Auto Insurance Glossary

This Auto Insurance Glossary will help you gain an understanding of many crucial terms pertinent to auto insurance. With this basic insight, you will be able to make more knowledgeable and informed decisions based on your specific requirements.

Accidental Death Coverage – A component of the auto insurance policy under the personal injury protection, whereby the insurance company is required to provide payment to the insured’s nominated beneficiary in the event that the policy holder dies from accident injuries.

Actual Cash Value – When a policyholder makes a claim, the insurance firm reimburses just the actual cash value of the vehicle. The actual cash value of the car is arrived at by subtracting its depreciation value from its original cost.

Adjuster – A person who is assigned the task of investigating and settling auto insurance claims.

Anti-Theft Recovery System – This is sophisticated electronic car security device that is installed in a hidden area of the vehicle. In the event the car is stolen, the device can be activated to emit signals which can lead to the exact location of the vehicle. Several insurance companies offer car owners a discount for installing an anti-theft recovery system in their vehicles.

Auto Insurance Policy – In the auto insurance glossary, there are six broad categories of coverage provided by most insurance firms. Though many are optional coverage features, few are a mandatory legal requirement. Collision, bodily injury liability, property damage liability, comprehensive coverage, uninsured motorist coverage and personal injury protection coverage are the most common types of auto insurance coverage.

Auto Insurance Premium – This is the price charged by an insurance firm for coverage. It is generally based on factors like cost of mishaps, theft and several other losses. Premiums are largely dependent on the type of coverage bought by the insured, the model of the vehicle, car driver’s gender and age details, the insured driver’s driving history and the area where the car will most likely be driven.

Benefit – The sum of money paid by an insurance company to the policy-holder or his/her beneficiary when an auto insurance claim is filed.

Bodily Injury Liability Coverage – Protects a policyholder in the event that he/she is proved responsible for causing injury to someone in an auto accident. The coverage helps the policyholder bear the injured party’s medical costs and loss due to wages. It may also help cover the policyholders lawsuit related expenses.

Broadform Collision Coverage – Offered only in the state of Michigan, Broadform Collision Coverage is similar to standard collision coverage except that is bears the expense of the policyholder’s insured vehicle involved in a collision damage irrespective of whose fault it is.

Business/Commercial Use – This usage classification simply means that you use your vehicle primarily for business purposes like sales, delivery and after-sales service or any other commercial activity. Commuting to and from the workplace does not come under business use.

Claim – A policyholder’s application to be compensated for the loss that has been covered by the insurance policy.

Collision Coverage – A feature of an auto insurance policy whereby the damage to the policy holder’s vehicle is covered in the event of a collision.

Collision Deductible Waiver – This optional auto insurance coverage is available in a few states and pays for the deductible of the collision coverage of a policyholder in the event that he/she is a part of an accident where an uninsured driver is held lawfully responsible.

Comprehensive Coverage – The component of an auto insurance policy which covers damage caused to the policy holder’s vehicle in an event other than collision with another vehicle. The general circumstances can include loss from theft, fire and other natural or man-made calamities.

Credit Card Security Code – An added security measure that ensures that no one can pay for an insurance policy with a credit or debit card without actually being in possession of the card. It is a 3-digit number that is embossed on the signature strip alongside the Visa, MasterCard or Discover logo. American Express card ID numbers are printed on the front side of the card and are 4 digits long.

Commuting – If a policyholder’s primary use is commuting, it means that the car is predominantly used to travel to and from work.

Continuously Insured – The duration of time that a policy holder has been insured by one or multiple insurance firms without a gap in the coverage.

Declarations – The page on a policyholder’s auto insurance policy that offers a complete factual summary of vital information related to the policy.

Deductible – The sum of damages you’ve agreed to pay for filing an auto insurance claim.

Defensive Driver Programs – These courses are intended for imparting defensive driver training to motorists of all age groups along with “mature driver safety courses” meant especially for drivers who are 55 years and older. In a few states, policyholders qualify for an insurance premium discount if they have taken these courses.

Depreciation – The decrease in the value of an object owing to wear and tear, age or being outdated.

Driver Improvement Courses – The Driver Improvement Program is an instructional module spread across 6-8 hours for providing driver rehabilitation. It can be assigned to a driver in a situation where the driver has been referred by a District Court Judge; the driver has been referred by an Administrative Law Judge; the driver is granted probation before the actual judgment for a violation while on a provisional driving license.

Effective Date – This stipulates when the auto insurance policy commences.

Emergency Road Service – This is an optional coverage feature that requires the insured to pay a fixed amount for the following emergency road services: towing, tire change, gas delivery, lockout service and battery services.

Endorsements – Changes to the original insurance policy that can include among other things adding a new vehicle or changing the deductibles of an auto insurance policy.

Exclusions – Circumstances that are not a part of the coverage of a particular auto insurance policy.

Extraordinary Medical – A component of Personal Injury Protection and First Party Benefits plans, Extraordinary Medical coverage offers protection in the event that the policyholder sustains serious accident injuries and requires extended medical care.

First Party Benefits – This is an optional auto insurance coverage offered by insurance firms in Pennsylvania. It covers family members residing in a single household for lost wages, accidental death, medical costs and/or funeral expenses.

Full Coverage Auto Insurance – The entire coverage offered by a policy other than mere liability coverage.

Funeral Benefits – A part of the auto policy’s personal injury protection or first party benefits option. Under this coverage, a policyholder who succumbs to accident related injuries is entitled to have their funeral expenses paid for in portion irrespective of who is responsible for the accident.

Garaging Location – It is the location where the insured vehicle is most often parked. Garaging location is generally determined by the ZIP code of the policyholder’s main residence.

