Auto insurance is a necessity, but not all policies are created equal. Plans are typically written using industry lingo, which can make it challenging for the average driver to completely understand what they're paying for. To ensure you're choosing the right one, take a moment to learn about these three common terms.

3 Common Auto Insurance Terms

1. Underwriting

As a driver, “underwriting” is one of the most important words you should understand. This is the process in which the cost of your insurance policy is determined. Performed by an underwriter, it takes into account various aspects of your life, including your driving record, your credit score, and the vehicle's safety rating. Every insurance company uses their own formula to determine premiums, which is why quotes vary so drastically.

2. Personal Injury Protection

Personal injury protection (PIP) is a type of coverage that is designed to protect you and any passengers in the vehicle after an accident. Even if the collision is determined to be your fault or the other driver isn't insured, this component provides financial assistance for medical costs as well as lost wages as the result of an injury. In some states, like North Carolina, PIP isn't required, but it can help you avoid extensive financial costs if a crash occurs.

3. Financial Responsibility Law

Each state puts into place its own minimum requirements for liability coverage. All auto insurance plans must meet these minimum requirements, but anything outside of the coverage is an out-of-pocket cost. For this reason, many agents suggest increasing your liability coverage to higher amounts in case you're involved in an accident with high medical and property damage costs.

Understanding auto insurance terms will help you choose the right policy. If you need assistance finding coverage that meets your needs, turn to the professionals at A Better Choice Insurance Agency in Concord, NC. The family-owned company has built a reputation over their 25 years of service for going above and beyond for their clients. Request a quote today by calling (704) 782-2073 or visiting them online.