Posted on: Jun. 12, 2017 in Auto Insurance

Auto insurance is full of jargon. Terms that need defining are all over the place. Test your knowledge of some common terms below.


1. What is the amount you must pay out of pocket before your insurance company will pay the rest of the claim?

It’s called the deductible. This amount can typically range from $200 to $2,000 and it’s the policyholder’s responsibility.

2. What kind of coverage pays for damage to your car if it hits something like a car or an object, is hit by another car, or rolls over?

As the name implies, collision coverage deals with this kind of damage. It’s so named because your car collided with something else.

3. What kind of coverage pays for the damage your car causes when it hits something else like someone’s house, their car, or a person?

Liability coverage is what protects you if you cause an accident, hurt someone, or cause damage to property. If you are sued by another party, legal expenses may also be covered. Typically, this type of coverage is required in most states.

4. What kind of coverage deals with theft, vandalism, damage caused by hitting an animal, and some weather events and natural disasters?

Acts with other causes besides those from a collision are handled under your comprehensive policy. It pays for damages that weren’t caused by a collision with another vehicle or object. It often includes windshield coverage. This policy is often not mandatory if your car is older and not worth very much.

5. What is the term for the situation when one insurance company attempts to recover payments it made on a policyholder’s behalf when it is determined the other driver is at fault?

It’s called subrogation. After an accident, it may be determined that the other driver was at fault. If your insurance company made any payments to repair your vehicle, they may seek to be reimbursed by the other driver’s auto insurance company. If they are successful, you may receive some or all of your deductible back. Keep in mind that if you are found at fault, the other driver’s insurance may subrogate against your insurance.

6. Your car is worth a certain amount of money when you buy it. However, once you drive it, and as it ages, the value will go down. What is this called?

This is called depreciation. The age, wear and tear, and other factors go into determining just how much and how fast the car loses value. The value of the car is important when the insurance company is determining how to handle a claim.

7. What does it mean if your car is “totaled” in an accident?

This is when the insurance company decides the car is beyond repair and is no longer safe to drive. If your car is considered a total loss, the insurance company will handle your claim differently than if they decide to reimburse for repairs.

Insurance doesn’t have to be confusing. In fact, the more you know about it, the easier it can be to get the right coverage for your situation.

If you’re ready for a new car but your credit is keeping you from getting approved, CreditYes can help with our bad credit auto loan program! We can match you with a dealership in your area that will be with you every step of the way. Our service is fast and free. Fill out our secure online application and get behind the wheel of your next car today!