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5 Car Insurance Terms You Need to Know

insurance terms
Car insurance jargon is like a foreign language, often to the point where shopping for a new provider can feel similar to a high school Spanish class. And getting into a car accident is like being dropped in a foreign country.

Unfortunately, you can’t fake your way out of coverage like you could a Spanish vocabulary test. You actually need to study to understand the benefits of your car insurance and earn a passing mark.

Brush up on your car insurance terminology starting with these five important terms.

crash test dummyDoing so can save you loads of money in the long run.

1. Collision

Although collision coverage is optional, it’s wise to buy it. If you’re driving home on a stormy night and you hydroplane and crash into a tree, collision covers everything but the deductible – the amount of money you’re comfortable paying out of pocket in the event of an accident. Collision covers a number of scenarios including car accidents. It’s better to be safe than sorry!

2. Consumer price index

Every month, the U.S. Bureau of Labor Statistics in the Department of Labor publishes a list of consumer prices that can serve as a guide for people shopping for car insurance. An easy way to get the best deal is to plug your car information into compare.com. The website compares rates of a lot of companies so you can have all of your options laid out for you side-by-side.

3. Comprehensive coverage

Comprehensive coverage is a type of insurance protects you from damage that isn’t related to a car accident. For example, if someone breaks your windshield or your car catches fire, comprehensive comes in handy. It can also cover natural disasters, civil disturbances, falling objects and vandalism, depending on your insurance carrier.

“Gap insurance picks up where your lease car’s insurance leaves off.”

4. Premium

By Wise Geek’s accounts, the premium is the amount you’ll pay for insurance. It’s contingent on a few factors including health, age and location. You can either pay your premium in one lump sum or as monthly installments.

5. Gap insurance

One of the major perks of leasing a car is that many repairs and replacements are taken care of by the dealer. However, in the event of a major accident, it’s rare that everything is covered. Gap insurance picks up where your lease car’s insurance leaves off. For example, if you totaled your car but still had payments left on it, gap insurance could be applied to pay off the balance.

More Insurance Terms

We’re just getting started with explaining every insurance term that might be useful to understand. If you want to keep reading, we can help you learn about everything from what is an SR-22 to spelling out what MedPay does.

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Based on a survey of 100 California Residents. Average savings determined via a comparison of their selected policy against their self-reported annual premium.