If you live in the U.S., there's a 48 in 50 chance that your state requires you to have car insurance (New Hampshire and Wisconsin are the lone hold outs, for those wondering). Of course, knowing that you need car insurance is only the first step. Navigating providers, comparing cheap car insurance quotes, and choosing specific coverage comes next.
It can be tough when you're unfamiliar with the terminology.The real value of insurance is in the details. That's what makes understanding the lingo so important to getting a great deal. To help familiarize you with the basics of car insurance, we've put together a list of some of the terms you'll most need to know:
The premium is the fee you pay to the insurance company to keep your coverage active. A number of factors determine your premium. Your age, sex, years of driving experience, the type of car you own, and where you live (urban areas tend to have higher premiums than rural ones) are all taken into consideration. Car insurance premiums tend to be listed as 6-month coverage. Usually, you can make payments monthly, quarterly, or all up-front (which can come with a nice discount). With Elephant, we give you the chance to have a 12 month policy, meaning you could lock in your low rate for the year!
If you pay for your health insurance, chances are you already have an idea of what a deductible is. It represents the amount of money you'll need to pay out of pocket in the event of damages to or loss of your car. When your full deductible is paid, your insurance company reimburses the rest of the cost. Typically, the lower your deductible is, the higher your premium will be. An insuranceQuotes study found that Americans increasing their deductibles from $500 to $1,000 can save an average of 9 percent on their car insurance premiums.
3. Primary driver
Here's a term that means just what is says: the person (or persons) directly covered under your car insurance policy. Many families choose the make the primary drivers include every driving-age member of the household. This ensures that no matter who's driving at the time of an accident, any damages to the person or the vehicle are protected.
4. 'At fault'
Another relatively straightforward definition, "at fault" simply describes the party responsible for any kind of accident. In most cases, either the driver found to be at fault or his insurance provider pays for the majority of damages. Keep in mind, however, that some states – including Florida, Pennsylvania, and Massachusetts – are no-fault states. For a complete list, see here.
5. Collision coverage
An optional policy in most states, collision coverage pays to fix or replace your vehicle when it's damaged by another car in an accident or by hitting a stationary object. Collision coverage is valuable because it protects your car from damages caused by another vehicle (including hit-and-run collisions) or uninsured drivers. In some states, it may even be in effect when driving a rental car.
6. Liability coverage
When you're at fault in an accident that's caused property damage or injuries to another person, liability coverage helps you cover the cost. Most states require at least some level of liability coverage and for good reason. It can keep you from financial ruin by paying for another party's recovery costs, medical expenses, and potentially even your legal defense if you're sued.
7. Comprehensive coverage
What's most important to understand about comprehensive coverage is that it doesn't really mean total coverage. In other words, you can't just buy comprehensive coverage and forget about every other type of policy. Rather, comprehensive insurance protects your vehicle not just from collision-related damages, but also damages caused by hail, wind, fire, flood, theft, and vandalism.
8. Personal injury protection
If you have personal injury protection coverage, your car insurance provider pays (within predetermined limits) for the medical and funeral expenses of the insured driver, driver's passengers, or any pedestrians involved in the accident. Not every state makes PIP coverage available, but in those states that do, you may hear it referred to as "no-fault" coverage.
9. Uninsured/underinsured motorist coverage
We've paired these two terms because of their similarity. Uninsured motorist coverage helps you pay for expenses caused by an uninsured driver responsible for an accident that resulted in injuries or death. Underinsured motorist coverage is near-identical. It goes into effect when the other, at-fault driver doesn't have enough insurance to cover all the bills. Limits may apply to each.
10. Occasional driver
If you live with a spouse, roommate, or child who drives your car infrequently, you may want to add this individual to your policy as an occasional driver. Know that this designation is often left up to your insurer. Your provider can decide whether the person drives enough to warrant occasional driver status. Miles driven and time spent behind the wheel are common criteria for determining whether motorists are occasional drivers.
Have more questions about auto insurance? Check out Elephant's helpful guide.