Auto Insurance Glossary  


Having Trouble Understanding Auto Insurance Terminology?

Below are definitions of common terms used when automobile insurance coverage is being discussed.  If there are some terms or acronyms that you have heard and are unsure of what they mean, hopefully you will be able to find them below.

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A | B | C | D| E | F | G | H | I | J | K | L | M | N | O| P| Q | R | S | T | U | V | W | X | Y | Z

A

Accidental Death Coverage 

The component of your auto insurance which covers the insured in the case of them dying from accident related injuries, in which case the auto insurance coverage may provide a payment to the insureds designated beneficiary.  top

Accident Forgiveness

Accident forgiveness means that some auto insurance companies won't add a surcharge to your premium after an at-fault accident.   Customers who have not had an at-fault accident in the previous five years usually qualify for this program if offered by their auto insurance company.  top

Actual Cash Value

What your vehicle is worth.  The purchase price of the car minus any accumulated depreciation.  If your car is totaled, this is the amount you would be reimbursed. top

Adverse Selection

Adverse selection refers to the tendency of high-risk (non-standard) drivers to seek an insurance policy with richer benefits than those who are at a lower risk. top

Auto Insurance Agent (Broker)

Authorized representatives of the auto insurance company.  They sell auto insurance coverage as well as manage the policy once it is in force. top

Auto Insurance Premium

Your auto insurance premium is the amount you pay for auto insurance coverage.  Your premium may be expressed monthly, quarterly, semi-annually or an annual premium, whichever you choose.  top

Anti-theft Recovery System

A device that will help to locate and recover your car in the event that it is stolen.  You may be eligible for auto insurance discounts if you install one of these devices in your car. top

B

Bodily Injury Liability Coverage

Bodily injury liability coverage is the portion of auto insurance coverage that protects you if you are held responsible for injuring someone else in a car accident.  The amount of coverage for the victim is capped at the limits you select when you purchase your auto insurance policy. top

Broadform Collision Coverage

Broadform collision coverage is only relevant as a portion of auto insurance coverage in Michigan.  This type of collision coverage works like typical collision coverage, but also pays for collision damage to your insured car regardless of who's at fault. top

 

C

Collision Coverage

Collision coverage helps pay for auto repair or replacement costs if your car is involved in a collision or rolls over.  top

Collision Deductible Waiver

The collision deductible waiver is the portion of auto insurance coverage pays the deductible for your collision coverage if you're involved in an accident in which an uninsured motorist is held legally responsible. 

Not available in all statestop

Comprehensive Coverage

Comprehensive coverage helps pay for damage to your car resulting from fire, certain natural disasters, falling objects, and vandalism, and theft.  Mutually exclusive of collision coverage.  top

Continuous Coverage or Continuously Insured

The amount of time you have been covered by one or more auto insurance companies without a lapse in coverage.  top

Covered Loss

D

Deductible

A deductible is the amount of damages you agree to pay for if you file an auto insurance claim, before your auto insurance coverage kicks in.  Although choosing a higher deductible  will lower your auto insurance rate, if you file an auto insurance claim, you'll have to pay the full, pre-established amount of the deductible out of your own pocket in order to receive payment from your auto insurance company. top

Declarations

The declarations page of your auto insurance policy summarizes your factual information.  This is the information for which your auto insurance coverage is based: your name and address, a description of the insured vehicle(s), as well as the coverages, limits, and deductibles and of course the resulting auto insurance premiumtop

Defensive Driver Programs

In some states you may qualify for auto insurance discounts if you enroll in a defensive driver program.  Essentially these are educational programs that teach you how to be a "safer driver", and thus less of a risk for the auto insurance company to cover.  top

E

Effective Date (Also See Policy Effective Date)

The date that your auto insurance coverage begins.  Before this date you will not be covered in the event of an accident.  top

Emergency Roadside Assistance

Emergency Roadside Assistance, sometimes called towing coverage, is optional coverage that pays a negotiated fixed amount for services such as towing, tire changes, lock-out services, and gasoline delivery if you run our of gas.  top

Endorsements (sometimes called Riders)

Endorsements are changes to the original auto insurance contract. In auto insurance coverage, endorsements may include changing your deductibles or adding a new car to your policy. top

