If you're buying a new car, you'll probably also be buying auto insurance, which protects you financially from physical damage or bodily injury in the event of a car accident, theft, or natural disaster and any liability that you may face as a result.
There are lots of types of coverage, and sorting through them can be confusing. Do your research and consult with an agent to determine which type of plan is best for you.
Meanwhile, here are a few terms that will help you sort through the insurance buying process.
1) Premium
A premium is a payment (typically monthly) made to an insurance company in return for insurance coverage.
2) Deductible
A deductible is the out-of-pocket amount you agree to pay for damages resulting from a car accident. Typically, the higher your monthly premium, the lower your deductible.
3) Bodily Injury Liability Coverage (BI)
If you cause an accident, bodily injury liability coverage pays the medical costs for injuries (including rehabilitation, pain and suffering) or death to people involved in the accident other than the insured driver. It also pays for legal costs.
4) Comprehensive Coverage
Comprehensive coverage pays for damages to your car due to an event other than a collision, such as natural disasters, theft, and vandalism.
5) Collision Coverage
If your car overturns or is involved in a collision with another vehicle or object, Collision coverage pays for the damage to your vehicle, and can be extended to cover a non-owned vehicle or rental the insured is operating.
6) Loan/Lease Payoff Coverage (GAP Insurance)
If your car is declared a total loss (the insurance company determines that the cost to repair the car is more than the actual value of the car) as a result of an accident or is stolen, gap insurance pays the difference between what you still owe on your vehicle and what your insurance determines is the actual value of your vehicle, less your comprehensive or collision deductible.
7) Personal Injury Protection (PIP) Coverage
Personal Injury Protection Coverage reimburses the insured driver, passengers, and any person struck by the insured vehicle (within the specified limits) for medical, hospital, in-home care, or funeral expenses incurred as a result of an accident.
8) Property Damage Liability Coverage (PD)
Property damage coverage pays for damage to others' property resulting from an accident when an insured person is legally responsible for the accident. Property damage coverage may also pay for legal defense costs.
9) Uninsured/Underinsured Motor Vehicle Coverage
Uninsured and underinsured motorist coverage pays for medical bills, rehabilitation, pain and suffering, and funeral costs for the insured driver and passengers in the car in the event of a hit-and-run or when an accident is caused by a driver without insurance or with insufficient policy limits to fully reimburse you for damages they caused.
10) Medical Payments Coverage (Med-Pay)
This covers medical expenses for you and your passengers, regardless of who is at fault in the accident.
According to Consumer Reports, bodily injury liability, property damage and uninsured and underinsured motorist coverage are must-haves, while collision, comprehensive, personal-injury protection, and medical payments coverage are deemed as coverage you’ll probably need.
Study Before You Buy
When you're familiar with these terms, you can get the coverage you need and compare quotes from different insurers.Sites like insweb.com compare premiums, so you can do much of the research online.
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