For the average person, dissecting their automobile insurance policy is about as easy as reading stereo instructions backwards when written in a foreign language. There are a myriad of different policies, premiums, deductibles and forms galore for you to sift through any time you are purchasing a new policy, or even if you are just making adjustments to your current policy. Because of this, it’s important to adopt (at the very least) a rudimentary understanding of car insurance terms to better prepare you for your next adventure in the automobile insurance industry.
Liability coverage
Liability covers you in the event you are at fault in an accident. It’s the amount paid to the other party in the accident to cover damage to their property and/or medical claims as a result of a collision. It is important to note liability coverage does not cover damage to your personal property or cover any healthcare you might need as a result of an at fault accident.
Personal injury protection
Personal injury protection, more commonly known as PIP, covers your healthcare costs (as well as the healthcare costs of anyone in the car with you) in the event that you are injured in a collision. Some PIP policies will include coverage to make up for as much as 80 percent of your lost wages, in the event that you need time off after a collision. Coverage amounts and limits vary, based on policy selection, as do most other elements of your insurance coverage, but having an extra hedge of protection never hurt.
Uninsured or under insured motorists’ coverage
In states where the number of uninsured or under insured drivers is high, this coverage becomes non-negotiable, but protects you in the event that you are a victim of a hit and run, or in the event that you have an accident and the party at fault doesn’t have enough (or any) insurance. While this coverage does boost your premiums, many consumers see it as a necessary evil, and a type of coverage that helps quite a bit in the wake of most accidents.
Collision coverage
Your collision coverage is the pre-set amount your insurance company dictates to help you either repair or replace your car in the event of an accident, regardless of who is at fault. When it comes to your collision coverage, you are in the driver’s seat when it comes to the amount of coverage and the deductible – the amount you pay when you need to use this coverage. Typically, deductibles range anywhere from $250 to $1,000, depending on the coverage amounts and limits you set. The higher your deductible, the lower your premium and vice versa.
Comprehensive coverage
Comprehensive coverage covers the cost to repair or replace your vehicle for any reason other than an accident. This sort of coverage typically includes hail coverage, theft or various other scenarios that result in damage to your vehicle when it is not actively in use. Just like collision coverage, the amount of coverage and deductible are determined entirely by you.