Car Insurance Terms Explained
Congratulations, you’ve bought your first car! So… what’s next?
Getting a car is a big responsibility, and with it comes another obligation: car insurance. The most important thing for you to know is that you’ll have to get car insurance when you buy a new car. As mandated by law, getting car insurance, even if it’s just the basic Compulsory Third Party Liability insurance, is required before you can register your car at the Land Transportation Office. In other words, you won’t get to ride your car if it doesn’t have insurance.
For legal-related stuff, expect that there will be terms and conditions involved. It’s the same for a car insurance policy. If you’re a first-time applicant, the terms included in a car insurance policy might be a bit confusing and overwhelming for you so it is important to research a lot before getting some. Don’t jump the gun! To help you out, here are some important terms related to auto insurance that you need to understand:
Auto or Car Insurance
This refers to the insurance contract that will cover or protect the insured against several liabilities or losses when the insured is involved with a vehicular accident.
This is the form that you’ll need to give to the insurance company when you apply for a car insurance. You’ll need to fill it out with your personal information.
This refers to an unexpected event that you might encounter on the road. It may lead to several incidents such as body injuries, property damage, or death.
The policy schedule shows in detail the coverage of your insurance. How much you have to pay for each and how much the company will cover.
If your car is insured based on its agreed value, it means that the amount that your insurance company is willing to give should it get damaged or stolen is already fixed.
This is the amount your car is worth before an accident. If your insurance policy is based on your car’s market value, it means that the insurance company will cover the cost for repairs or replacement if your car is damaged or stolen depending on a number of factors such as its make, condition, or kilometers travelled.
This refers to the amount of money that you need to pay for your car insurance policy.
This is the amount of money that you’ll need to pay straight out of your pocket before the insurance company covers the rest of your expenses.
This would refer to your request from your insurance company to cover your loss, or reimburse you from any expenses from the damages you’ve incurred based on the terms of your insurance policy.
This is the person who is covered by the insurance which protects them from certain conditions mentioned in the insurance policy. In other words, this is the person insured.
The third-party persons refer to anyone inside or outside the car in the event of an accident who isn’t related to the insured within a certain degree. For a complete clarification, here is a quote from Paragraph (c) of Section 386, Chapter VI of the Insurance Code of the Philippines:
“A third party is any person other than a passenger as defined in this section and shall also exclude a member of the household, or a member of the family within the second degree of consanguinity or affinity, of a motor vehicle owner or land transportation operator, as likewise defined herein, or his employee in respect of death, bodily injury, or damage to property arising out of and in the course of employment.”
On the other hand, a passenger is defined as:
“Passenger is any fare paying person being transported and conveyed in and by a motor vehicle for transportation of passengers for compensation, including persons expressly authorized by law or by the vehicle’s operator or his agents to ride without fare.”
In short, anyone who isn’t your relative or employee who is involved in the accident is considered as third party. Anyone inside the car who aren’t your family within the second-degree of consanguinity or affinity, let’s say your friends, are also considered as third party and therefore covered by the insurance.
Compulsory Third Party Liability (CTPL)
The Compulsory Third Party Liability insurance is mandatory car insurance that will cover the insured from liabilities from a vehicular accident which results to a third-party’s bodily injury or death.
Voluntary Third Party Liability
When you only have Compulsory Third Party Liability, the coverage of the insurance is only limited for up to P100,000 for the death, bodily injury, and medical expenses of third-party persons. Any amount higher than that will come straight out of your pocket. However, with Voluntary Third Party Liability, the excess will be covered by this insurance for up to a certain amount if the limit on the CTPL is already consumed.
Comprehensive Car Insurance
Comprehensive Car Insurance is insurance that provides more coverage on top of the basic Third Party Liability insurance. The coverage depends on the insurance provider, but the common inclusions covered may include loss, damages, or liabilities caused by accidents or malicious acts by third party persons.
Auto Personal Accident (Auto PA)
The Personal Accident Insurance can protect not only you, but your passengers in case you get in a car accident. This policy offers compensation on certain car accident results, but the coverage can depend on the insurance company. Some companies offer PA coverage which include accidental death, permanent or temporary disability, surgery, medical expenses, and funeral expenses.
Own Damage Car Insurance (OD)
This is a type of insurance coverage that covers theft and the damages done to insured vehicles. The scope of the coverage will depend on your car insurance policy. For example, the coverage on theft may only be limited on factory-made parts, as some insurance companies may not cover stolen accessories.
Fire and Theft Cover
This is a car insurance inclusion that will cover damages on your vehicle that are caused by fire or theft. For instance, if your car has been stolen or has been damaged accidentally by fire, then the insurance company shall pay for the expenses up to the amount stated in your policy.
Acts of God/Nature (AON)
This is an optional type of insurance that provides coverage to the insured vehicle against damages done by things that cannot be prevented by man. Meaning, your vehicle is covered if it has been damaged by natural disasters like earthquakes, floods, or typhoons.
Loss of Use
This is a type of coverage that allows the insurance company to provide you with transportation compensation while your car is being repaired.
Unnamed Passenger Personal Accident Insurance (UPPA)
Personal Accident for Unnamed Passenger means that the driver and the passengers of the car will be covered in the event of death or bodily injuries sustained in an accident.
Road Side Service
This is an additional benefit offered in a car insurance that will provide you roadside assistance like towing and other services if you break down in the middle of the road.