HEV – Hybrid Electric Vehicles are power-driven by battery and fuel.

Homeowners Insurance – If an auto insurance holder’s car is vandalized, he/she claims damages from the auto insurance firm. However items pilfered from the car come under the policyholder’s homeowner’s insurance.

Income Loss – Income Loss coverage under the insurance policy’s First Party or Personal Injury Protection offers protection if a policyholder is unable to earn an income due to accident injuries.

Indemnity – It is a pre-agreed amount paid for a loss that comes under the coverage.

Insurance Agent/Broker – Independent state-licensed professionals who offer advice on insurance policies along with selling it and managing it on behalf of insurance companies.

Insurance Claim Report – Details provided by independent consumer reporting agencies about insurance claim filed by the policyholders with their insurance firms. The information is gathered from several insurance companies.

Insurance Score – A rating based on analytical algorithms that objectively determine the likelihood of potential insurance losses based on the policyholder’s credit history.

Insured – An individual covered by a particular auto insurance policy.

Judgment – A final decision dispensed by a court of law in an auto accident related lawsuit.

Liability – Legal responsibility for the damages in an auto accident.

Liability Coverage – Protects a policyholder from depletion of personal assets for paying damages if held legally responsible for an auto accident. The two primary types of liability coverage include property damage and bodily injury.

Limits – The optimal amount that will be paid by the insurance company for a covered item.

Medical Benefits – They are mostly a component of the Personal Injury Protection or First Party and cover medical expenses arising from accident-related injuries.

Medical Payments Coverage – This auto insurance component pays for the medical and/or funeral costs of a covered motorist and/or the other passengers in the vehicle who are killed or injured, irrespective of who is at fault.

Motor Vehicle Report – A detailed account of your driving history that is obtained by auto insurance companies from the policyholder’s state.

National Credit File – Offers independent and objective information about an individual’s financial record. It is used for calculating insurance scores.

No-Fault Insurance – Under No-Fault Insurance, establishing responsibility before settling the insurance claim is not a pre-requisite.

No-Fault States – In selected states, it is legal requirement for insurance firms to reimburse the policyholder’s losses irrespective of who is responsible for the accident.

Non-Passive Alarm – It is a manually activated device that sounds off an alarm when someone attempts to break in to your vehicle. Car owners may qualify for a reduced premium if it is installed in the vehicle.

Passive Alarm – An alarm that is automatically charged and gives out warning sounds if someone attempts to break into the car. A vehicle fitted with this alarm may qualify the policy holder for an insurance discount.

Personal Injury Protection – It is a type of auto insurance coverage that includes extended coverage of accident-related medical expenses and/or lost wages due to injury and other similar damages.

Pleasure Use – When you use your car primarily for fun and recreation.

Policy Expiration Date – It is the date when a policyholder’s auto insurance policy coverage ends if it is not renewed.

Policy Term – The duration for which an auto insurance policy stays valid.

Primary Driver – The individual who drives the vehicle most often.

Primary Use – Determines the main purpose for which the car is used. It is generally classified as business, commuting and pleasure.

Primary Policyholder – The main policyholder who is generally billed for the policy.

Property Damage Liability Coverage – Offers a policyholder protection in the event of being held legally responsible for damage to another individual’s property. The coverage can also pay for related legal expenses.

Rental Car Reimbursement – It is an optional coverage that pays for the expenses of a rental car in circumstances when the policyholder’s vehicle is damaged or stolen.

SR-22 – A legal document showing proof of financial responsibility.

Secondary Driver – A driver listed in the auto insurance policy that is covered for driving the covered automobile.

Supplemental Family Member Liability Coverage – It is an optional coverage that protects the policyholder in the event that he/she is held responsible for an accident that leads to the injury or death of a family member. It is offered only in Maryland

Supplementary Spousal Liability – It is an optional coverage offered only in New York for protecting the policyholder in the circumstances that he/she is held responsible for the accident -related injury or death of a spouse.

Stacking – Stacking is available only under the uninsured/underinsured motorist bodily injury coverage, where the limits increase in proportion to the number of cars being insured by a single policyholder.

Steering Restraint – It is a shield fixed on the upper and lower casing of the vehicle’s steering. Individuals may qualify for a discount if their car is equipped with a Steering Restraint.

Tort – Incidents when an individual is held legally responsible for causing injury to another individual or destroying his/her property.

Towing Coverage – It is an optional coverage that pays a fixed sum for towing if the vehicle breaks down or is damaged in an accident.

Underinsured Motorist Bodily Injury Coverage – This type of coverage offers protection to a policyholder or other passengers in the car in the form of medical costs, lost wages and/or other losses in the event that the accident is caused by a driver with insufficient insurance coverage.

Underinsured Motorist Property Damage Coverage – Protects the policyholder’s car if it is damaged in a mishap caused by an individual who doesn’t possess sufficient auto insurance coverage.

Uninsured Motorist Property Damage Coverage – Offers the policyholder protection in an instance when his/her vehicle is damaged by a motorist who has no auto insurance.

Uninsured Motorist Bodily Injury Coverage – Offers protection to the policyholder in the form of lost income, medical costs and other damages when the policyholder or other passengers in the car are injured by a driver who has no auto insurance.

Uninsured/Underinsured Motorist Bodily Injury Coverage – In selected states uninsured and underinsured motorist bodily coverage are incorporated in a single coverage.

VIN – Vehicle Identification Number: it is a unique 17-digit code assigned to every vehicle. It contains the car’s serial number and abbreviated information about the make, model and year of manufacture.

To be as knowledgeable as possible about auto insurance, it’s imperative to have a thorough understanding of the aforementioned car insurance glossary terms. Understanding them helps prospective policy buyers decide on the best insurance policy to suit their requirements.