The Most Misunderstood Terms in Car Insurance History

If you drive an automobile, car insurance is one of the most valuable things you pay each month. It may be annoying to pay the premium, but you can drive with peace of mind from knowing you are covered.

That’s assuming that you are properly covered, of course. Some drivers may not have enough coverage because they didn’t fully understand the policy they signed. And the misunderstanding usually comes from confusing car insurance vocabulary in the policy itself.

We put together this guide about the most misunderstood terms in car insurance history to cut down on confusion. Keep reading to discover what these terms are and what each one really means.

Deductibles

On paper, the idea of a deductible is simple enough. A deductible simply represents the amount of money you must pay out of pocket before your insurance pays for anything. For example, if you have a $10,000 deductible, you would have to pay $10,000 of your own money before your insurance coverage kicks in.

But what often confuses drivers is the relationship between the deductible and the monthly premium. Generally speaking, a higher deductible leads to a lower amount you have to pay. But in the event of an accident, you’ll need to pay every penny on that deductible before your insurance company steps up.

Ultimately, it’s up to you and your insurance agent to look at your finances and find the deductible amount that is best for your situation.

Personal Injury Protection

In most states, Personal Injury Protection (or PIP) insurance is entirely optional and mandatory in others. And in all states, it’s a bit confusing.

PIP insurance helps to pay the medical expenses related to an accident regardless of who was at fault. And on top of paying for medical expenses, this type of insurance can help cover lost wages, loss of essential services, and even funeral expenses.

In most states, this type of insurance is an optional form of extra protection. But Puerto Rico and 12 states (including Florida, Hawaii, Kansas, Kentucky, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Dakota, Pennsylvania, and Utah) are no-fault states which require you to have PIP insurance.

Property Damage Liability Insurance

Property damage liability insurance is confusing because insurance agents tend to talk about “liability insurance” as one thing. But there are different forms of liability insurance, and property damage liability insurance can be confusing.

Simply put, this type of insurance helps to pay for any property damage that you may cause with your vehicle. And this covers a wide range of potential damage.

For example, the most common type of property damage is damage to the other person’s vehicle. But this will also cover scenarios where you drive into someone’s mailbox or slam into a city light pole.

It can be confusing as to who this policy protects. In this case, property damage liability insurance only covers the damage you do to other cars. If you want better protection for your own vehicle, then you need to take out some collision insurance.

Bodily Injury Liability Insurance

As we said earlier, “liability insurance” actually contains multiple kinds of insurance. The first is property damage liability insurance. And the second is bodily injury liability insurance.

This type of coverage works the same as property damage liability insurance but focuses on other people’s injuries rather than damage to vehicles or property. So if you are at fault in a car accident, your bodily injury liability insurance will help to pay for the other party’s medical expenses.

Once more, this type of insurance is only designed to help pay for the bills of those that you injure. If you want additional financial protection for your protection, you should invest more in either your regular health insurance or optional PIP insurance.

Comprehensive Insurance

Perhaps the most misunderstood car term of them all is “comprehensive insurance.” And the reason it is misunderstood is simple: “comprehensive” car insurance isn’t all that comprehensive.

Despite the term “comprehensive,” this type of insurance merely refers to extra coverage for events outside of a car collision. For example, only comprehensive insurance can help protect your car from fire, vandalism, and even falling trees.

In most states, you are only required to have liability insurance. But if you have a combination of liability, collision, and comprehensive insurance, some agents and carriers will refer to this as having “full coverage.”

The SR-22

The primary reason that the SR-22 is a misunderstood term is because of a specific term many drivers and even many insurance agents use: “SR-22 insurance.” In reality, there is no such thing as SR-22 insurance.

Instead, the SR-22 is merely a form you file with your state to indicate that you now have the minimum level of required automobile coverage. This form sometimes goes by different names, including SR-22 Bond and Certificate of Financial Responsibility.

Most drivers do not need to file an SR-22. Instead, this is a form a driver may be ordered to provide to the state after being convicted of a DUI, DWI, or certain other driving offenses.

Where does the term “SR-22 insurance” come from? When a driver is legally required to file an SR-22, they are considered a risky driver, and many carriers will not insure them at all. The carriers who will still insure risky drivers often charge them a hefty monthly premium.

Therefore, some drivers refer to the pricey insurance as SR-22 insurance. Or they may use this term to refer to the insurance carriers who will help drivers file the SR-22 form with the state.

Getting the Right Car Insurance

Now you know the truth about these misunderstood car insurance terms. But do you know where you can find the automobile insurance coverage you need today?

Vern Fonk has the information and services you need for your car insurance. To discover the difference Vern Fonk can make for your coverage and premiums, get an online quote today. Or you can find the nearest office and visit us! Or, pick up the phone and give us a call at 1-800-455-8276.