Car insurance basics
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Basic insurance terminology
When you buy insurance, you receive an insurance policy, that is, a document that spells out exactly what is covered and what is not covered.The items covered by your insurance are called your benefits.
The amount you pay for the insurance is called the premium.
When you have costs and submit bills to your insurance company, this is known as filing a claim.
Your insurance company will typically pay only a portion of your costs. The amount of a claim that you must pay before the insurance company will cover the rest is called the deductible; the amount you pay toward each medical bill is called the co-pay.
Types of auto coverage
Collision coverage insures you against damage to your vehicle caused in an accident.
Comprehensive insurance protects you against other forms of damage to your car, such as fire, theft, flood, and vandalism
Liability insurance pays for injuries and property damage you cause to other people’s property with your car if you’re at fault.
Medical payments covers medical care for you and your passengers if injured in an accident in your car.
Personal injury protection covers medical and other expenses (such as loss of income) in the event of an accident in your car.
Uninsured/ underinsured motorist coverage pays you if you’re injured by a driver who doesn’t have enough insurance, or if you’re injured in a hit-and-run accident.
Optional insurance may cover additional expenses such as towing, rental car benefits while your car is being repaired, or roadside service.
How deductible impacts premium
Typically, the higher the deductible amount, the less expensive the insurance premium. So a good strategy is to get a policy with the highest deductible that you’d be able to comfortably afford if you had to. This will minimize the cost of your policy.
Your credit score
Your credit score could impact how much insurance companies charge you in premiums. To learn more, see the topic Using Credit to Your Advantage.
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