Car insurance is a particularly complex topic. Nevertheless it is very important to know the details in order to make sure you are getting the best coverage for your vehicle. This article will introduce some important terms you may not know about that can affect the nature of your car insurance policy.
Among different terms, perhaps Excess is one of the most important. It is also the most common and something that people ask most often as well. Excess is the amount of money you have to pay before your car insurer pays out the benefit to you. As such, the insurance premium will go down when you increase your excess. Conversely, premiums get more expensive when you opt for a lower Excess.
Other than Excess, you have to learn about No Claim Discount (NCD). This is also known as the No Claim Bonus. If you have made no claims in the past one year, insurers will reward you by giving you a discount on your policy. Each year, your NCD increases by 10% will it reaches the maximum of 50%. However if you get into an accident and you need to make a claim, your NCD will drop.
For example, if you have an NCD of 50% and you made a claim, your NCD will drop to 20%. Supposing your NCD is 40%, your renewal NCD will become 10%. Below 40%, your NCD would have dropped to 0%. This is a guideline that all insurers abide by.
Having said this, it does not mean you have to kiss goodbye to your NCD each time you get into an accident. If you have a maximum of 50% NCD, you can buy an NCD protector for a small fee. This rider will help preserve your NCD value even after you made a claim. This is something like insurance for your NCD. This is definitely worthwhile, considering the price of an NCD protector is only 10% of the premium. In case you get into an accident, you have to sacrifice a lot more for the next 3 years.
A final term to introduce in this article is Policy Coverage. Each insurer's coverage is different and you have to find out what features and benefits are available. The Policy Coverage is defined in the policy wording, a document that is binding for both the insurer and the insured. By referring to this document, you will be able to find out what risks are covered and what are not. Also, there are conditions to your car insurance coverage. This means risks may not be covered during exceptional times or when there are violations of certain rules.
