5 Terms You Should Know about Auto Insurance

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Auto insurance protects you from financial loss because of the damage or destruction of your vehicle. It can be hard to know what type of coverage you need. The following article will provide an introduction to the most common types of auto insurance, as well as some key terms that you should know.

Liability

Liability is your financial responsibility in an accident. If you cause an accident that injures someone and damages property, you are responsible for paying those costs. To lessen your responsibility, you can purchase insurance, such as from an auto insurance Newark DE company, to assume that risk for you. Many states require some level of liability insurance.

Collision

A collision can refer to an accident between vehicles or between vehicles and stationary objects, but collision can also refer to the type of insurance that provides coverage for collision damage. This insurance only pays for the damage and replacement parts for your vehicle in a collision in which you are deemed at fault. There may be exclusions and limits to this kind of policy.

Comprehensive

Comprehensive insurance is an insurance policy that can pay for damages and replacement parts for your vehicle because of falling objects, hail, and collisions with animals. This insurance is usually considered a type of insurance that pays for damage from causes beyond human control. Most states do not require comprehensive insurance, but comprehensive claims can be common and account for a significant amount of financial loss. These policies may also contain exclusions and limitations.

Deductible

In many auto policies, you are required to pay a certain amount of money before the insurance pays. In some cases, you may be required to pay out-of-pocket for a portion of the claim. This initial amount is called a deductible. Collision and comprehensive insurance policies often carry a deductible, but you may choose the amount of the deductible based on the policy you carry.

Peril

A peril is a risk that has the potential to cause damage or injuries that might require reimbursement by the insurance company. An example of a peril in auto insurance is deer, which can cause an unexpected accident that injures you and damages your vehicle.

It is important that you understand what insurance you need so you are covered from financial loss in case of an accident. A licensed insurance agent can clarify your policy and help you ensure there are no coverage gaps.

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