A Guide To Car Insurance: Car Insurance Basics
Just like taxes and balancing a checkbook many teens and young adults do not understand car insurance. Why would they? A large number of teens are not getting their driver’s license as early and when they do, their parents typically manage their auto insurance policy. Unlike taxes and money management, many people are able to continue into adulthood having auto insurance without understanding how it works.
Then suddenly an accident occurs and you are left wondering, “Why doesn’t my car insurance cover this?” or “I thought car insurance protected my vehicle from everything”. Not exactly.
Understanding auto insurance is extremely valuable knowledge and can help you to save money. You can save money on your auto insurance policy, by correctly reporting car insurance claims, and by knowing more about insurance before you need renters insurance or home insurance.
IMPORTANT NOTE: These definitions are not written for legal purposes or exclusive to insurance coverage. The purpose of this page is to communicate the basics of auto insurance so you can have a greater understanding of it.
Wait! What is an auto claim or a car insurance policy for that matter!?
If this is you, read our breakdown of the basics of car insurance. We provide real-life examples to make the car insurance terms and coverages more understandable.
What Is Car Insurance?
Car insurance at its most basic level is a service you pay for. By paying for car insurance you will be protected. Protected from what? Example: If you get in an accident and you have the right car insurance you can receive money to help replace or repair the vehicle or to pay for medical bills. Essentially you are protected from massive financial debt because of accidents that can occur.
Car Insurance Terminology Definitions In Layman’s Terms
Below are car insurance words explained in normal words. Don’t you hate when you ask what a word means and their answer has 5 more words or phrases that you don’t know the meaning of? We will try to not do that here. Below covers the words you will need to know to understand car insurance. These aren’t all the car insurance terms, just the ones that are important for you.
- Car Insurance Quote: An insurance agent will look at your driving situation (past accidents, your vehicle, age, gender among other factors) and tell you how much car insurance will cost. How much car insurance coverage you want/need will determine your car insurance cost.
- Car Insurance Coverage: Your coverage is what you are protected from. There are a few different kinds of car insurance coverage you can have. We will go into more detail after you know more car insurance terms.
- Car Insurance Policy: This is the car insurance coverage written up in a formal document. Essentially it has everything you are purchasing written down. After you read this you should be able to understand your full auto insurance policy.
- Car Insurance Claim: In the event of an accident, a claim is basically the reported accident. You place a claim with your insurance agency and they will work with you to see what your auto insurance policy covers.
- At Fault: It means you are to blame for the car accident or damages.
The 6 Primary Types Of Car Insurance Coverage
The three primary types of car insurance coverage are liability, collision, and comprehensive. These types of car insurance can all be on one policy. They are not insurance you buy separately. If you understand what each of these insurance coverages are, you can purchase your car insurance and know what you are buying.
1. Liability Car Insurance Coverage
Liability insurance is required for auto drivers by law in almost every state. This insurance pays for property damage or medical injuries or property damage that you are being held accountable for or “at fault” for. Example: You are texting and driving and rear-end the person in front of you. It causes damage to their car and it hurts their back. Liability insurance could pay for their medical bills and car repair.
There are subcategories to liability insurance like bodily injury liability insurance and property damage liability insurance. While these are self-explanatory in nature, below are the definitions and examples.
- Bodily Injury Liability Insurance: This coverage is designed to help in the medical expenses of someone’s injuries you caused in an accident. Note, this does not include your own injuries.
- Property Damage Liability: This coverage is designed to help pay for damage you cause to a person’s personal property. Note, this does not include your own property.
2. Collision Car Insurance Coverage
Collision coverage is a part of car insurance that helps in repairing and replacing your vehicle in the event of a collision or accident. This insurance coverage is designed for your vehicle. Just as liability is designed for anyone else that is involved with an accident that is your fault, car collision insurance is for your own vehicle. Example: You damage your car in an accident, collision insurance will help pay for repairs or replacement costs. The payout for your vehicle may be limited. This is a huge factor in why car insurance rates can be so different.
This introduces you to collision insurance, but there are a lot of aspects of this coverage you should learn more about.
3. Comprehensive Car Insurance Coverage
Comprehensive car insurance is my favorite part of car insurance. Why? Example: Because I live in Pennsylvania and there is a lot of deer in PA. Along with a lot of deer come a lot of hit deer and damaged vehicles. Comprehensive auto insurance helps protect you from the weird and the wild. It can help provide funds to repair or replace your vehicle if it is damaged in an incident that is not a collision.
Comprehensive coverage is optional if you fully own your vehicle, but there are a lot of benefits to having it. Just look at some things that you could be covered for if you have the correct comprehensive coverage:
- The car is run over by an elephant. Unlikely, but not impossible.
- A squirrel makes a nest in your engine and chews on the wires.
- Hail damage.
- A stone cracks your windshield.
- You hit a deer.
4. Medical Car Insurance Coverage
When an accident occurs, there is always a chance of injury. From back pain to needing a medivac to the nearest hospital. Medical coverage on your car insurance can help pay for medical expenses like surgery, transportation to the hospital, and treatment. Medical coverage is extremely important to have on your car insurance because it not only protects you but it helps protect your loved ones riding in your vehicle.
5. Personal Injury Protection (PIP) Car Insurance Coverage
Some states provide personal injury protection (pip) insurance. Personal injury protection is similar to medical coverage but it extends beyond the medical injury expenses and can provide coverage for loss of income due to the injury. Pennsylvania is one of the states that require PIP insurance.
6. Uninsured Or Underinsured Motorist Coverage
Even though it is illegal to drive vehicles without insurance, people do it. In the event where you get into a car crash with an uninsured or underinsured driver, you will need coverage to pay for damage or medical expenses. This coverage is actually required in certain states and can help protect you and your family from financial hardships.
Additional Types Of Auto Insurance
There is a wide variety f additional auto insurance coverages you can get. From roadside assistance and towing insurance to specific types of insurance like classic car insurance. Learn about them here and make sure you are protected when you are on the road.
Contact Strickler Insurance For Your Car Insurance
Strickler Insurance is a car insurance company located in Lebanon PA. We provide great coverage on comprehensive, collision, and liability car insurance along with all of the additional coverages listed here. Contact us if you want to learn more about your auto insurance. We also have a wide variety of content and resources on insurance in our blog. Learn more and control your future insurance coverage!