5 Tips to Help You Understand Your Car Insurance

Unless you receive a little education about the terminology used in car insurance policies, they can be quite confusing. The language is not often the same as the everyday language that most people use. Even when some words sound familiar, they may have special meanings reserved for insurance policies. A brief primer of car insurance meanings can be helpful in interpreting existing policies or when purchasing a new one.

Liability insurance covers the other vehicle and property belonging to others in the event of an accident.

Legally, you have to carry liability insurance to buy a car license or to drive a motor vehicle. The states mandate this coverage. However, you will need more than the state minimum of liability insurance if you need to protect significant personal assets. Although liability insurance technically seems to protect those who are not at fault in an accident, it actually protects you, too. If you are sued, everything that you own is at risk to be lost if your liability limits are set too low.

Collision insurance is the policy that protects your vehicle.

After an accident, if the other driver is not insured, or it's a one-car accident, your insurance will have to pay to fix your car. After the deductible is met, it is your collision insurance that will pay the body shop for the repairs. Collision insurance is required by lenders before they will issue a loan on a car. Many people drop their collision coverage after a car is paid off. However, if you cannot afford to easily replace the car, it is often a better idea to keep the collision insurance until the car is worth only about the amount of your deductible.

Comprehensive insurance fills in the areas that liability and collision insurance miss.

If your car is stolen, you need comprehensive insurance to pay for your loss. The same is true following vandalism, storm damage or glass breakage from a rock on the highway. Comprehensive insurance steps up and gives you the protection that you need in the event of a non-collision loss regarding your car.

If you regularly drive a car that you do not own, you may want to consider buying non-owned auto insurance.

This insurance is designed to cover a vehicle belonging to someone else. Non-owned auto insurance can be purchased to cover collision, liability and comprehensive losses. While the car owner may have adequate coverage, the owner's insurance may not be required to cover a loss that occurs when another person drives the car. The only sure way to be protected is for you to buy your own non-owned auto policy.

Underinsured and uninsured motorist is important auto insurance.

When you have a wreck with someone who is not covered or who is inadequately covered, you may still be at risk for a suit. Uninsured and underinsured insurance will protect you when the other driver's insurance is insufficient to do the job. This type of protection comes into play when there are passengers or pedestrians involved in the accident. It can also pay when property belonging to third party is damaged as a result of the accident.