7 Auto Insurance Terms You Should Know Before You Select an Auto Policy
Auto insurance is the one type of insurance policy every single driver is required to have. But often, we don’t have a true understanding of what is covered by our policy until something happens and we need it. To make sure that you are getting the coverage you need, you will need to understand these 7 auto insurance terms.
- Deductible: your deductible is the amount you pay out of pocket in the case of a loss or damage to your car. If you have a $500 deductible and the cost of repairs after an accident is $2,000, then you would pay $500 and the insurance company would pay $1,500. If your deductible is increased, you will see your premium go down and if you reduce your deductible, your premium will go up.
- Premium: the premium is how much you pay your insurance company to keep your policy active. Many factors go into your premium: your age, gender, driving record, credit history as well as your job.
- Comprehensive Coverage: Although this coverage is often mistaken for all-inclusive coverage, comprehensive coverage is actually insurance that covers you for damage or loss not caused by a collision. This means natural disasters or something like theft or vandalism.
- Collision: If you get into an accident, collision coverage will pay to fix or replace you’re your vehicle. This coverage protects you if the damage or loss if caused by another driver’s vehicle, as well as damage from hitting something else like a tree or pole.
- Liability: Liability insurance covers bodily injury and property damage when you’re found to be at fault in an accident. The state you live in will set minimum amounts for the liability coverage you are required to carry, but you can carry higher limits, and it is recommended that you do so.
- Occasional Driver: If you let other drivers use your car sometimes, adding occasional driver coverage will protect your car should they get into an accident. Typically, insurance companies will extend this coverage to specific occasional drivers that you list in your policy.
- Personal Injury Protection: Personal injury protection (PIP) coverage will cover the medical or funeral expenses of the insured person, as well as lost wages and other people in the vehicle and pedestrians who may be hit by your vehicle. This limit is different from your liability limit and typically covers 80% of the aforementioned expenses.