The language used with insurance can get confusing. It is important for you to understand what you are agreeing to and how that agreement will work if you are going to ensure that you are covered completely.
Here are just a few important terms (concerning automobile insurance) that you need to know:
Liability Coverage – This coverage protects you against any of the financial obligations that might result from an accident. Typically it will cover physical injuries or property damage up to a certain amount. Most states require that all vehicles have liability coverage to protect the other party in case there is an accident.
Uninsured Motorists Coverage – There are times when accidents are caused by individuals who are not insured or that causes the accident and the leaves the scene. Any expenses that you incur from these situations are paid for through the Uninsured Motorists Coverage that exists in your policy (subject to the monetary limits set by your policy).
Exclusions – The part of the insurance policy that lists all of the different situations that will not be covered by the policy. It often includes situations, properties, perils or even persons that are not covered. The Exclusions section of the policy will cover things that are not expressly included in the policy.
Full Coverage Car Insurance - The term implies that everything is covered but in reality there is no such policy. It is most often used for a policy that is more than just liability and is most commonly used by the policy holder to describe the coverage that is held. Insurance companies do not issue full coverage auto insurance policies.
Gap Insurance – This is the policy you need to guarantee that the amount paid in case of a total loss will cover the gap between what you owe on the vehicle and the market value of the vehicle at the time of the accident. If you are making lease or loan payments then this coverage is recommended.
Collision Coverage – This is the portion of the policy (or the individual policy) that will cover the vehicle when there is damage caused by a collision with another car or object or if the car is upset (turned over) regardless of fault. Typically it is limited to the value of the car minus any deductibles.