TheMillionDollarBrain

Getting Car Insurance? Make Sure You Know These Terms

Listening to your insurance agent speak about the different types of coverage available using all types of insurance terminology can be a little overwhelming. So can trying to go through your policy without an understanding of some of the more common insurance terms. Make it easier on yourself by familiarizing yourself with the following key car insurance terms:

•   Bodily injury liability – A type of coverage that will protect you if you are responsible for a car accident that has injured or killed another person. Bodily injury liability coverage will cover the medical costs of the person injured, help to fund your legal defense if taken to court and help to pay for any legal judgments made against you.

•   Collision coverage – A type of coverage that will pay for the damages caused to your vehicle due to a collision with either another vehicle or an object.

•   Comprehensive coverage – A type of coverage that pays for any damages caused to your vehicle as a result of any event other than a collision. For example, damages caused by fire, floods, theft, vandalism or windstorms. 

•   Declarations page – The summary page of your car insurance policy. It lists the types of coverage you have chosen, the limits for each type of coverage, the costs of each coverage, the vehicles that the policy covers and all other applicable information.

•   Deductible – The amount that you agree to pay out of your own pocket for damages from a loss or accident. Once you have paid that specific amount, your insurance company will pay for the rest of the costs resulting from that specific incident.

•   Gap insurance – A form of coverage that will protect you financially if you total a new vehicle. New vehicles lose a large percentage of their value as soon as you drive them off the dealership lot. Because of this, the insurance company will only cover you for the used value of the car. Gap insurance will help pay the difference between what you owe the dealership and the used value paid out by the insurance company if you total the car.

•   No-fault insurance – Only certain states have no-fault insurance. No-fault insurance is meant to reduce lawsuits. It means that drivers cannot sue one another unless someone is seriously hurt. If you are in an accident due to the fault of another driver, it is your insurance company that will pay the claim instead of the other driver’s insurance company, as well as vice versa. 

•   Premium – The monthly payment that you make to the insurance company in order to be insured. 

•   Property damage liability – A coverage that will pay for the damages if your vehicle damages another person’s vehicle or property.

•   Uninsured motorist coverage – There are two forms of uninsured motorist coverage: bodily injury and property. These forms of coverage will pay for any damages or medical bills as a result of being in an accident caused by a driver who is either underinsured or uninsured. 

Familiarize yourself with these auto insurance terms so that you know exactly what you are getting when you are purchasing car insurance.