General Auto Insurance Terms

When you are looking to find the best possible coverage and most favorable premiums, then understanding auto insurance terms will be a key element of this effort. The more you know and understand the car insurance industry jargon, the better prepared you’ll be to effectively evaluate and compare the various policies so that you can make the right choice for you own unique needs.

In an ideal world, all car insurers would provide simple to understand, up front information so that you would be able to quickly and easily determine which policy is ideal for you. However, this, unfortunately, is not the case as insurance companies – like any kind of business – are operating for the primary purpose of making a profit.

Therefore, it’s up to you to build a base knowledge including understanding auto insurance terms and concepts, to prepare yourself. This, in combination with the advice and assistance of an insurance agent you trust, will be invaluable to making the best auto insurance choices.

Use the following terms to get you started:

• Deductible – this is also sometimes referred to as the excess. It is the amount that you will pay toward a claim before your insurance company pays the rest.

• Collision insurance – an optional form of coverage that protects you against damage to your vehicle when you have been in an accident, regardless of who was at fault, you or another driver.

• Comprehensive coverage – this protects you against any incidents that are not a collision, such as theft, fire, scratches, vandalism, broken windows, and other similar events.

• Liability insurance – essentially, this is a form of transference of risk, which protects you not only against losses that could arise as a result of losses from third parties, and from legal liability should a third party be injured while you are driving.

• Underinsured and/or uninsured coverage – this is an important form of coverage that protects you if you are involved in an accident with someone who is not insured or who does not have enough insurance, so that you can make sure that you are still able to make a claim.

• Rental Car Reimbursement – when your car is in the shop for a covered loss, this coverage usually pays a daily benefit. Example of this, $30 per day or $50 per day. This coverage will not kick in if you car is in the shop for maintenance issues.

• Medical Payments – This coverage pays a set benefit amount per person in your vehicle no matter who is at fault for the accident. This is optional and may work differently in different states. With California auto insurance, this coverage usually has two options, primary or secondary. Primary will pay no matter what your health insurance covers or not and secondary will only kick in after the health insurance pays out (secondary medical payments is lower in cost than primary).

• Claim – this is the request that you complete in order to ask the insurance company with which you have a policy, to cover the costs associated an incident covered by that policy.

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