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5 Important Auto Insurance Terms To Know

Liability, Collision, Comprehensive, Deductible, Subrogation

When it comes to car insurance, do you feel completely lost? It’s so full of jargon and insider-talk, how is a regular person supposed to understand? Well, although there are many terms you can leave to the professionals, there are a few you should know to know if you have the best coverage for your situation. We’ll walk you through five important terms you need to know.

Liability Coverage

This is the coverage that protects you if you cause an accident, hurt someone, or cause damage to property. If you are sued by another party, legal expenses may also be covered. The limits of coverage are broken down into two types – property damage and bodily injury – meaning the policy will pay up to the specific limits for the specific damage from the accident. It is required in almost every state and each state sets its own minimum. You can generally buy more coverage if you’d like.

Collision Coverage

Collision coverage pays for damage to your own vehicle if it hits something such as a car or object, is hit by another car, or it rolls over. If someone else hits you and their insurance can’t or won’t cover the cost of damages (or they don’t have enough or any insurance), your collision coverage is what pays for the repairs. This coverage is optional in most states, however, if you’re financing or leasing a car, it will probably be required by the lender. Once your car is paid off or is very low in value, you may find it more cost effective to drop this coverage.

Comprehensive Coverage

This coverage generally goes together with collision. It covers damage to your car for reasons other than what collision covers. For example, it covers damage caused by hitting an animal as well as some weather events and natural disaster, such as a tree falling on your car. It also covers theft and vandalism. It also sometimes includes windshield coverage.


When you file a claim for damage to your car, you’ll be required to pay a certain, pre-determined amount before the insurance company will step in. This is known as your deductible. The higher your deductible is, the lower your premium for the policy will be. Deductibles range from $250 to $2,000. If possible, save up the amount you need for your deductible in an emergency fund and raise your deductible as high as you can.


After an accident, it may be determined that the other driver was at fault. If your insurance company made any payments to repair your vehicle, they may seek to be reimbursed by the other driver’s auto insurance company in a practice known as subrogation. If they are successful, you may receive some or all of your deductible back. However, if you are found at fault in an accident, the other driver’s insurance may subrogate against your insurance.