The world of car insurance terminology can be an incredibly confusing yet important set of words to learn. Since there are so many different types of insurance to choose from, it’s important as a smart shopper to learn every piece of terminology possible in order to receive the proper coverage for them and their family. Not knowing which type of insurance you are required to carry can be the difference between being covered in case of an emergency and being financially responsible if the unthinkable should happen. Below is a list of important car insurance terminology and what it means to you as a buyer.
Bodily Injury Liability (BI) – The coverage of other physical injuries of which you are responsible. This type of insurance is required in every state and provides legal representation in the event that a lawsuit is brought against you. Insurance claims from another driver’s insurance company will cover medical bills, loss of income, or other physical problems cause by you as a driver. Different states have a different amount of required bodily injury liability insurance, and it’s important to see what your state requires. It’s also a wise idea to purchase a larger amount of liability insurance to further protect you against lawsuits filed by other drivers.
Property Damage Liability – Just as the car insurance terminology would suggest, this type of insurance protects you against lawsuits filed over damage to someone else’s property. This type of car insurance also covers any damages or other personal property that may have been part of an auto accident. Just like with bodily injury liability insurance, it’s a good idea to purchase this type of insurance, as property damage can cost quite a pretty penny to repair.
Collision Coverage – Quite possibly the most important type of insurance, collision coverage repairs damages to your car when it hits or is hit by another driver. This type of insurance relies on another incredibly important piece of car insurance terminology called a deductible. A deductible is the amount of money that the insured driver pays out of their own pocket to help cover damages to the car in the event of an accident. By choosing to pay a higher deductible, the amount of money the driver must pay per month or the ‘premium’ remains lower. Safe drivers know that an accident can happen at any time without warning, so collision coverage is an important type of insurance to carry.
Deductible – A deductible is the amount of money that insured drivers are willing to pay out of their own pocket for damages to their vehicle. Car insurance companies are a business first and foremost. If you are costing them a lot of money as a driver, they will require more money to insure you. By selecting a higher deductible, drivers are able to keep their monthly premiums down. This is a great option for safe drivers who primarily carry insurance as a safety net. In the event of an accident you will be paying more for damages, but your rates will be lower on a monthly basis.
Premium – The amount of fixed money that your insurance company requires you to pay to remain insured. This number depends on a myriad of different elements and can change over the course of time. Many different companies have discounts in premiums depending on how much you drive your previous driving record, your marital status, and many other personal traits. It’s important to ask questions about premiums and decide which company fits your nature as a driver and is within your budget range.
It’s important to know basic car insurance terminology in order to select the right company to fit your and your family’s needs. The more you research the topic and educate yourself on the caveats of car insurance, the better equipped you will be to find the right coverage plan at the right price when the time comes. For those who are just learning about car insurance, the idea can be a little overwhelming at first. With the right amount of dedication and research, however, one can gain the knowledge to properly protect their family and find an insurance plan that fits their budget.
