A Glossary of Car Insurance Terms
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Before beginning your search for the right car insurance for your needs, you should learn all that you can about car insurance terms. These range from the types of coverage available, factors that go into determining your premium, and who fulfills specific roles when it comes to car insurance.
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The following is a quick guide to terms often associated with car insurance.
Additional interest insured
An additional person or party, such as a lien holder, is listed as “additional interest insured” on a policy. In case of an accident with an insured person or vehicle, the additional person or party might find themselves liable in addition to the policyholder.
The adjuster works for the insurance company and reviews any injuries or damages, as well as approves any payments made on a claim.
An anti-theft device acts in an active or passive capacity when installed on a car. Some insurers offer discounts for having such devices installed.
Bodily injury liability coverage
Bodily injury liability coverage pays for injuries or deaths to anyone other than the insured driver in an accident. This includes legal defense costs if the policyholder finds themselves the subject of a lawsuit in connection with an accident.
A claim represents the request by the policyholder for payment under the terms of the policy whenever the car insured suffers damage from an accident or other cause.
Comprehensive coverage is coverage for your car that extends to damage done from an event other than a collision, most often in the form of damage from vandalism, theft, and inclement weather.
Collision coverage comes into play when your insured vehicle collides with another object or overturns. Collision coverage might also apply to a rental car or other non-owned vehicle.
Continuously insured means that you maintained insurance coverage on your vehicle without a lapse in coverage.
Credit-based insurance score
Based on credit history, the credit-based insurance score represents a confidential ranking developed by insurance companies to dictate your overall creditworthiness, which plays into risk assessment and helps determine your car insurance premium.
A declarations page dictates the type of coverage you elect, the limits on that coverage, and its cost. The declarations page also spells out the specific vehicles on the policy, the types of coverage for each, and other important information about your policy.
A deductible indicates how much you elect to pay before your car insurance coverage starts to pay out. A higher deductible amount results in a lower premium.
Defensive driving represents acts of driving meant to minimize risk while driving. Some defensive driving techniques include maintaining a safe distance from other vehicles, looking for road hazards and other vehicles while driving, and keeping both hands on the wheel.
Driver improvement course
For drivers 55 years and older, a driver improvement course allows you to refresh your knowledge and improve your driving skills. Driver discounts represent another benefit of such a course.
Diminished value is determined by the value of a car after repairs from damage suffered in an accident. Sometimes you can collect payment for the diminished value of your car from the responsible party’s insurance.
Discounts (good student, good driver, multi-car, multi-policy)
Car insurance companies offer many different discount types to entice car owners to choose them over their competition. Common discounts include good student, good driver, multi-car, and multi-policy discounts, all of which offer a percentage discount for certain conditions.
Distracted driving offenses include texting and using your phone while driving, as well as other actions that take your attention off of the road while driving. You can actually get a traffic ticket in many states for not focusing your attention fully on the road.
You must list anyone that stays in your household on your insurance policy. Their driver status determines if they can drive the vehicle or not.
Driver statuses include rated, or drivers who can drive the vehicle; excluded, or drivers who cannot drive the vehicle and do not receive coverage if they do; and listed, which includes anyone in the household who does not drive the covered vehicle.
A DUI, Driving Under the Influence, conviction comes about from driving while under the influence of drugs or alcohol.
If caught driving under the influence of alcohol or drugs, you can expect to see an increase in your car insurance premiums. In addition, you would also need to file an SR-22 form in conjunction with acquiring new car insurance.
Full coverage usually refers to having more than just liability insurance on a vehicle. Though not a legitimate term, full coverage generally means that insurance policies also contain collision and comprehensive coverage.
Gap insurance is the same thing as loan/lease payoff coverage. It comes in handy if the insurance adjuster determines your vehicle as a total loss in an accident. As a result of depreciation in your car’s value from the time you bought it, you might end up owing more on the car than you receive from the insurance company as a payout. Gap insurance makes up for this difference.
The place you park your vehicle when not in use. For homeowners and renters, this includes the garage or on the street outside.
A pre-determined sum paid for a covered loss. This is what your insurer will compensate you with after an accident.
Liability coverage is the minimum coverage type in most states. Liability covers the other car or person involved in an accident, reimbursing them for any injuries or damages sustained, up to a certain listed amount.
Coverage limits represent the most that you can expect the insurance company to pay for damages or injuries. Many states have a minimum coverage limit you must meet when buying insurance.
