What do my car insurance policy terms mean?
Insurance is one of those words that can make your hair stand on end. It can turn a smile sideways in the blink of an eye. Auto insurance can be a tricky subject to navigate, but it is important to have it. In fact, it is mandated by Texas law to have certain minimum amounts of coverage. Policies, however, can be dotted with lingo that is hard to comprehend. Have you read through your coverage and asked, “What do my car insurance policy terms mean?” We have some assistance for you on some of the most common terms and phrases.
Common automobile insurance terms and what they mean
- Premium. This is the amount that you pay for your insurance over the course of the time it is in effect. This amount is owed regardless of whether or not you actually need to use your coverage.
- Deductible. Not to be confused with your premium, this is an amount that you have to pay out of pocket before the insurance coverage for certain claims go into effect. For example, if you file a $1,000 claim and you have a $500 deductible, and your insurance plan indicates it pays the costs after deductible, you are required to pay that $500 while the insurance company covers the rest.
- Collision Coverage. As the name implies, this is the coverage specifically for collisions.
- Comprehensive Coverage. This coverage is essentially for everything else that is covered on your plan that does not involve collisions, such as weather-related incidents, theft, and the like.
- Gap Insurance. This is insurance that will pay the difference between the vehicle’s cash value and the amount that is still needed to be paid on the loan.
- Liability Insurance. This pays for injuries to the other party involved in a crash, as well as damage to other vehicles from an accident you caused.
- Personal Injury Protection (PIP). This is coverage for funeral or medical expenses of an injured person, as defined by specific limits for each insurance policy.
- Principal Driver. This is the driver who drives the vehicle the most.
- Occasional Driver. This is someone who is not the primary or principal driver on the policy.