Exclusions

Situations that are not covered by your auto insurance policy.  These will be outlined in your policy documents.  top

Extraordinary Medical

Extraordinary medical coverage protects you in the event you suffer accident-related injuries that require serious and/or long-term medical care. These benefits begin only after you have exhausted the limit on your standard medical benefits coverage.  Sometimes part of personal injury protection portion of your coverage.  top

F

First Party Benefits (FPB)

A type of auto insurance coverage that is only available as part of Pennsylvania auto insurance.  With FPB, if you're injured in an automobile accident, you and relatives residing in the same household are covered for medical expenses, lost income, accidental death, and/or funeral costs. top

Funeral Benefits

Usually part of personal injury protection,

If the insured dies as a result of accident related injuries, this protection will cover a portion of the funeral costs regardless of who was at fault in the accident.  top

G

Gap Insurance

Gap Insurance is the difference between the actual cash value of your car and what you still owe on your auto loan  top

Garage Location

The location of where the insured member's car is parked most of the time.  top

H

Hybrid Electric Vehicle (HEV)

A Hybrid vehicle is one which is powered partially by gasoline and partially by a battery.  top

I

Income loss

Generally part of personal injury protection.  Income loss protects you if you are unable to work due to injuries suffered as a result of an car accident.  This type of coverage, will cover a portion of your lost salary, as well as other expenses that you might incur while trying to return to work. top

Insurance Score

Your Insurance score is based on a statistical model developed by the insurer that allows them to objectively measure the relative likelihood of future insurance losses based on your credit history and other factors. top

Insured

In the context of auto insurance, the term insured refers to a person who is covered by a given auto insurance policy.  top

J

K

L

Liability Coverage

Liability coverage protects you when you are found legally responsible for injuries or damages that arise from an automobile accident.  Two components of liability coverage include bodily injury & property damagetop

Limits

Limits are maximums put in place by the insurer which indicate the maximum that they will pay out for a covered lossYou can choose your limits for to some extent for certain coverage types, but some states require you to maintain minimum levels of auto insurance coverage for various components.  top

M

Medical Benefits

Medical Benefits are generally covered as part of policy's personal injury protection.  This portion of your coverage covers medical expenses resulting from an automobile accident.  top

Medical Payments Coverage

This auto insurance coverage component pays medical bills and/or funeral expenses if a covered driver or accompanying passengers are injured or killed while in an insured vehicle, regardless of fault in an accident.  Medical payments coverage may also cover policyholders and their family members when in others' vehicles.  top

Motor Vehicle Report (MVR)

A Motor Vehicle Report (MVR) provides information on your driving record, including accidents and moving violations.    top

N

National Credit File

The National Credit File provides objective consumer information regarding and individuals financial history. This information is used by insurance companies to calculate insurance scores, which in term is used to determine your auto insurance premiumtop

No Fault Auto Insurance

No-fault auto insurance, refers to the way the auto insurance company settles a covered auto insurance claim.  Generally, if a certain coverage is no-fault, responsibility for the accident doesn't have to be assigned before an auto insurance claim gets settled and ultimately paid.  top

Non-Passive Alarm System

A non-passive alarm is one which is manually activated every time you leave the car. If someone attempts to open your car door, the alarm will sound.  In addition, the alarm system disables the automobile's starter, ignition system, and/or fuel circuit.  The use of non-passive alarm systems may qualify you for an auto insurance discounttop

Non-Standard Auto Insurance

O

P

Passive Alarm System

Passive alarms are automatically activated and emit warning sounds when someone tries to get into your car. Once the passive alarm has been triggered, the system disables the automobile's starter, ignition system, and/or fuel circuit.  Passive alarm systems differ from non-passive systems in that they do not need to be manually activated.  You may be eligible to receive an auto insurance discount if your car has a passive alarm system.  top

Personal Injury Protection (PIP)

Personal Injury Protection is a kind of auto insurance coverage available only in certain states, where it's often mandatory.   In some states, PIP pays for lost wages and similar losses that were directly the result of an auto accident  top

Policy Effective Date (See Effective Date)

Policy Expiration Date

The date when your auto insurance coverage ends if it isn't renewed.  Can usually be found on the declarations page of your auto insurance policy itself or on you proof of coverage card.  top 

