Comp, Collision, Liability: Understanding Insurance Definitions

Understanding your car insurance policy can be like reading a foreign language. Insurance definitions are confusing if you do not know what the terms mean. It is hard to tell an agent what you want if you don't fully understand even the basic insurance coverage definitions.

Full Coverage Car Insurance

Some people believe they can tell an agent that they want full coverage insurance and the agent will automatically know what they want. You may even believe that asking for full coverage means you have tons of insurance and that your vehicle is covered for anything that happens to it.

Full coverage is just a term people use that means you have more insurance than a simple liability policy. You still need to determine what you choose to have on the car insurance policy, and what financial amounts.

Liability Car Insurance

Liability car insurance is the least expensive insurance. Some people with older vehicles have liability insurance only. This means that the vehicle is not covered for any damages if an accident is your fault, and in some policies, medical is not provided as part of the liability package.

If you are involved in an accident that is not your fault, the other driver's insurance will pay for your damage. If the other driver has limited or no insurance, this could be a major ordeal to get your car fixed or your medical bills taken care of.

Collision and Comprehensive Car Insurance

People often confuse these terms, or do not fully understand them. When you choose a car insurance policy, you can have one or both of these included in your policy, or if your car is not financed, or not worth a lot of money, you may opt to have neither. You need to understand what you are choosing or giving up.

Collision insurance will pay for the damages to your car even if you are at fault. For example, if you slide into a ditch and dent a bumper or fender, your collision coverage will pay for the repairs. There is a deductible that you must pay, and you can choose that amount when you get the policy. The insurance will only pay the repairs up to fair market value of your car.

Collision insurance is not required by law, but is a wise choice unless you can afford to repair the car yourself. If the car is financed, the finance company may require you to have collision insurance..

Comprehensive car insurance is often confused with collision insurance. Some people don't understand if they should have one or the other or both. Basically, comprehensive covers things that collision does not. Vandalism, fire and storm damage are a few things that comprehensive insurance covers.

My vehicles have comp and collision coverage on them. If a tree limb falls on my car, I can't afford to repair it myself, so I choose to pay the extra insurance premium. Setting up an insurance package is an individual choice. Just be sure to understand what you are getting.

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Insurance Terms

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