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November 9, 2017

Decoding 10 Common Car Insurance Terms

Insurance uses a lot of terms and phrases that may be confusing. It’s important to understand the key terms so you’ll know exactly what you’re getting, what’s covered, and if you’re getting a good deal. Here are 10 common car insurance terms that you should know.

#1. Insured Value
Insured value is the total amount the insurance company will pay if your car is damaged beyond repair. Insurers calculate the rate of depreciation (depending on the age of the vehicle) to determine the value they will give for your car aka insured value.

#2. Deductible 
A deductible is the amount you pay out before the insurance company covers the rest of the claim. For example, if the total claim is P 10,000 and the deductible is P 4,000, then you pay the P 4,000 and the insurance covers the remaining P 6,000.

Usually, car insurance deductibles depend on the policy and the company and may come in as a percentage of the total claim or a minimum peso amount, whichever is higher. It’s important to understand how much you’ll be shelling out in case of an accident.

#3. Premium
This is the amount paid to the insurance company for your policy.

#4. Own Damage and Theft
This covers loss or damage to the car due to theft and accidents including overturning, falling, and fire.

#5. Acts of God/Nature 
This refers to any event in which humans have no influence or control over, be it cause or effect. Examples are floods, earthquakes, wildfires, hurricanes, volcanic eruption, typhoon, and tsunamis.

#6. Compulsory Third Party Liability (CTPL)
Also known as the compulsory motor vehicle liability insurance, this is a requirement when registering your car at the Land Transportation Office (LTO). It protects you from indemnity or financial obligations to a third party who was injured or killed by your car.

Do note that this won’t cover you or anyone else in your car (Refer to Auto Personal Accident).

#7. Excess Bodily Injury
When you are found legally responsible for a car accident, the excess bodily injury coverage will pay, in excess of obligations beyond the CTPL coverage, for any injuries associated to the other person or people involved.

Just like CPTL, this doesn’t cover you or anyone else in your car (Refer to Auto Personal Accident).

#8. Property Damage
This covers the damage you cause to another person’s property while driving.

#9. Auto Personal Accident 
This can provide compensation for death or serious injury (such as losing a limb or permanently losing sight in an eye) for the driver or any of his companions in the car as a result of an accident they caused.

#10. Riot / Strike / Civil Commotion
This refers to loss or damage directly caused by strikers, locked-out workmen, and riots of various kind.

Be sure to ask your insurance agent or broker for an explanation whenever there’s a term you’re unclear of. After all, it’s your insurance and you don’t want any surprises.


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