Auto Insurance Terminology

Auto Insurance Terminology You Should Know

Are you confused about the different auto insurance terminology thrown at you? We know it can get confusing, but this is why we are going to go over everything to make it easier for you. Knowing the definition of each term is important because not understanding the difference between each coverage may cause you to choose the best one fit for your needs at the best rate. Let’s go over the auto insurance terminology you should know.

What is a deductible?

A car insurance deductible is how much the driver will pay before the insurance provider pays for the rest of the claim. How much you pay depends on the policy and the company. You can get a 5-minute quote with our team of experts to see how much you can save on your policy. The typical range of deductibles can land anywhere between $0 and $1,500.

An important thing to note is that car insurance deductibles and premiums are correlated. Choosing a high deductible for your car insurance policy indicates it will have a low premium. On the other hand, choosing a low deductible means a high premium.

A high deductible can help you save money on auto insurance every month. However, you will have a heavy bill to pay if you file a claim.

What is a premium?

A car insurance premium is the sum of money you pay to an insurer so they grant coverage and pays for any claims you might have to make.

Therefore, when someone says the word rate in the insurance world, they are talking about the premium. These two terms are used interchangeably.

Most people pay car insurance premiums yearly, every six months or monthly. Also, some insurance companies offer discounts to people who prepay their premiums.

Do you think you’re paying too much for auto insurance? Get your 5-minute quote to get your best rate or premium.

What is bodily injury liability?

Bodily injury coverage protects you if you cause a collision that hurts or kills someone. It does this by financing your lawful protection and covering judgments against you if you’re prosecuted. It further pays for the lost payments or medical costs of anyone you hurt in a crash. However, bodily injury coverage does not protect you or anyone else in your vehicle.

What is collision coverage?

The collision coverage part of your auto insurance policy protects your car if you damage it by hitting another car or object. Therefore, collision payouts tend to be restricted to the cash value of a car. If your vehicle is a little bit older, it is likely you may want to disregard this part of your insurance place.

In addition, state law does not require you to have collision coverage, but lenders often do.

What is comprehensive coverage?

Comprehensive coverage guards you if something other than a collision damages your vehicle. Some of the places it covers:

  • Broken windows.
  • Damages from unprecedented objects.
  • Damages that come from hitting an animal.
  • Natural disasters like hail, hurricanes, earthquakes and tornadoes.
  • Weather damage.
  • Theft.

Comprehensive coverage is also recognized as physical damage coverage or Other-Than-Collision (OTC) coverage, so keep an eye out for those terms while shopping for this type of car insurance.

What is property damage coverage?

Property damage auto insurance protects you if your car damages another person’s car or assets. This can also protect you from lawsuits related to damaging someone else’s car or property. However, a lot of insurers do not offer and sell this coverage.

Every state except New Hampshire requires drivers to carry a set amount of property damage car insurance coverage. Something to consider is that the requirements for this type of coverage are surprisingly low because they have not been updated in many years.

What is no-fault insurance?

No-fault insurance includes your medical bills after a vehicle accident, regardless of whether you caused the collision or not.

What is medical payments coverage?

Medical payments car insurance covers part of your medical bills and funeral costs if you’re injured or killed in an accident. This also includes any of the passengers in your vehicle affected by the accident. This kind of insurance coverage also covers you and/or loved ones included on your policy if a car ever hits you while you’re walking or riding a bike.

What is personal injury protection?

Personal injury protection also protects you if you’re injured in an accident. This insurance coverage includes:

  • Medical bills.
  • Treatment costs.
  • Loss of wages.
  • Child care expenses.
  • Funeral expenses.

Depending on wherever you live, personal injury protection might also protect loved ones and/or other passengers who are injured in an accident. It could potentially cover pedestrian injuries, too. It’s important to call your local agent to verify how covered you are.

What is uninsured motorist coverage?

Uninsured motorist coverage protects you if another driver hits you and doesn’t have any liability coverage. This is important to keep in mind, because if you’re in a collision with an unprotected driver, and you don’t have uninsured motorist coverage, you will presumably have to pay your repair and medical bills out of pocket. Some states require drivers to obtain at least the smallest amount of uninsured motorist coverage.

What is underinsured motorist coverage?

Underinsured motorist coverage protects you if another driver hits you and has some liability coverage, but not enough of it to cover your medical or repair bills.

Depending on which state you call home, you might need to buy at least some underinsured motorist or UIM coverage. You may even need to buy both UM and UIM.

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