Terms you need to Understand when Buying Auto Insurance

The world of auto insurance can seem very confusing, making it easier to just go with what an agent suggests for coverage. Learning the auto insurance lingo may be a tedious chore, but it just might help you save some money and hassle in the future. Knowing what the terms mean can help you make an informed decision on what policy and even company is right for you. 

* Premium

This is the amount you pay every time you receive a bill from the insurance company. By making your timely payments, the insurance company is obligated to pay claims made according to the terms of your policy.

* Deductible

This is the amount of money you pay before your insurance company will kick in and pay when you file a claim. In other words, if you are involved in an accident, you pay a certain amount out of your own pocket and then your insurance company will pay the remaining amount to cover damages. The amount of the deductible usually corresponds to how much your premium is; the lower your monthly payment is, the higher the deductible. 

* Bodily injury liability

What this means is that if someone is injured or killed by your vehicle, you are protected. This coverage pays for the other party’s medical expenses and can even cover your legal expenses (depending on the dollar amount of your coverage) should you be sued by the other party or their next of kin. This coverage does not take care of you or your passengers medical expenses in an accident. 

* Collision coverage

This covers damages to your vehicle if you are hit by another vehicle or object. The important thing to know about this coverage is that if you own an older vehicle, the coverage may not help very much because it only pays the cash value of your vehicle.

* Property damage liability

This covers damages to a vehicle or property that your vehicle damages. It does not cover damages to your vehicle. In some instances, depending on the company, there is a version of this coverage that protects you against legal claims filed as result of the damages.

These are just some of the many terms you should understand when shopping around for auto insurance. The biggest reason you want to know these terms is to avoid costly mistakes in the unfortunate event of an accident or other claim involving your vehicle. For example, it is unwise to assume that since you are paying for bodily injury liability, that your medical expenses will be covered as well as the other people involved in the accident.

If you are expecting your medical bills to be covered and they are not, you will not only have injuries to recover from, but also medical bills you are responsible for paying yourself. It all comes down to knowing what you are paying for each month, and what the fine print of your policy says.