Auto Insurance Decoded – What You Need to Know

Woman calling auto insurance company - Copyright: NejroN

Understand Auto Insurance Terminology

Auto insurance is certainly not the easiest thing to understand. Most of us will probably never fully get what is going on behind the online quote.

Being familiar with auto insurance terminology can, however, help a little.

Your auto insurance policy is often a package of seven primary coverages. Each has its own separate premium amount.

The seven basic coverages:

  • Bodily injury liability (if you injure or kill someone while driving).
  • Medical payments, no-fault or personal injury protection coverage (pays for the medical expenses of the injured driver and passengers in your car).
  • Uninsured motorists coverage (if an uninsured driver, or hit-and-run driver, injures you).
  • Comprehensive physical damage (if your car if it is stolen or damages are not the result of a collision).
  • Collision coverage (if damages are the result of a collision).
  • Property damage liability (if your car damages property).
  • Rental reimbursement coverage (if you need to rent a vehicle after a collision).

Sometimes you also want to add other coverage like emergency road assistance.

Auto insurance policy

On your quote you will also see your deductible. This is the amount you must pay out of your own pocket before your insurance kicks in. A $1,000 deductible means you pay the first $1,000 on a claim that is, for example, $3,000. The insurance company pays the remaining $2,000.

A low deductible means higher premiums. One way to lower your premiums is to raise your deductible. You should, however, always select a deductible that you know you can pay out-of-pocket.

How Much Do You Need?

Decoding your online quote means you should carefully examine the amount of coverage you actually need. For older cars you may want to consider dropping Collision and Comprehensive Coverage. Your insurance company will normally limited coverage to the cash value of your car.

When comparing different quotes, you should also make sure you look at the same coverage.

The Largest Auto Insurance Companies by Market Share

  1. State Farm
  2. Berkshire Hathaway (Geico)
  3. Allstate
  4. Progressive
  5. Farmers

Woman calling auto insurance company – Copyright: NejroN / 123RF Stock Photo

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