Auto Insurance Terms You Need To Know

Reading through an insurance policy can be time consuming and confusing. These documents are legal contracts binding policy owners and insurance companies and understand them is crucial. To make the process smoother, CNet has complied the following most common insurance terms you need to know.

Collision coverage

Collision coverage pays damages to your vehicle, even if you are at fault. If you are financing your car, collision coverage is mandatory.

Comprehensive coverage

Comprehensive coverage covers damages to your vehicle that is not caused by another car. For example, your vehicle can catch fire or you can total it hitting a dear and it would be protected by comprehensive coverage.


A deductible is the amount of money that you pay upfront when making a claim before your insurance kicks in. If you choose a higher deductible, the cost for your insurance policy will be reduced.

Declarations page

The declarations page is a summer of your auto insurance policy. It includes the type of coverage and limits of the insured vehicle.

Full coverage

A full coverage policy typically includes comprehensive and collision coverage, uninsured and under insured motorist coverage, roadside assistance and rental car reimbursement. What companies consider full coverage varies between insurance providers so make sure you are getting the coverage you need.

Gap insurance

Gap insurance covers the depreciation value while the car is being financed. Cars depreciate in value as soon as you leave the dealership. The $30,000 you purchased will not be worth the same amount after a few weeks. However, your car loan will not be reduced to match the current value. Gap insurance protects borrowers from paying out of pocket if their loan higher than their car is actually worth.

Liability insurance

Liability insurance is the minimum amount of insurance you must legally purchase. It pays for damages and injuries of the other party if you are at fault for an accident. Liability coverage does not pay for damages or injuries for your vehicle.

No-fault insurance

No-fault insurance pays out injury benefits to the policy owner regardless of who is at fault. No-fault insurance does not apply to property damage.

Personal Injury Protection (PIP)

PIP is basic coverage required in no-fault states. It covers medical expenses, lost wages, funeral costs and other expenses that accumulate due to injuries.


A Certificate of Financial Responsibility (SR-22) is proof of insurance for drivers with a suspended license. Insurance providers with file the required paperwork with the DMV on your behalf.

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