4 Key Terms for Understanding Car Insurance

Whether you are a first-time driver or have years of driving experience, purchasing auto insurance is one of the most important responsibilities you have as a car owner. Its main purpose is to provide you with financial and legal protection against damage, lawsuits, and bodily injury that may incur from an accident. 

However, obtaining car insurance can be a bit of a complicated task for drivers as there are many car insurance terms that aren’t easy to understand. Whether you need to submit a claim after being involved in an accident or try to understand the process of buying car insurance, there are certain legal terms and confusing jargon in the policy document that will have you searching for a dictionary.

To help you along, we have prepared a brief glossary of four common car insurance terminologies you should take note of so you can have an easy policy purchase experience.

Car insurance quotes

A car insurance quote is one of the most important words you need to know and understand when purchasing auto insurance. It refers to the estimate of how much you will have to pay for a policy based on the type of coverage you choose and the information you provide during the initial car insurance quote process.

In general, insurers use their own unique formula to calculate a car insurance quote which can vary between companies, regions, and certain factors they take into account. For instance, in Ontario, CA, some factors that can affect your car insurance rate include your location, personal characteristics, type of coverage, driving record, and credit-based insurance score.

For more information, consult with reputable brokers and click here to find out how you can get the best possible coverage for your car in Ontario.

Auto insurance coverages

When shopping for car insurance, you will have to understand the common types of coverage available on a car insurance policy. The main purpose of these coverages is to provide you, your passengers, and your vehicle with financial and legal protection if you are involved in a car accident. Depending on where you live, some of these coverages are required by law and some are optional.

In general, the most common car insurance coverages you can greatly benefit from having include:

• Liability insurance;
• Uninsured and underinsured motorist coverage;
• Comprehensive coverage;
• Collision coverage;
• Personal injury protection.

All of these coverages offer something different, so make sure you consult with a car insurance broker to gain a better understanding of each and purchase the right one for your situation.

Auto insurance claim

An auto insurance claim refers to the report you submit to your car insurance provider after being involved in an accident to obtain financial compensation to cover the damages, injury treatment, and other costs that have been incurred from the collision. The process of filing the insurance claim can vary depending on the provider and the type of car insurance coverage you have. 

Usually, an auto insurance claim is only approved if your insurance policy covers it. For instance, collision and comprehensive coverage will cover most things, whereas liability insurance only covers property damage and bodily injury for the other driver if the accident was your fault. 

Also, the nature of the event can affect the car insurance claim process, meaning the process for a car accident will be different from a stolen car insurance claim investigation.

Deductibles

A deductible is another important term you should take note of when purchasing car insurance. It refers to the amount you have to pay out of pocket for a claim before your insurance covers the rest. 

In general, only two types of auto coverage carry deductibles and these are collision and comprehensive coverage. In most companies, the common deductible is $500, but the amount can vary based on your preferences and budget. The general rule is the higher your deductible is, the cheaper rate you will have on your premium.

However, you need to make sure you can actually afford to pay a high deductible so you don’t delay necessary repairs and prevent yourself from having a non-working vehicle that you can’t drive.

Final thoughts

Purchasing car insurance is one of the most important responsibilities you have as a car owner. However, the task can be quite complicated if you don’t understand the key terms that are included in the policy documentation. So, to find the right coverage for you, make sure you refer to our post and understand the most common words used in car insurance policies.