Getting a new car insurance policy can be complicated, as you’ll need to select everything from your deductible to your coverage levels.  If you’re feeling confused, check out the following auto insurance definitions:

Deductible – This is the amount you’ll pay if you file a claim on your policy.  For example, if your policy has a $500 deductible and you get into an accident that causes $1,000 of damage, you’ll pay $500 out of pocket and the insurance company will pick up the rest.  Typically, the higher your deductible, the lower your monthly premium will be.

Collision Insurance – Collision insurance is pretty self-explanatory – this is the part of your policy that covers your liability when you hit or get hit by another car.  Depending on your policy, this may also cover damage to the other vehicle if you’re found to be at fault in an accident.  You’ll usually have a separate deductible for your collision insurance than your comprehensive insurance.

Comprehensive Insurance – Comprehensive insurance is the part of your policy that covers accidents other than collisions with other vehicles.  Most comprehensive policies cover fires, theft, windstorms, flood and vandalism, although you’ll want to check your policy to determine exactly what’s covered.  And, as mentioned previously, you’ll choose a separate deductible for this element of your policy than your collision insurance.

Bodily Injury Liability Coverage – Your bodily injury liability coverage typically begins at $25,000 and can go as high as $500,000 or more.  If you’re found to be at fault in an accident, this coverage will pay for any injuries or deaths caused to people in the other vehicle.  It may also pay for legal expenses incurred if you’re taken to court by victims in the crash.

Property Damage Liability Coverage – Your property damage liability coverage is typically bundled with your bodily injury liability coverage, and covers any damage you cause to other people’s property.  Your state may require you to carry a certain amount of these two types of insurance, so it’s important to check for any restrictions before signing up for a policy.

Uninsured/Underinsured Motorist Coverage – This type of insurance covers expenses resulting from injuries or deaths caused to you and anyone else in your car if you’re hit by a driver who isn’t carrying adequate insurance.  Again, policy options may vary from as little as $25,000 to $500,000, and you may be required to carry this by your state.

Personal Injury Protection – Personal injury protection coverage can be used to cover qualified medical or funeral expenses for you or any passengers in your vehicle, up to the limits you select.  Typically, this type of coverage is required by no-fault states – any insurance representative should be able to tell you whether or not this applies to you.

Policy Limits – Your policy limits represent the most your insurance company will pay out if you file a claim.  For example, if you have a personal injury policy with a limit of $1,000, your insurance company will pay out no more than $1,000 if you file a claim for personal medical expenses.

Policy Premium – The premium is the cost of your insurance policy, and will vary based on many different factors including your age, driving history, car and credit score.  Usually, your premium is good for six months, and you can pay it monthly or in one lump sum.  You may be eligible for discounts if you pay all at once or if you pay via bank withdrawal.