You probably already have auto insurance, but do you understand it fully? If you have car insurance or are looking to get a plan for yourself, it’s important that you understand the different coverage types and definitions so you can ensure that you are adequately protected.
What Is a Claim?
An auto insurance claim is a documented, formal request that you make to your insurer for compensation in case of financial loss. The insurance company will then verify the validity of your claim and cut you a check. Remember that while auto insurance is meant to protect you financially, filing too many claims may cause your insurance provider to raise your rates. But, the good news is that most insurance companies have streamlined their claims processes, which means you just might be able to complete the entire claims princess with your phone, at the scene of the incident.
What Is Liability Coverage?
This is the part of your car insurance plan that covers damages you cause to other vehicles or people in an accident. Typically, most states in the U.S. require people to have auto insurance.
What Are Underinsured and Uninsured Coverage?
This provision will protect you financially if your vehicle is damaged by someone who doesn’t have adequate coverage or no auto insurance plan of their own. It covers both collision and liability.
What Is Comprehensive Car Insurance?
This insurance covers damages to your vehicle as a result of vandalism, trees falling on it, floods, or theft. Your car insurance plan will typically mention what is covered, which is why it is important that you pay attention to the fine print.
What Is Collision Coverage?
This insurance protects you against incurring financial losses if your vehicle is damaged due to an accident. It covers you regardless of whether you were at fault or not. Both collision and comprehensive coverage have deductibles – the lower the deductible, the higher your premium will be. The converse is true as well.
What Is Rental Reimbursement Coverage?
This will cover the cost of a rental car in case your car is stolen or damaged.
What Is Gap Insurance?
Sometimes also called an umbrella rider, gap insurance will cover the actual difference between the book value of your car and the remainder of your car loan. This can be quite helpful if the pending loan amount of the car is higher than what it is worth.