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Demystifying car insurance policies, types, and terms

Most states require auto insurance. But do you have the right type for your needs?

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Most states require drivers to have auto insurance — but how do you know if you're getting the right type of policy for your needs?

First, fulfill your state's and lender's minimum requirements. A call to your state's insurance commissioner's office can get you started.

The next step is becoming familiar with non-required types of insurance and what each one covers, as well as what is meant by some commonly seen insurance terms.

Know these insurance terms

  • Bodily Injury Liability covers injuries, lost wages, pain and suffering, and other damage you might cause to other drivers, passengers, and/or pedestrians. 
  • Rental Reimbursement may pay for a rental vehicle if your car is not drivable after a crash.
  • Collision may provide coverage for damage inflicted to your vehicle after a rollover or crash with another car or object. This coverage typically requires a deductible.
  • Comprehensive provides coverage for damage to your vehicle after a non-vehicle or non-rollover incident, such as theft or weather damage. This coverage typically requires a deductible.
  • Emergency Road Service may cover expenses related to a breakdown, including towing and locksmith services.
  • Medical Payments and Personal Injury Protection may offer compensation for medical expenses, lost wages, and even funerals if you or other covered persons are injured in a vehicle-related crash.
  • Property Damage Liability may cover damage you cause to another individual's property while driving. This also covers court costs and legal expenses.
  • Uninsured or Underinsured Motorist Coverage may provide reimbursement if you're involved in a crash with a driver who doesn't have sufficient liability insurance — or any at all.

Learn these basic terms

  • Premium: Payment you make to your insurance company for your policy.
  • Deductible: The amount you pay before your insurance company may pay the rest, up to any policy limits that apply. Higher deductibles equal lower premiums; conversely, lower deductibles equal higher premiums.
  • Covered Persons: Policies generally cover the policyholder, their spouse, other relatives living in the home, and individuals driving the policyholder's vehicle with their permission.

This document contains only a general description of coverages and is not a statement of contract. All coverages are subject to all policy provisions and applicable endorsements, and may vary by state. For further information, please see a State Farm® agent.

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