10 terms in a car insurance contract you need to know

When you want to buy a new car, you will have to spend time thinking about some factors before making decisions. One of them is to decide what type of car insurance you will buy.

There are many different types of car insurance, depending on the legal requirements of each country. It can make you confused, even if it is not the first time you buy a car or buy insurance.


Here are the 10 most popular terms you should know before choosing your car insurance:

  1. Insurance premium

Premium is the amount of money that you have to pay the insurers for compensation in case of car accidents or any risks.

  1. Level of exemption

An exemption is a term regulating that if there is a loss and the cost of repair is below the deductible, the insurance company is not responsible for paying the cost. In contrast, if the cost is equal to and higher than the normal deductible, the insurance company must pay the remaining costs after deducting the exemption.

For example, you choose a car insurance policy with an exemption of $300. Unfortunately, the accident occurs, the repair costs $400 million. In this case, the insurance company will pay the difference of $100. Normally, the higher the premium, the lower the discount.

  1. Liability insurance for injuries

If you drive a car and cause an accident, the insurer will pay for medical expenses, loss of earnings, injury recovery or burial costs for the victim of the accident, not for the driver. The injury liability insurance also covers the legal costs involved.

  1. Comprehensive insurance

Comprehensive insurance will pay for all damages to your car, regardless of what the cause is. For example, if your car is damaged in an accident caused by another driver, instead of waiting for his/ her car insurance company to check, you can pull your car straight to the nearest repair shop. Your insurance company will pay for the repair costs and then claim the insurance company’s payment from that driver later.

  1. Collision insurance

If your car is overturned or collided with another vehicle or obstacles, collision insurance will pay for damage to your vehicle. This insurance can be extended to vehicles that do not belong to you or rental cars.

  1. Differential insurance

If you have not paid off your car loan and the car is stolen or caught in an accident (the insurance company determines the cost of repairing the vehicle is higher than the actual value), the differential insurance will compensate the difference between your outstanding debt and the actual value of the car. You will not have to pay for a car that is no longer usable.

  1. Injury insurance

Injury compensation will cover medical expenses, funeral expenses, drivers, passengers or any other person who suffers from damages caused by the insured vehicle within the prescribed limits.

  1. Liability insurance for property damages

Liability insurance for property damages will make up for the loss of property of another person due to an accident caused by the insurer. This insurance can also cover the legal costs associated with the accident.

  1. Insurance coverage below compensation

This insurance covers medical expenses, rehabilitation or funeral expenses for the driver or passengers insured on the vehicle in case the person causing the accident escapes or does not have insurance to make compensation.

  1. Health insurance

This insurance covers all medical expenses for drivers and passengers in cars, regardless of who causes the accident.

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