If you recently started shopping for auto insurance, it can be confusing trying to navigate the process if you’re unfamiliar with much of the vocabulary used in the insurance world. It’s important to learn some basic terms so you can properly compare policy options. Here are a few words you’ll need to know to make an informed decision when selecting insurance coverage. 

Auto Insurance Definitions You Should Know

1. Collision 

If your vehicle is damaged or totaled as the result of hitting another car or object, collision coverage pays for repairs or replacement parts. Although the law doesn’t require drivers to have this type of coverage, many lenders do. Therefore, if your vehicle is financed, you may need to add it to your policy. 

2. Comprehensive

Comprehensive coverage will protect you in the event a loss occurs due to incidents other than a collision. This includes theft, vandalism, damage from a falling object, weather-related damages, fire, and damage from colliding with an animal. 

3. Deductible 

A deductible is the out-of-pocket amount you must meet before your insurance kicks in to cover the rest. For example, if your deductible is $1,500 and your insurance pays for 75% of the costs after you meet your deductible, you must first reach $1,500 out-of-pocket before your insurance covers the rest. You are given the opportunity to decide how much your deductible should be at the time your plan is purchased. Keep in mind, higher deductibles mean lower premiums and vice versa.  

4. Liability 

This is the part of your auto insurance policy that covers any body injuries and property damage you cause in an accident. The majority of states require their drivers to carry a minimum amount of liability coverage. In Alaska, these limits include $50,000 for bodily injury or death per person, $100,000 for total bodily injury when multiple people are hurt, and $25,000 for property damage. 

5. Premium 

The premium is how much you pay to maintain active coverage. Insurance companies calculate premiums based on a driver’s level of risk, which means how likely they are to file a claim. Your cost will be dependent on a variety of factors, such as where you live, what you drive, your age and gender, your driving record, and your credit score.  

Without an understanding of auto insurance terminology, it will be difficult to know if you’re buying the right coverage or getting the best deal possible. Make sure you’re sufficiently covered at a price that fits your budget by working with the professionals at Dunlap Agency, Inc. Offering more than 30 years of experience, they have been entrusted to provide numerous residents in and around Fairbanks, AK, with high-quality products from some of the industry’s most reputable carriers. Call (907) 456-5202 to schedule an appointment or visit them online to request a quote.