4 Auto Insurance Terms To Know

Posted on: 12 October 2019

If you own and operate a vehicle, you will need to purchase automobile insurance. In most states, a minimum amount of coverage is required by law. Therefore, educating yourself on this important type of insurance is imperative. With this guide, you will learn a few essential terms to know and fully understand when securing auto insurance.


A deductible is a confusing term for most people even though it is a common term associated with all of your different insurance policies — homeowners and health included. Basically, the deductible is the amount of money you need to pay out of your own pocket before the insurer pays on the claim.

If you file a claim for damage after an accident, your deductible must be paid before the insurance company pays the rest of the claim. The amount of your deductible depends on your specific policy and coverage. In most cases, lower premiums will mean higher deductible, so you will need to decide which is more important to you.


Liability coverage is a key part of your auto insurance policy. If you cause an accident that results in damage to another vehicle or physical injuries that affect the other driver and their passengers, your liability insurance will cover the claim.

Liability insurance is the minimum required amount of coverage you need to have. There are states that allow you to show financial responsibility proof, showing you can handle the cost of making repairs or paying for medical costs if you are involved in an accident and do not have liability coverage.


Collision coverage is also important to have if you own and operate a vehicle. This type of coverage insures the cost of any damages to your vehicle if you are involved in a collision.

The cost of having collision depends on a few factors, including your vehicle's value and how costly it would be to make repairs. In addition, the insurance company may factor in your driving record, since traffic violations and multiple accidents mean you are a higher risk to insure.


Finally, you need to understand comprehensive coverage. Comprehensive coverage will pay for damages to your vehicle that are caused from other factors.

If your car is damaged by wind, hail, or a tree limb that falls on the vehicle, the comprehensive part of your auto policy will pay for the repairs.

It is important to note that not everyone has comprehensive, or full, coverage on their vehicles. Talk to your insurance agent today to determine if it will be a smart investment.