145 (2)). However, you do not have to accept the offer. This coverage does not pay for damage to your motor vehicle.

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