7 Important Insurance Terms You Need To Understand When Buying Auto Insurance

When you buy an auto insurance policy, there are some terms that you need to understand. Understanding some of the common jargon in auto insurance will help you better understand what you are purchasing.

Term #1: Premium

A premium is an amount that you pay for your insurance coverage. Generally, your premium amount is designed to provide you with six months of coverage, although you can often pay your six-month premium in monthly installments. Keep in mind, though, that many insurance providers will offer you a discount if you pay the full premium up-front instead of breaking it into six monthly payments.

Term #2: Primary Owner

When you set up car insurance, they will want to know who the primary owner of the vehicle is. This should be the individual who has their name on the vehicle's title and should be the individual who is setting up the insurance policy.

Term #3: Additionally Insured

The term "additionally insured" refers to a person who is part of your household, specifically included in your policy. For example, if you and your spouse drive the vehicle, your spouse would be listed as additionally insured on your policy.

Term #4: Liability Insurance

Liability insurance is designed to protect you against legal liability from other parties if you get into an accident. Your liability insurance will pay for any property damage and medical bills you cause to other people if you get into an accident.

A number will be associated with liability insurance, such as 100/200/50 or 200/400/100. The first number is the maximum amount of bodily injury coverage everyone could get under your policy. The second number is the maximum coverage for the entire accident, and the first number is the maximum amount of property damage your policy will payout.

It is generally a good idea to carry a little above the liability requirements for your state.

Term #5: Personal Injury Protection

Next is personal injury protection. This part of your policy is about protecting you and the people in your car. The amount of money that your insurance provider will pay for medical, hospital, and funeral expenses, no matter who is at fault or the accident. This part of an insurance policy protects you.

Term #6: Collision Coverage

When you get into an accident, if you are responsible for the accident, you need to have comprehensive coverage if you want your vehicle's repairs to be covered by your insurance policy.

Term #7: Comprehensive Coverage 

There are other ways, outside of a vehicular accident, that can damage your vehicle. Comprehensive insurance is designed to help pay to fix your vehicle if it is damaged in a fire, or if someone steals your vehicle, or if something falls on your vehicle, for example.

If you come across a term or phrase you are not familiar with as you purchase your auto insurance policy, be sure to ask your agent about the term. Your agent's job is to make sure you fully understand your policy and how it protects you.