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Understanding 5 Types of Car Insurance Coverage

If you feel like you need to take a foreign language course to "speak insurance" don't worry, you're not alone! But, you need to at least understand the basic auto insurance terms because they spell out what you are and aren't covered for in your policy. Here is a translation of some basic insurance lingo:. You will see three numbers when you are buying liability coverage. Most states require a mandatory minimum amount and insurance companies offer the option to purchase more. In other words, coverage in case you cause an accident where there is either physical or property damage to other people.

You will see three numbers when you are buying liability coverage.

Most states require a mandatory minimum amount and insurance companies offer the option to purchase more. In other words, coverage in case you cause an accident where there is either physical or property damage to other people. This is a general term that covers bodily injury BI liability and property damage PD liability.

See explanation of limits, above. BI pays for injuries to other people when the insured vehicle's driver is legally at fault. Optional coverage for when your car is damaged as a result of colliding with another object—a brick wall, for example, or a rollover.

It also can come into play if you hit a pothole that severely damages your car. This insurance applies only to your car. It doesn't cover whatever the car collided with that's what your property damage liability is for. According to data from the National Association of Insurance Commissioners, 72 percent of insured drivers carry this coverage. Optional coverage for when your car is stolen or damaged in ways that don't involve a collision.

Examples include: The price of comprehensive insurance is affected by the risk of loss, meaning the likelihood that an insured car will be stolen or damaged, and the car's value at the time of the loss. According to data from the National Association of Insurance Commissioners, 77 percent of insured drivers carry this coverage.

The first page of the insurance policy that generally includes your name, address, the insured property, its location and description, the policy period how long the coverage will be in forcethe amount of the insurance coverage, the premiums and additional specific information provided by the insured.

Auto Insurance Terms You Should Know

If you can afford to carry a higher deductible on collision and comprehensive coverage, you can substantially lower your costs. Tangible, out-of-pocket expenses, such as medical expenses, rehabilitation expenses, lost wages and essential services. Typically, this refers to the law that requires motorists to have auto insurance, however most states also permit a bond or cash deposit as evidence of the ability to pay for negligence in causing losses to others from the operation of a motor vehicle.

In 47 states and the District of Columbia, it is illegal to operate a vehicle without obtaining proof of insurance. Enacted by Congress inthis law grants authority to the states to tax and regulate the business of insurance see regulation. This coverage usually optional pays the doctor, hospital bills, and funeral expenses for injuries to you and the passengers in your car, regardless of who causes the accident, up to the policy limits.

Med Pay is sold in states with traditional tort insurance laws. In states where Med Pay is optional, drivers may choose to rely on their own and their passengers' own health insurance to cover resulting injuries. Most insurance companies offer a wide range of coverage amounts. In some "no-fault" states, a dollar amount for medical and rehab expenses that must be reached in order to file a lawsuit for damages for non-economic damages i.

See verbal threshold. There are different versions of no-fault auto insurance laws in 12 states and Puerto Rico.

A glossary of auto insurance terms can really help you understand your policy as you deal with a claim. It can also help you compare car. But, you need to at least understand the basic auto insurance terms because they spell This is a general term that covers bodily injury (BI) liability and property. 10 common car insurance terms every consumer should know because they appear on your premiums and explain your insurance rates.

In theory, the system is supposed to discourage lawsuits by allowing policyholders to recover financial losses from their own insurance company without having to prove that anyone is at fault in an accident. Motorists may only sue for injuries and for pain and suffering if their case meets certain minimum conditions.

Seven states, including Utah, require that you meet a minimum dollar threshold to be able to bring a lawsuit over damages over and above your economic losses. In New Jersey, Pennsylvania and Kentucky, motorists may choose to reject the lawsuit threshold on their insurance policy and keep their right to sue for any auto-related injuries.

Click here to learn about Colorado's transition from no-fault to tort. Intangible benefits, such as pain and suffering, inconvenience, emotional stress, impairment of quality of life, loss of consortium, etc.

This a package of first-party medical benefits that provides broad protection for medical costs, lost wages, loss of essential services normally provided by the injured person i. It is usually associated with a no-fault auto insurance system.

This coverage is for when you damage someone else's property with your vehicle. Usually it's someone's car, but it can apply to other property such as buildings, utility poles, fences and garage doors. Insurance is based on the history of loss experience for similar risks. SR insurance form Official document some states require to prove you have sufficient car insurance. The SR, filed by your insurance company, allows you to keep or reinstate your driving privileges after serious or repeated traffic-related offenses, such as DUIs or driving without insurance.

State-required minimum The car insurance coverages and limits that states require their residents to carry. These limits are often very low and would be insufficient if you caused a large accident. Underwriting The insurance company's process of evaluating how risky you are, based on factors such as your vehicle, location, accident history, credit and age.

Auto Insurance Glossary of Terms

An insurer uses its underwriting findings to calculate your rates. NerdWallet is a free tool to find you the best credit cards, cd rates, savings, checking accounts, scholarships, healthcare and airlines.

Start here to maximize your rewards or minimize your interest rates. Instantly compare top car insurance companies Get started. We want to hear from you and encourage a lively discussion among our users. Please help us keep our site clean and safe by following our posting guidelinesand avoid disclosing personal or sensitive information such as bank account or phone numbers.

Of course, navigating the world of car insurance can be a confusing some of the most basic car insurance definitions so that you can properly. Glossary of Common Auto Insurance Terms. This basic coverage is called "25/ 50/25" coverage. Loss - The amount an insurance company. While different states mandate different types of insurance and there are several additional options (such as gap insurance) available, most basic auto policies.

Any comments posted under NerdWallet's official account are not reviewed or endorsed by representatives of financial institutions affiliated with the reviewed products, unless explicitly stated otherwise. A household member of the policyowner, who is also covered by the policy as a driver — typically all licensed drivers in the home aside from the primary driver. A crash that you cause, either partially or completely.

A request for payment from your car insurer to cover vehicle repairs, injury treatment or other costs. Car insurance quote. Collision coverage. Pays to fix your vehicle if you cause a crash or have a one-car accident, such as hitting a tree.

Basic auto insurance terms

Comprehensive coverage. Pays to repair your car after animal collisions, and also covers a specific list of noncollision issues — including car theft, falling objects and fire, among others.

Predetermined amount your insurer subtracts from your settlement for collision and comprehensive claims. The exact day your auto policy starts. Full coverage car insurance. A policy that includes liability insurance plus collision and comprehensive coverage.

If your car is totaled or stolen, pays the difference between its dollar value and your remaining auto loan balance, if the balance is the higher number. Liability insurance. Pays for others' injury treatment and property damage if you cause a crash, as well as your legal defense costs if you're sued.

When you start to consider the various types of auto insurance coverage It does not include all terms and conditions and exclusions of the services described. Getting basic car insurance is probably your top priority when buying a vehicle. Not everyone knows all the car insurance terms and lingo. This is what protects you when you injure someone in a car accident and or. You pay for car insurance every month and may make a claim or two in time discussing basic car insurance definitions and coverage types.

The maximum amount your policy will pay for a given accident. Pays for your own injury treatment and that of your passengers no matter who caused the crash up to your policy limit. Personal injury protection PIP. Similar to MedPay, PIP pays for your injury treatment and that of your passengers regardless of who caused the accident.

How you most commonly use your vehicle, such as for commuting, pleasure or business. The cost of your auto insurance, either monthly, yearly or per six-month period. SR insurance form.

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