The Insurance world is filled with special terms or expressions that only a few outside of it might truly comprehend. It might be difficult as a policy holder to understand what is really being communicated by the Insurers when they use these jargons that fly right over the top of your head. Thus, we bring to you a comprehensive decoded list of jargons used in the space of car insurance, which can aid you to better understand your Insurance policy and communicate effectively with your insurer.
Insured Value: This is the amount of money that your car is valuated at. Suppose you buy a car worth Dh 90,000. Your insurer might only offer you a cover of up to, let’s say, Dh 80,000. This means that even if your car is worth more, you would get only Dh 80,000 if you write your car off. Most people tend to under-insure their car to save some money on their insurance premiums. However, it is always advisable to Insure your car for as much as its true worth is.
Adverse Selection: Though this is a term that you would not encounter as much while applying for insurance, it is worthwhile knowing what it really stands for. Insurance companies keep a tab of the different kinds of people buying their insurance policies. To bring about an analogy, consider the case of health Insurance. A random 20-year old healthy person might think “Why should I pay Dh 200 every month towards Insurance when I am fit and fine. I don’t need a policy”. On the other hand a 70-year old ailing person might feel, “Wow. I pay just Dh 200 a month and all my bills would be taken care of. I am definitely buying the policy”. This kind of “adverse selection” by the population might put the Insurers at great risk of incurring huge losses as they must make frequent pay-outs towards claims. Thus Insurers carefully analyse the profile of a customer like driving history, traffic records and other factors while selling insurance policies.
Agency Repair: Authorized car dealers and service centres usually charge higher than others for spare parts and servicing of cars. So, if you want an Insurance cover that pays for such services, you would have to shell out a little more for your policy.
Excess: While making a claim, the entirety of the amount quoted by the service centre for repairing your car will not be settled by the Insurer. A small amount of money should come out of your own pocket, (called as ‘Excess’), before your Insurance kicks in. However, you can control this amount by choosing to pay a higher premium.
No claims discount: Suppose that you have not made a single Insurance claim in the past year. Your Insurer acknowledges this fact and provides you with a discount on your premiums for the next year. This is called as a ‘No-claims discount’.
Third Party – Liability Insurance: This is the minimal form of Insurance required for any vehicle. Through this Insurance, the provider pays only for damages to a third party caused by your car. Damages to your own car will not be covered. Every other form of insurance, such as comprehensive policy, comprehensive with add-ons, etc., builds on top of the Third party-liability insurance.
Depreciation: Your car’s insured value will not remain the same for the entirety of the period for which you wish to insure. Every year, the car will be devaluated by a fraction of an amount keeping in mind the age of the car and the associated increase in maintenance of the vehicle.
Black box: Although not fully implemented in the UAE, the Blackbox is a device that would be onboarded on your vehicle by the insurer to measure how you accelerate, brake and monitor other driving habits. This will in turn determine future aspects of your policy.
Foreign Extension: If you wish to keep your car insured even while you drive out of the country, you must purchase the foreign extension add-on of a policy for an extra-cost.
Indemnity: It is the basic principle by which an Insurance holder is put at the same financial position as before the accident had occurred.
Modification: You might have made modifications to your car such as to the suspension systems, wheels, exhausts, windows etc., and these will not be traditionally covered by the insurance company. The modifications will have to be declared to the company before you purchase the policy.
Annual mileage: This is the number of miles that your car is expected to cover in a year. This number in turn affects the costs of your policy.
This article covers only the major jargons used by Insurance companies. We advise you to read the policy document and refer other sources to fully understand all the terms and conditions of the policy. Happy Motoring!