Loan/lease payoff coverage
Also called gap insurance, payoff coverage pays the difference between what you owe and the amount your car insurance pays when declaring your vehicle a total loss, or when it is stolen and not recovered.
Medical payments (MedPay)
This is an optional insurance coverage that pays medical and funeral expenses considered reasonable and necessary. The injury or death must happen in conjunction with a car accident.
The primary policyholder. Generally, this is the name of the person who first acquired the insurance policy before any other people were added to the policy.
Any driver who does not drive the car on an ongoing basis and only drives the car occasionally.
OEM/Generic auto crash parts
Original Equipment Manufacturer (OEM) parts represent replacement parts for the outside of a car provided by the vehicle manufacturer. Generic, or aftermarket parts, represent those made by companies other than the manufacturer.
Personal injury protection (PIP) coverage
Personal injury protection (PIP) coverage represents the most basic coverage in states that utilize the no-fault insurance model. PIP coverage pays medical, hospital, and funeral expenses for all involved in a car accident, within specific limits.
Policy expiration date
The date on which your current car insurance policy ends, requiring renewal (often done automatically). You can find this either on the declarations page, a cancellation notice, or your insurance identification card.
The policyholder of a car insurance policy represents the primary name of the person, or group, holding the car insurance policy.
The policy term represents the amount of time your policy remains active. This period usually runs for a quarterly, semiannual, or annual length of time.
The premium is the amount of money you must pay to a car insurance company for the specified coverage.
Your primary residence is your home address for the length of the policy term. You must notify the car insurance company if you move so they can make any necessary adjustments to your policy amount.
This is the purpose you mainly use your vehicle for. Some options include driving the car to work, for business, pleasure, or even farm use.
The principal driver is the primary driver of the vehicle who plans on driving the car most of the time.
Property damage liability coverage
Property damage liability coverage pays for damages to the property for others involved in an accident besides the driver. It also pays for court costs if you are sued for damages suffered in an accident.
Rental reimbursement coverage
Rental reimbursement coverage details the amount you can spend on a rental car if you lose the use of your vehicle due to an accident. A limited amount, this coverage usually goes along with comprehensive and collision coverage.
When you have your license revoked, your license is fully cancelled. To get it reinstated, you must go through the licensing process again, including taking a written and road test. In addition, you must also pay any civil penalties you owe and get approval from your state’s DMV.
Reasons for getting a license revoked include driving without insurance, being convicted of a serious traffic offense, and making a false statement on your driver’s license application form, among others.
Roadside assistance coverage
This coverage pays for towing, jump-starts, locksmith services, and other services as a part of your car insurance policy.
Used by many states to denote when a car receives a certain percentage of damage, salvage titles list the status of a vehicle, including cars deemed a total loss or rebuildable.
Second named insured
The second named insured are other drivers listed on the policy, who, while not the primary driver, do receive the same coverage level as the principal driver.
An SR-22 is a court document used to demonstrate financial responsibility by drivers convicted of certain traffic violations, such as DUIs, driving without insurance, and a revoked or suspended license.
A suspended license means you have lost the temporary use of your license. Indefinite license suspensions means you must take action to have it reinstated, including paying a traffic ticket, overdue taxes, or child support payments. A definite suspension lasts until the suspension period ends and you have paid any suspension termination fees
A vehicle is declared totaled when an insurance adjuster deems a car a total loss–when the cost of the repairs exceed the value of the car. For drivers with comprehensive or collision coverage, the insurer decides the full market value of the car and pays out, minus the deductible if the driver is at fault.
Umbrella liability is extended coverage beyond the limits of your regular policy. Umbrella coverage provides added protection if sued and covers claims that fall under your homeowner’s insurance policy.
Uninsured motorist coverage
Uninsured motorist coverage covers an accident if the other driver does not have insurance, up to a certain limit.
Underinsured motorist coverage
Underinsured motorist coverage provides supplemental insurance in instances where the other driver does not carry enough insurance to cover damage, injury, or death suffered in a car accident.
Uninsured/underinsured motorist property damage coverage
Like uninsured and underinsured insurance for damage to persons, property damage insurance covers property damage in cases where the other driver does not have insurance or carries limited personal property coverage.
Vehicle identification number
The Vehicle Identification Number, or VIN, is a vehicle’s unique identifying number. Each vehicle has a unique VIN that identifies the car make, model, and year of production.
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