Actual cash value (ACV) - The value of your property, based on the current cost to replace it minus depreciation

Binder - A temporary insurance contract that provides proof of coverage until you receive a permanent policy.

Bodily injury (BI) - Physical injury to a person.

Claimant - A person who makes an insurance claim.

Collision coverage - Pays for damage to your car without regard to who caused an accident. The company must pay for the repair or up to the actual cash value of your vehicle, minus your deductible.

Comprehensive coverage (physical damage other than collision) - Pays for damage to or loss of your automobile from causes other than accidents. These include hail, vandalism, flood, fire, and theft.

Declarations page - The page in your policy that shows the name and address of the insurer, the period of time a policy is in force, a description of the vehicle, the amount of the premium, and the amount of coverage.

Deductible - The amount the insured must pay in a loss before any payment is due from the company.

Depreciation - The act of lowering an item´s value due to use or wear and tear.

Earned premium - The portion of a policy premium that has been used to actually buy coverage, or that the insurance company has "earned." For instance, if you have a six-month policy that you paid for in advance, two months into the policy, there would be two months of earned premium. The remaining four months of premium is called unearned premium.

Endorsement - A written agreement attached to a policy expanding or limiting the benefits otherwise payable under the policy. Same as a "rider."

Gap Insurance - Insurance that pays the difference between the actual cash value of a vehicle and the amount still to be paid on the loan, Some gap policies may also cover the amount of the deductible.

Liability insurance - Pays for injuries to the other party and damages to the other vehicle resulting from an accident you caused. It also pays if the accident was caused by someone covered by your policy, including a driver operating your car with your permission.

Liability limits - The maximum amount your liability policy will pay. Your policy must pay at least $25,000 for each injured person, up to a total of $50,000 per accident, and $25,000 for property damage per accident. This basic coverage is called "25/50/25" coverage.

Loss - The amount an insurance company pays on a claim.

Medical payments and personal injury protection (PIP) - Both pay limited medical and funeral expenses if you, a family member, or a passenger in your car is injured or killed in a motor vehicle accident. PIP also pays lost-income benefits.

Named driver exclusion - An endorsement that provides that a policy does not cover accidents when a specifically named person is the driver.

Named driver policy - A policy that covers only the drivers specifically named in the policy. Generally, all other drivers are excluded from coverage under the policy. This type of policy is usually written by surplus lines companies.

Non-owners policy - Insurance coverage that offers liability, uninsured motorist, and medical payments to a named insured who does not own a vehicle.

Non-renewal - A decision by an insurance company not to renew a policy.

Property damage (PD) - Physical damage to property.

Rental reimbursement coverage - Pays a set daily amount for a rental car if your car is being repaired because of damage covered by your auto policy.

Rider - A written agreement attached to the policy expanding or limiting the benefits otherwise payable under the policy. Same as an "endorsement."

Reinstatement - The process by which a life insurance company puts a policy back in force after it lapsed because of nonpayment of renewal premiums.

Surcharge - An extra charge added to your premium by an insurance company. For automobile insurance, a surcharge is usually added if you have at-fault accidents.

Surplus lines - Coverage from out-of-state companies not licensed in Texas but legally eligible to sell insurance on a "surplus lines" basis. Surplus lines companies generally charge more than licensed companies and often offer less coverage.

Towing and labor coverage - Pays for towing charges when your car can´t be driven. Also pays labor charges, such as changing a flat tire, at the place where your car broke down.

Underwriter - The person who reviews an application for insurance and decides if the applicant is acceptable and at what premium rate.

Underwriting - The process an insurance company uses to decide whether to accept or reject an application for a policy.

Uninsured/underinsured motorist (UM/UIM) coverage - Pays for your injuries and property damage caused by a hit-and-run driver or a motorist without liability insurance. It will also pay when your medical and car repair bills are higher than the other driver´s liability coverage.

You might drive a nice car or a beater. Regardless of what you drive there are several reasons that auto insurance is a must have:
1. In most states, it’s the law and there is no worse feeling than being pulled over by “officer friendly” when your insurance has expired.
2. It provides protection for you, your family, and your hard earned assets.
3. It can help protect you from “Murphy” of “Murphy’s Law” so that he doesn’t move in to your spare bedroom and turn your life into a country song. (I was in a darn’ wreck and totaled my truck. I didn’t have insurance, so the guy I hit sued me and took all my stuff. Now I ride the bus alone, because I’ve got no wheels. Boy I wish that I had insured my automobile! (Sorry poetry and music lovers, this is the best we could come up with).

There are policies that cover you financially if your car is stolen, damaged by another driver, hit by a natural disaster, or if another driver isn’t insured; these coverage’s are all very important to be educated on and consider, but two of the most important types of auto insurance are liability and comprehensive coverage.

Liability Coverage

When it comes to how much liability insurance you should have, that can be answered in one word: lots. Liability auto insurance is the cheapest and best buy in the entire insurance world. It really does pay to have a large amount—around $500,000 or so. If you are in an accident that is “your fault,” the liability insurance covers what is considered to be your fault, like the costs to get a car fixed or someone’s medical bills.

If you do not have liability insurance at that time, you would be responsible for paying that amount out of pocket, which would not be a good situation. Liability auto insurance is a definite must-have, no matter what kind of car you drive.

Comprehensive Coverage

You should have comprehensive auto insurance as well. Comprehensive insurance pays for when your car is damaged or stolen. If your car is expensive, you need it for obvious reasons. If you are driving a beater, it doesn’t cost much to insure, so just keep the coverage. If you have no money, don’t take the risk of having your vehicle totaled, leaving you with no way to get around. Since you wouldn’t get money from the insurance company or your savings, you would be stuck. Don’t put yourself in that situation. Just eliminate the potential stress by having comprehensive coverage.

If you have some money set aside and are driving a less-expensive car, do a cost-benefit analysis. If it only costs $20 a month to insure a $3,000 car, that’s a good deal since it will take you a longer time to pay more in insurance costs than it would to replace the car if you had no coverage.

Always make sure you are covered in case life decides to hit you…or your car.