Car Insurance Terminology Explained

Not only is car insurance required by law in practically every state, but it is also a wise way to protect yourself, your family, and your assets in the event of an accident. However, car insurance terminology can baffle even the most astute person when scanning an insurance policy or shopping for a new insurance carrier. Understanding the language of car insurers can not only help you to tailor a policy to fit your needs, but it can also keep some money in your pockets. Here we will examine some of the most commonly used terms you will find in a car insurance policy.

Deductible: This term refers to the amount that you are required to pay towards any damages sustained in an auto accident. Your car insurance will cover any costs beyond this dollar amount. It should be noted that the size of your insurance policy’s deductible can substantially affect what you pay for your car insurance.

Bodily Damage Liability Coverage: If you are the fault of an accident that causes injury to others, this type of coverage helps protect you from bills such as medical expenses for bodily injury, compensation for a loss of income, funeral expenses, legal fees, and other various expenses.

Property Damage Liability Coverage: If you are of the cause of an accident that results in damage to the other driver’s property, this type of coverage can help pay for any structural damages incurred, vehicle repair or replacement. This coverage can also keep your assets safe in the event that you are sued.

Collision Coverage: This coverage helps to protect your automobile if you are in an accident that involves another car or an object such as a tree or a lamp post. It also helps to pay for repairs or replacement up to the Actual Cash Value (ACV) of your car which takes into account things like the age of your car and the wear and tear on it.

Comprehensive Coverage: This type of coverage protects your car in a situation that does not involve another driver or vehicle. For example, comprehensive coverage can protect you when your vehicle is damaged by vandalism, a storm, an object falling on it, or a collision with a large animal. This type of coverage also includes broken or damaged windshields.

Uninsured Motorist Coverage: This coverage may pay for injuries or property damage sustained in an accident with an uninsured motorist or, in some states, an unidentified driver. Depending on the policy, this may also cover underinsured motorists who have insufficient coverage to pay a claim.

No-fault Insurance: This coverage may pay for your medical treatment, any lost wages, and various other accident-related expenses no matter who is at fault.

SR-22 (Certificate of Financial Responsibility): This is a certificate required by a state to verify that a driver is maintaining liability coverage car insurance. A person who has a history of DUI, reckless driving, or uninsured motorist offenses will be required to obtain this certificate from his or her car insurance company.

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