Before you start shopping around for auto insurance, you should get a handle on some of the common car insurance terms. In all reality, the more you know about car insurance, the better chance you’ll have at finding the perfect coverage for your vehicle. Sure, you’d love to think that all companies would be upfront and honest with you about what you need and what you don’t need. But come on, what company doesn’t want to make some profit? This is why having the basic knowledge when it comes to car insurance can make all the difference when it comes to your auto coverage. Read on to learn some common auto insurance terms and then see how much money you can save!

Absolute Liability

This is liability without fault, also known as liability without regard to fault or strict liability. You may see this pop up when something considered contrary to public policy happens, even though the event wasn’t intentional.

Liability Insurance

In a nutshell, liability insurance is risk transference. Not only does give you protection against loss that arise from third parties, it covers your legal liability from injures to other people or their property.

Collision Insurance

This type of insurance is optional. Collision insurance provides coverage for the insured’s vehicle, subject to a deductible, that is involved in an accident. Basically, this covers you whether the accident was your fault or not.

Deductible

Also known as excess, this is the amount you agree to pay toward the total amount of an insured loss, whether it is per claim or per accident. Usually a fixed rate, the deductible must be paid before the policy benefits can be applied to a claim.

Uninsured and/or Underinsured Coverage

This type of insurance is great protection for you and your family if you happen to be hit by someone without insurance coverage. Having uninsured or underinsured coverage allows you and your family’s bodily injury to be paid for.

Comprehensive Coverage

Comprehensive insurance covers your vehicle in case of non-collision related incidents such as fire, theft, weather, impact with animals and vandalism.

Gap Insurance

This insurance is good for people who have just purchased a new vehicle. In a nutshell, new cars depreciate right after leaving the dealership lot. Gap insurance covers the difference between what an insurance company says your car’s worth and what you would actually owe on the vehicle.

Gap insurance usually only covers theft and accidents, but that can vary depending on the insurance policy. You can also purchase gap insurance from the dealership. However, you can expect to pay even higher premiums.

Property Damage Coverage

This covers any damage you may cause to another’s vehicle. Basically, if you cause it, you’re covered.

Claim

This is your request for reimbursement concerning a loss covered by your auto insurance policy.

Full Coverage

Actually, full coverage isn’t really what it sounds like. Technically, full coverage is a combination of collision and comprehensive coverage, meaning that your car’s physical damage is covered.

Secondary Driver

Also known as an occasional driver, this person is covered for driving the insured vehicle. However, this coverage does not mean that they’re the primary driver.

Shop Around To Find Cheap Auto Insurance

Familiarizing yourself with the above common car insurance terms will result in you making a wise decision when it comes to your auto coverage. Take your time and shop around before committing to a provider and you will be find the cheapest auto insurance company that will still meet your coverage needs.

The above terms are just the ones most frequently talked about or that affect the majority of drivers on the road. There are more common car insurance terms, but they are mainly state specific. The best way to find out what’s required in your state is by visiting your local DMV’s website.

By: James J. Robinson