Policy Term

The length of time your auto insurance policy is in force.  Generally 6 mo. or 12 mo. unless you are cancelled due to non-payment etc.  top

Property Damage Liability Coverage

Property damage liability coverage protects you if you are held legally responsible for damaging someone else's property in a car accident.  This type of coverage also helps pay your expenses in a related lawsuit. The amount covered is capped at the limit you choose when you purchase your auto insurance policy.  top

 

Q

R

Rental Car Reimbursement

 An optional auto insurance coverage that helps pay for your rental car expenses if an car covered by your auto insurance policy is damaged or stolen and you need a rental car.  top

Rider (See Endorsements)

S

Secondary Driver 

Sometimes referred to as an occasional driver, the secondary driver is a driver who is listed on your auto insurance policy as a driver of an insured vehicle, but is not the primary driver.  top

SR-22

An SR-22 is an official document that shows proof of financial responsibility. Many Motor Vehicle Departments require an SR-22 for people convicted of certain traffic violations. top

Supplemental Family Member Liability Coverage (SFML)

Only exists as part of Maryland auto insurance.  This type of auto insurance coverage protects you if you�re found to be legally responsible in an accident resulting in injury or death to a family member.

The amount covered by SFML is equal to the Bodily Injury limits purchased, or equal to the state minimum requirements of 20/40.  top

Supplemental Spousal Liability  (SSL)

This type of auto insurance coverage is only available as part of New York auto insurance coverage.   This type of auto insurance coverage protects you if you�re found to be legally responsible for an accident resulting in injury or death to your spouse.  The amount covered by SSL is capped at the limit you choose when you buy your auto insurance policy.  top

Steering Restraint

A steering restraint is an anti-theft device that essentially is a durable collar or shield fitted to the upper and lower casing of your car's steering column. You may qualify for an auto insurance discount if your car is fitted with a steering restraint.  top

 

T

Towing Coverage

Optional coverage.  Pays a fixed amount toward towing if your car breaks down or if it's disabled in an accident.  top

U

Underinsured Motorist Bodily Injury Coverage 

Underinsured motorist bodily injury coverage is available in some states, and is usually mandatory if available.  This type of auto insurance coverage pays for your medical expenses, lost wages, and other damages when you are injured in an accident caused by a driver who has insufficient auto insurance coverage. 

Underinsured Motorist Bodily Injury Coverage typically pays the difference between the coverage limit you select and the other driver's bodily injury coverage limit. 

The amount of coverage is capped at the limit you choose when you buy your policy.  top

Underinsured Motorist Property Damage Coverage

Underinsured motorist property damage coverage is available in some states, and is usually mandatory if available. Complementary to underinsured motorist bodily injury coverage above, this type of auto insurance coverage protects you if your car is damaged in an accident caused by a driver who has insufficient auto insurance coverage.

This kind of auto insurance coverage pays the difference between the coverage limit you select and the other driver's property damage coverage limit.

The amount of coverage is capped at the limit you choose when you buy your policy.  top

Uninsured Motorist Bodily Injury Coverage

Uninsured motorist bodily injury coverage is available in some states, and is usually mandatory if available.

This kind of auto insurance coverage pays for your medical expenses, lost wages, and other general damages when you or your passengers are injured in an accident caused by a driver who has no auto insurance. Uninsured motorist coverage also pays for injuries sustained in hit-and-run accidents, where the culprit cannot be identified

The amount of coverage is capped at the limit you choose when you buy your policy.  top

Uninsured Motorist Property Damage Coverage

Uninsured motorist property damage coverage is available in some states, and is usually mandatory if available.

This kind of auto insurance coverage protects you if your vehicle is damaged in an accident caused by a driver who has no auto insurance.

The amount of coverage is capped at the limit you choose when you buy your policy.  top

V

Vehicle Identification Number (VIN)

The VIN is the unique 17-digit number found on every car. The VIN contains the vehicle's serial number, as well as abbreviations for the make, model, and year.  Your car's VIN can be found on your vehicle registration card, and also engraved near the base of the windshield on the driver's side dashboard and/or on the edge of the driver's side door.  top

W

X

Y

Z

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