Comentarios del lector/a

10 car insurance terms you need to know

por Lashay Southee (2020-02-15)

page1-45px-Travel_Insurance_Infographic_id="article-body" class="row" section="article-body"> Getty Images Buying car insurance is more than finding a company and paying the premium for coverage. Insurance policies are packed with legalese that can make understanding your policy difficult and confusing. To help, we've compiled the 10 most common automotive insurance terms you need to know. This will help you make the right decision when purchasing protection for one of your most expensive and valuable assets -- your car. 

Collision coverage
This kind of coverage pays for damages to your vehicle, no matter who is at fault. If you drive a new car, a classic or just something near and dear to your heart, collision coverage is a good buy -- in fact, if you're financing your vehicle, it's likely a mandatory expense. However, if you bought your 20-year old ride for $1,500 and a case of Diet Dr Pepper, it's probably not worth it.

Comprehensive coverage
This pays for damage to your car or truck not caused by a collision with another vehicle. Ex-lover took a baseball bat to the quarter panel? Covered. Hit a deer? Covered. Car stolen from the mall parking lot, caught fire during a riot, floated away during a hurricane? Covered, covered and covered. As with collision coverage, comprehensive is worth the price if you drive a new or otherwise valuable car (and it, too, could be mandatory if you're still financing your ride).

Enlarge ImageComprehensive coverage is a good idea if you have a nice Porsche that may be involved in a mudslide. 

Justin Sullivan / Getty Images Deductible
This is the amount you pay out of pocket for repairs when making a claim before your insurance kicks in. The higher your deductible, the lower your monthly payments.

Declarations page
No, this isn't where you declare your undying love for your Miata. It's essentially a summary of your coverage, including kind of coverage you have, the limit and cost for each and what vehicle is covered.

Full coverage
Don't be fooled! "Full coverage" auto insurance doesn't truly exist. However, online insurances it can imply that a policy includes more than liability coverage. For example, a policy with comprehensive and collision coverage, uninsured and underinsured motorist coverage, roadside assistance, rental car reimbursement and the like could be considered "full coverage."

Gap insurance
This term is best explained by example. You may have heard that a car's value begins depreciating as soon as you drive it out of the dealership, so your $80,000 car has a value of $70,000 after, let's say, three months. You've been paying $1,000 per month, so you now owe $77,000 on a car that is only worth $70,000. As you're lamenting this fact, some distracted driver comes along, slams into you and totals your car. Guess what? Your policy is only going to pay out the $70,000, leaving you on the hook for $7,000 for a car that you can't even drive any more.

Gap insurance is worth considering for folks leasing or making payments on a car, but if you own your car outright or owe less on it than the car is worth, you can leave gap insurance on the table.

Liability insurance
This is the minimum amount of insurance you need to carry. It pays for damages and injuries to the other party in an accident of your fault, but does not pay for any damages/injuries to you or your vehicle.

There are two kinds of liability insurance. Bodily injury liability covers you if you are at fault for another person's injury or death. It will pay for medical expenses, lost wages and the somewhat intangible "pain and suffering." If you are sued, bodily injury liability will pay for your defense and court costs. Usually it will be written as two numbers, for example $25,000/$50,000. The first number refers to the limit of payment per person, the second to the limit of payment per accident. So if you do bodily injury to four people in an SUV, your policy will only pay out $50,000. You're on the hook for the rest.

Enlarge ImageWith liability insurance, if you're at fault insurance will pay out only for the person you hit.

Robert Nickelsberg / Getty Images Meanwhile, property damage liability pays for damage done to property, including the other party's car or anything damaged during the accident -- like the fence you hit when you accidentally put the car in reverse instead of drive. It's usually written in conjunction with bodily injury limits, so you might see $25,000/$50,000/$40,000. The first two numbers are your bodily injury limits, the third represents the amount the policy will pay out for property damage.

No-fault insurance
No-fault insurance keeps blame out of the insurance game. Each party's insurance will pay injury benefits to the policy owner regardless of who was at fault in an accident. So, even if you are injured by a drunk driver, your insurance pays out the benefit. It does not cover property damage.

No-fault  was devised as a way to cut back on motorists suing each other for minor injuries. Each state determines the limit of coverage and you are responsible for paying the difference unless injuries pass a threshold of severity. If the injuries are severe, as is likely in our drunk driver example, it is possible to collect from the at-fault party. However, each state sets its own threshold.

Enlarge ImageHow mad would you be if someone spray painted your car?

Josh Edelson / AFP/Getty Images According to Allstate, as of June 2017 the following states have no-fault insurance: Arkansas, Delaware, Florida, Hawaii, Kansas, Kentucky, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Dakota, Oregon, Pennsylvania and Utah. No-fault insurance is optional in District of Columbia, New Hampshire, South Dakota, Texas, Virginia, Washington and Wisconsin. However, laws can change, so be sure to inquire with your agent as to what your state requires.

Personal Injury Protection (PIP)
This is the basic coverage required in no-fault states. Your state will determine specific details, but in general, PIP will cover medical expenses, lost wages, funeral costs and essential services you may not be able to perform due to injuries.

Also known as a Certificate of Financial Responsibility (CFR), this is essentially proof of insurance for folks who have had a suspended driver's license.  If you've been convicted of driving under the influence, driving without insurance, or if you've got a bad driving record with an injury-causing accident to your name, you'll more than likely need an SR-22.

The DMV will inform you of the need to file an SR-22. You'll have to contact your insurance provider and have them file the paperwork with the DMV. This may result in your being reclassified as a high-risk driver, so be prepared to have your rates go up or your policy cancelled altogether. Requirements vary by state, but in general, you'll have to carry an SR-22 for three years.

Originally published Sept. 1, 2018.

More From Roadshow 2020 Honda Insight review: Effective, if a bit annoying 2020 Ford Explorer ST review: A midsize SUV with a focus on fast 2019 Honda Passport review: All the SUV you really need Comments Car Industry Notification on Notification off Cars