3 Misunderstood Car Insurance Terms That Could Cost You

Buying car insurance can be a lot more confusing than drivers might expect. It may seem like a simple matter of reaching out to an insurer and getting a policy in place, but there are actually tons of choices to make about what coverages to buy.

Unfortunately, sometimes drivers end up making costly mistakes when getting covered that hurt their bank account balance. In particular, here are three terms that are often misunderstood -- and not knowing the truth about them could come at a huge cost.

1. Comprehensive coverage

When drivers hear about "comprehensive coverage," it's not surprising that many people think it will be truly comprehensive, or cover everything they need. After all, it's right there in the name.

In reality, comprehensive coverage is not nearly as comprehensive as a reasonable person would assume. Basically, this type of insurance pays for non-collision related damage. It pays for things like glass breakage to a vehicle, damage to the car due to vandalism, a tree falling on the car, or theft.

What it does not do is pay a single penny toward crash damage that a driver might incur. With an average cost of $5,700 in property damage costs per vehicle in auto accidents, that can be a big problem for drivers who may think they are protected but who find out they are not.

Motorists who want to make sure their insurer actually pays in a crash will need to get collision coverage. In general, it's a good idea to get both collision and comprehensive coverage so the insurer will pay out for crash losses and all the other things that can go wrong. Collision costs around $290 per year on average and it is usually well worth it to ensure that car repairs can be paid for by insurance (or that insurance will pay to replace a totaled car!). Drivers with auto loans on their vehicles will generally be required to carry both comprehensive and collision coverage.

2. Bodily injury coverage

"Bodily injury coverage" is also a term that could be misunderstood. It's easy to believe this will pay for injuries the policyholder sustains -- but it won't. It only pays for bodily injuries caused to others in an accident. The actual policyholder will not have any insurance coverage of their own from this.

Those who want to make sure they can get their own medical bills paid by an auto insurer after an accident should get medical payments coverage, which will pay for their out-of-pocket health expenses like health insurance deductibles and other treatments health insurance may not cover. Usually, this adds less than $20 to auto insurance premiums but it could be invaluable in case of an accident that causes injuries.

3. Rental car reimbursement

Finally, "rental car reimbursement" is a confusing term because policyholders may think it covers the cost of damage to a rental car. In reality, it will pay for a rental car that is needed while repairs are being made on a vehicle after a covered loss. Without it, drivers could get stuck without transportation or paying out of pocket for a rental car.

Rental car reimbursement usually costs around $4 per month, and with the average cost to rent a car coming in at close to $100 a day in most parts of the country, having this coverage is crucial.

A full understanding of these terms is important to get the right coverage -- so drivers should review their auto insurance policies with this information in mind to ensure they have the appropriate protections in place.