Learning Car Insurance Terms

Car insurance can sometimes be difficult to understand. If you find terms that you do not understand, you could find yourself making purchasing mistakes that could cost you a significant amount of money. In order to understand car insurance, here are some terms that will be beneficial for you to know in order to make an informed decision regarding car insurance. 

• Liability: Liability insurance is required in most states. This type of insurance provides coverage to someone else if you caused an accident. Bodily liability covers injuries to the driver or passenger of another vehicle. Property damages cover damages to the property. The insurance will cover the cost to repair or replace the other vehicle involved. It is important to have liability insurance to protect yourself from huge financial losses.

• Assigned Risk: When purchasing car insurance, the company must decide if you are at risk to be involved in an accident. If you have had too many accidents or violations, it might be difficult for you to obtain car insurance through the traditional way. If you are assigned a risk pool, you are assigned to a certain insurance company. Because car insurance is required, this company is legally obligated to provide insurance. This type of car insurance is more expensive.

• Comprehensive Coverage: There are times when your vehicle is damaged as a result of something other than a collision. Comprehensive coverage covers the cost if your vehicle is damaged from a fire, theft, hail storm, flood or vandalism. Comprehensive coverage covers just about everything except a vehicle accident. Comprehensive coverage is beneficial because it protects you from unforeseen events that are beyond your control. You will need to decide on a deductible for comprehensive coverage. The average deductible is $500. Make sure you read the terms and conditions, so you will know exactly what is covered under your policy.

• Accident Forgiveness: Many car insurance companies offer accident forgiveness programs. With accident forgiveness, your car insurance premiums will not increase if you have an accident. Basically, the insurance company will “forgive” the accident, so you will not be penalized. With accident forgiveness, most insurance companies will forgive one accident every five years. Accident forgiveness can give you peace of mind knowing that if you are involved in an accident, your premiums will not sky rocket.

Negligence: When you are at fault in an accident and property damage or bodily injury occurs, you are considered to be negligent. Negligence takes place when you fail to act in accordance with the law and damage has occurred. If you are involved in an accident and are negligent, your car insurance premiums could increase.

• Exclusion: If there is a certain driver who cannot be covered under your policy, he will be excluded. The policy will name the driver that is not permitted to obtain coverage under the policy. Drivers can be excluded from coverage for having too many accidents or violation; therefore, the company considers him to be at high risk for having an accident.

• Deductible: A deductible is the amount of money that you are required to pay before the insurance company pays the rest. If you have a high deductible, your car insurance premiums will be lower. However, before deciding on a deductible, you want to make sure that you can cover the cost. Most deductibles are between $100 and $1000.

• Uninsured/Underinsured Coverage: Unfortunately, many people fail to purchase car insurance. If you have an accident with someone who does not have insurance or does not have enough insurance, you could be in trouble if you do not have this type of coverage. Uninsured/underinsured coverage protects you from paying out of pocket expenses if you are involved in a car accident with someone who does not have enough car insurance.

• Gap Insurance: If your vehicle is totaled in an accident, gap insurance will pay the difference between the actual cash value of your vehicle and the amount that you still owe. If your vehicle is totaled, you will still need to pay the lender what is owed them for the loan. Gap insurance will prevent you from having to come up with a huge amount of money to pay the difference.

• No-Fault Insurance: Some states have no-fault insurance laws in order to decrease the number of lawsuits that are filed as a result of car accidents. In these states, you cannot sue another driver unless you are seriously hurt in the accident. If you are involved in an accident, your insurance company pays the claim, not the insurance company of the other driver. 

Author bio: Chris is experienced internet marketer interested in key technologies to make your online business perform. During his career he worked for some of biggest Australian brands. Currently employed as marketing consultant for AU based insurance company, RealInsurance Car Insurance.

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