Buying cheap car insurance can be confusing and complex, in part because so many of us do not know very much about it. However, there are a few basic terms that you can learn that will help to demystify your coverage and help you get the insurance you need.
Bodily Injury Liability (BI)
Bodily Injury Liability coverage is insurance for bodily injuries or deaths that a policyholder may be responsible for because of an accident. This kind of insurance does not cover the policyholder or other people on the policy nor does it cover damage to any of the vehicles involved in the accident. It does, however, provide for a legal defense if a party in the accident sues the policyholder for things like medical bills, pain and suffering, or loss of income. This insurance is required by all states. The minimum requirement is also set by law and varies from state to state.
Property Damage Liability (PD)
This type of car insurance covers damage that the policyholder’s car does to someone else’s property. This normally covers damage to a car that is hit in an accident, but it also covers damage to other kinds of property, like fences, mailboxes, houses, and bicycles. Like BI coverage, this type of car insurance will provide a defense for the policyholder if they are sued for damages. Some states require a minimum level of property damage liability car insurance. All states set a maximum amount that can be paid out under this kind of coverage.
Comprehensive Coverage (COMP)
Comprehensive coverage covers damage to the policyholder’s vehicle, and sometimes other vehicles he or she was driving, for losses due to factors other than accidents. This kind of car insurance covers damages to stolen cars. It also covers damage caused by floods, fires, animals, and other accidental situations. The insurance will pay to fix the insured vehicle up to the coverage limit minus the deductible on the policy. Many people choose to have higher deductibles on this type of coverage to have a lower premium.
Collision Coverage (COLL)
This kind of car insurance covers damage to the policyholder’s vehicle when it hits or is hit by another vehicle or an object. Collision coverage will pay to fix the vehicle up to the policy limits minus the deductible, which the policyholder pays out of pocket. Many people choose to drop this coverage on older cars because coverage is limited to the cash value of the car. Collision coverage is not required by any state, but when loaning or leasing a vehicle, the lien holder will generally require the lessee to have this type of coverage.
Uninsured or Underinsured Motorist Coverage
There are several different kinds of car insurance that cover damages or injuries inflicted by an uninsured or underinsured motorist. Uninsured Motorist Bodily Injury (UNDUM) covers injuries to the policyholder and passengers when the uninsured motorist was at fault. Uninsured Property Damage (UMPD) covers damage to the policyholder’s property caused by an uninsured motorist. Finally, Underinsured Motorist Property Damage covers property damage in excess of the limits of the underinsured motorist.
There are many different types of car insurance coverage that you may want to consider when choosing an insurance policy. Make sure that you understand what all of them are and what the state requirements are before you choose an insurance policy.