It may be confusing and overwhelming to shop for car insurance or to deal with a claim, especially when a lot of unfamiliar jargon is used. These feelings become amplified when you’re a new car owner too.
Knowing basic insurance industry terms can help you understand what you may want to include in your policy. While your insurance broker is here to customize a plan that makes sense for your needs, having an understanding of what certain terms mean will help you ask questions and gain a better understanding when purchasing your policy or during the claims process.
Keep reading to learn some of the common terms you will encounter when dealing with a car insurance policy.
What is comprehensive insurance?
Comprehensive insurance is designed to cover damage to your car caused by events that are out of your control. Think of it as coverage for anything that could happen when your vehicle is parked. The specific details of comprehensive insurance vary, so that’s why we encourage you to talk with your BrokerLink advisor to go over your options.
Here are some non-collision incidents that are covered under most comprehensive policies:
- Vandalism, fire, riots and explosions
- Windshield and glass damage
- Falling objects like tree branches
- Weather events such as storms, hail, wind, floods, lightning and earthquakes
- Accidents with animals
Damage from vehicle collisions is typically not part of comprehensive coverage, but in the next section we’ll explain how collision coverage works hand-in-hand with comprehensive insurance.
What is collision insurance?
Collision insurance covers you when there is a collision with another vehicle, whether you are hit by someone else or if you are the cause of the accident. In some cases, it may also offer protection if your car collides with the ground or an object.
Both comprehensive and collision insurance have deductibles. The lower your deductible, the higher your premium will be. Conversely, the higher your deductible is, the lower your premium will be. Here’s what coverage collision insurance offers:
- A collision with another vehicle or object
- Coverage for your car on its own, in situations like a rollover accident
- Someone crashing into your parked car
- An accident in a car you’ve rented
In most situations, collision insurance does not cover:
- Injuries to other drivers in the event of an accident
- Vandalism or theft
- Accidents with animals
- Losses other than auto damage from a collision
What is liability coverage?
This is the part of your auto insurance policy that covers damage that you cause to other drivers in an accident. More specifically, liability coverage covers vehicle and property damage. In order to legally drive and operate a vehicle, this insurance is mandatory coverage that must be included on your car insurance policy.
If you’re at fault in a car accident, your liability coverage helps cover the cost of legal expenses arising from damages caused to other drivers, pedestrians or property, up to your policy limit. Some other liability coverages include:
- Bodily injury liability, which covers the financial cost of an injury or death resulting from an accident caused by you. It can cover medical bills, loss of income claims, as well as pain and suffering damages that may come about as a result of legal action.
- Property damage liability, which covers property damage to someone else’s property that was caused by you. This can relate to another persons vehicle, their home and/or landscaping.
Be sure to talk with your broker about the different types of liability coverage for yourself and others should you find yourself in an unforeseen circumstance.
Some of the most common causes of car accidents include:
- High speeds, which can easily turn into a situation where you lose control and cause harm to yourself or others. Accidents due to speeding can cause serious injuries and even death. Stay within the legal limits when driving.
- Impaired driving due to drugs or alcohol, which are some of the top causes for fatal accidents. If you find yourself in a situation like this, calling a taxi or friend is always the safest option.
- Weather, which can influence a number of driving concerns. Wet or icy roads can cause your vehicle to swerve or slide off the road, into other vehicles or even other objects. Switching out your tires to adjust to the season can help with this as does adjusting your driving for whatever the weather conditions are.
- Distractions that keep your eyes off the road for even a few seconds. Distractions can cause harm to yourself and others. Smart phones, changing the radio station and adjusting the temperature, are all things that can be classified as distracted driving.
What is uninsured and underinsured coverage?
If you find yourself in an accident caused by a driver without insurance, uninsured coverage simply means that you’ll be covered for any damage costs. This coverage will help pay for expenses, up to your policy limits, if you are hurt or if your car is damaged.
There are two kinds of coverage built into an uninsured policy:
- Uninsured property damage, which will cover damage to your property, including your car.
- Uninsured bodily injury, which will cover income losses, medical bills and other related costs from a covered accident.
Underinsured coverage helps you pay for any expenses if you’re in an accident caused by a driver with an insurance policy with limits that are not enough to cover the damages. Similar to uninsured motorist coverage, underinsured coverage includes property damage and bodily injury damage.
Both uninsured and underinsured coverage protects you from drivers with little to no insurance. Having this coverage offers another layer of financial protection from irresponsible drivers.
Get the right car insurance coverage for your needs
Not all car insurance policies are equal. Learning insurance terms can really help you understand your policy. Deciding what to get in a car insurance policy is a very big decision.
At BrokerLink, we work with many customers to protect them from events in and out of their control. We want to do the same for you because we know that your insurance policy provides extra peace of mind.
Consult with an experienced insurance broker from BrokerLink to learn more. We’ll be able to answer all your questions!
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Car insurance terms explained FAQs
Is there a car insurance policy that also covers belongings inside the car?
While specific policies such as comprehensive insurance will protect your vehicle if stolen, it doesn’t cover items inside your car. The items inside your car would be covered under your home or tenants insurance policy. We encourage you to talk with your broker about the specifics in your policy.
What is risk assessment and why is it important?
A risk assessment performed by your insurance company typically determines what your premium amount should be. This is calculated using a variety of factors and risks, which ultimately determines the probability that you may file a claim.
If I let someone else drive my car, will my insurance cover them as well?
Insurance covers the vehicle, not the person. Be mindful of who you allow to drive your car though. If accidents occur, it’s your insurance that will be affected.