The insurance industry, just like any other profession, is full of jargon and terminology that many outside the field don’t fully understand. The good news is that the average person doesn’t need to know EVERY word we use in the industry, so long as they have an agent who can break down the terminology for them.
However, there are a few phrases and terms that we suggest being familiar with, even if you aren’t an insurance broker.
During the next few weeks, we’ll go over a handful of insurance terms that YOU should know.
Here’s our first term.
No-Fault – One of the most commonly misunderstood terms in insurance. Truly, the term is a misnomer. “Regardless of fault” would be more appropriate. Here in NY State, we have Personal Injury Protection (PIP) as part of our state-mandated auto coverage. It provides a minimum limit of $50,000 (although we recommend you purchase higher limits) to cover you and your passenger’s injuries and lost wages in the event of an auto accident. It does this regardless of who was at fault. Your policy pays for you; meanwhile, if there was another individual involved in the accident, their own policy applies to them. This is an example of no-fault insurance because it pays out regardless of who caused the accident.
We often hear from folks that “I shouldn’t be charged any extra on my auto policy for my loss history because they were no-fault claims”. They don’t realize that no-fault doesn’t refer to whether you were or were not at fault. The truth is that a no-fault claim means that there were injuries that your policy paid for… regardless of fault.
Tune in next week for the second of Four Insurance Terms You Should Know!