6 Common Terms To Know Before You Buy Car Insurance

No one wants to spend more than they absolutely have to when they buy car insurance, but unless you have taken a few minutes to consider your personal situation and your needs, you may well be on your way to doing just that. Before you buy car insurance, you need to have the facts. Finding reasonably priced car insurance isn't difficult if you know understand what it is, and what it protects.

1. Liability Coverage pays the accident expenses of other individuals, which were caused by drivers under your auto insurance policy. This might include their medical or funeral costs, compensation for injury and suffering, reimbursement of lost wages, reimbursement for car repairs or replacement. Liability coverage may also pay your attorney fees, in the event you are sued because of an accident. This insurance is mandatory in all but two states (New Hampshire and Wisconsin).

2. Medical payments coverage pays for medical and/or funeral costs resulting from any accident, whether vehicular, pedestrian or bicyclist, and covers any or all passengers in a car, regardless of who was at fault. This insurance is optional, depending upon your state requirements.

3. Personal Injury Protection (or PIP) coverage pays you (the driver) in much the same way as medical payments coverage, and often includes payment of a percentage of lost income, and the cost of hiring a care giver if you're incapacitated. This coverage is for anyone who was in the car at the time of an accident, regardless of who was at fault. This insurance is optional, depending upon your state requirements.

4. Uninsured and Underinsured Motorist Coverage pays your medical expenses for an accident that was caused by a motorist who either had no coverage or insufficient coverage, to pay for your expenses. Coverage also includes accidents created by a hit-and-run driver. It picks up where that reimbursement ends. Coverage can be for either or both, bodily injury or property damage. This insurance is optional.

5. Collision coverage pays for repair or replacement, up to a fixed limit, of the insured's vehicle which was involved in an accident, subject to a predetermined deductible. This insurance is optional.

6. Comprehensive coverage pays for repair or replacement of a vehicle, up to a fixed limit, of the insured's vehicle that was involved in an incident that is not considered an accident, i.e. an act of nature, vandalism, etc. This insurance is optional.

A word about "no-fault" states: Some states have enacted laws, in an attempt to reduce fraud arising from auto injury claims, and to keep car insurance prices down. The states that have "no-fault" laws require your insurer to pay for medical bills incurred as a result of a car accident, regardless of blame. Generally, though, if you live in a "no-fault" state, the PIP insurance coverage will be required.