Auto Insurance Glossary

Not sure what a term on your auto insurance policy means? Well, check out the InsuranceRates.com Auto Insurance Glossary. Here's a run-down of the most common car insurance terms for your car insurance understanding and peace-of-mind.

1. Anti-Theft Device

Anti-theft devices are designed to deter thieves from stealing your car. The most common example is the audible car alarm.

2. Automobile Insurance

Automobile (auto) insurance is a form of insurance that protects your car in case of accidents or any other claims. There are different types of coverages you can get with your auto insurance policy and some coverages aren't required by law.

3. Basic Auto Policy

The Basic Auto Policy is primarily used to insure commercial vehicles as the more common Personal Auto Policy (PAP) is used to insure everyday vehicles.

4. Basic Limits of Liability

This is the least amount of liability coverage you need to comply with your states minimum requirements. You can choose to carry more liability coverage if you need more protection.

5. Bodily Injury Liability

Liability coverage will protect you should you cause injury to, or the death of, someone as the result of an accident.

6. Collision Insurance

Covers the loss to your car in the event of an accident.

7. Comprehensive Coverage

Covers the loss to your car in the event of everything but a collision; such as damage caused by a fire or falling objects. Also protects you in the event of theft or vandalism.

8. Continuous Coverage or Continuous Liability Insurance

The length of time you have continually maintained car insurance coverage on your vehicle.

9. Covered Person

The covered person is the individual(s) insured under a car insurance policy.

10. Deductible

The deductible is the amount of money you have to pay before the insurance kicks in to pay a claim. Deductibles usually range from $500 to $1,000.

11. Financial Ratings

Financial ratings reflect a rating organization's opinion on the financial strength and ability to meet ongoing obligations to policyholders. The ratings organizations most commonly identified with the insurance industry are AM Best, Standard & Poor's and Moody's.

12. Gap Insurance

If you are making lease or loan payments and you experience a total loss, there may be a difference (gap) between the market value of your vehicle and what you still owe on it. Gap insurance pays this difference.

13. Good Student Discount

If you have a student on your policy, you might be able to get a car insurance discount if your child maintains a B grade point average.

14. Lapse in Coverage/Policy Lapse

Any time that your policy has been canceled due to failure to pay your premium.

15. Medical Payments

Pays for medical and funeral expenses regardless of who is at fault. Covers passengers in your vehicle, and yourself should you be operating someone else's vehicle (with their permission).

16. Multi-Car discount

Multi-car discounts apply if you insure more than one vehicle with your insurance provider. Check with your insurance provider to see if they offer this discount.

17. No-Fault Insurance

Many states have enacted auto accident compensation laws permitting auto accident victims to collect directly from their own insurance companies for medical and hospital expenses regardless of who was at fault in the accident. Although there are many legal variations of no-fault insurance, most states still allow people to sue the negligent party if the amount of damages exceeds a certain state-determined threshold.

18. Limit

This refers to the maximum amount your insurance company will pay for all claims arising from a single incident. In terms of Bodily Injury coverage, when purchased in split limits, the second limit is the "per occurrence" limit: e.g. $100,000(per person)/$300,000(per occurrence).

19. Per Person Limit

This refers to the maximum amount your insurance company will pay for any one person's injuries arising from a single incident. In terms of Bodily Injury is purchased in split limits, the first limit is the "per person" limit: e.g. $100,000(per person)/$300,000(per occurrence).

20. Personal Auto Policy

The most common auto insurance policy sold today. Often referred to as "PAP," this policy is written in simple wording and provides coverage for liability, medical payments, uninsured/underinsured motorist coverage, and physical damage protection.

21. Personal Injury Protection

Personal Injury Protection (PIP) usually includes benefits for medical expenses, loss of income from work, essential services, accidental death, funeral expenses, and survivor benefits.

22. Physical Damage

Damage to your covered vehicle from perils including (but not limited to) collision with another vehicle or object, fire damage, vandalism and theft.

23. Policy

A policy is the written documents of a contract for insurance between the insurance company and the insured. Such documents include forms, endorsements, riders and attachments.

24. Policy Period

The period of time in which a policy is in effect. For example: six months or one year.

25. Policyholder

One who maintains ownership in an insurance policy. This may refer to the policy owner or those covered under the policy.

26. Premium

The price of insurance an insured person pays for a specified risk and a specified period of time.

27. Property Damage Liability Insurance

Protection against liability for damage to another's tangible property, including loss of use. Although this coverage is different than liability for bodily injury to another person, Bodily Injury and Property Damage Liability protection are generally written together.

28. Renewal

The process of keeping an active policy in force through the issuance of a renewal policy.

29. Rental Reimbursement

This optional coverage will reimburse you for a rental car if your vehicle is disabled due to a covered loss.

30. Towing and Labor Costs

This endorsement, which is added to the physical damage coverage, provides reimbursement up to a specified amount to tow your vehicle or pay for on-site labor costs.

31. Underinsured Motorists Bodily Injury

Underinsured motorists bodily injury coverage pays for a covered person's bodily injuries if the at fault party doesn't have enough insurance coverage.

32. Uninsured Motorists Bodily Injury

Uninsured motorists bodily injury coverage pays for a covered person's bodily injuries if the at fault party doesn't have insurance coverage or the accident was a hit and run.