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Auto Insurance Information Center

November 2012

Auto Insurance Coverage Terms Explained

What is the difference between comprehensive and collision coverage? Why does the amount of my deductible matter? What's an endorsement? Insurance terminology can sometimes be confusing.

Auto Insurance Coverage Terms Explained

Read on to see how we clarify these terms to give you the information you need to make informed decisions about your auto insurance coverage.

Collision Coverage

This type of coverage pays to repair or replace your car after a collision when it's damaged from hitting an object, such as a tree, sign or another vehicle, minus your deductible (an amount that you choose). The deductible is the amount of money you pay toward repairs before your collision insurance kicks in. The higher the amount you agree to pay, the less collision coverage will cost. Even if the accident is your fault, your collision coverage will provide money to repair the vehicle.

Comprehensive Coverage

Comprehensive coverage pays for the repair from other types of accidental damage unrelated to collisions, such vandalism, flood, hurricane, theft, and fire or falling objects. Comprehensive coverage typically pays for repairs as long as the cost of making the repairs does not exceed the vehicle's actual cash value. The actual cash value is determined based on the original purchase price minus depreciation.

If your car needs to be replaced, you will usually be reimbursed for your vehicle's actual cash value minus the comprehensive deductible you chose. Again, the higher the amount of your deductible, the less you can expect to pay on your premium.

Auto insurance endorsements

Automobile insurance endorsements (sometimes called riders) are optional provisions you can add to an insurance policy to expand or change coverage. Such things include additional transportation expense coverage, adding rental car coverage or customization coverage. You will find a list of all endorsements to your policy on the Declarations Page. When an endorsement is added to your policy, the insurance company will send a new declaration page detailing the endorsement.

Do your homework

Although many terms used in an insurance policy can seem confusing, having a good understanding of the terminology used is important to help you choose the coverage you need. Check your policy to see what your coverage limits are to make sure you’re not left under-insured: the last thing you want to find out after an accident is that you’re not covered.

Sources: dmv.org; usa.gov; nhtsa.gov

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