The biggest challenge in understanding car insurance are the terms car insurance companies use in your policy. Many people who have car insurance really don’t understand the common car insurance terms that are used on their policy declarations page. This page was created to help you understood some of these terms to help you better understand your car insurance policy.
You can browse the common car insurance terms below. They are listed alphabetical order to find them easier.
- Additional Interested Insured
- Anti-Theft Device
- Bodily Injury Liability Coverage
- Claim Adjuster
- Comprehensive Coverage
- Collision Coverage
- Continuously Insured
- Covered Loss
- Declarations Page (Car Declaration Page)
- Driver Improvement Course
- Full Coverage
- Garaging Location
- Loan/Lease Payoff (GAP) Coverage
- Named Insured
- Medical Payments Coverage (MEDPAY)
- Motor Vehicle Report (MVR)
- Occasional Driver
- Personal Injury Protection Coverage (PIP)
- Policy Expiration Date
- Policy Term
- Primary Use
- Principal Driver
- Property Damage Liability (PD)
- Rental Reimbursement (RR)
- Roadside Assistance
- Salvage Title
- Second Name Insured
- SR-22 Certificate of Financial Responsibility
- Uninsured/Underinsured Motorist Coverage (UM)
- Vehicle Identification Number (VIN)
Additional Interested Insured
An Additional Interest Insured can be any person or organization that can be legally liable for any damages the insured, or the insured’s vehicle causes. The best example of an additional insured is your bank or lienholder.
Anti-Theft Device is a safety feature in a vehicle that prevents someone from stealing a vehicle. For example, a car alarm on a car or vehicle recovery system (LoJack.) This device should add a discount to your car insurance policy.
The amount of responsibility an insured will be liable for if accident. In some states, the percentage of fault varies to see which insured’s insurance company will pay what percentage of bodily injury or property damage.
Bodily Injury Liability Coverage
When you are a responsible or are at-fault for an accident, the bodily injury liability coverage will pay out for the injuries that you have caused to the people in the other vehicle which you are liable for. This coverage covers the other party for injuries, death, and covers you if you are being sued. You should refer to your policy for this coverage as the coverage varies from state to state.
If an accident, a claim is when you report to your insurance carrier the accident that you were involved in. In return, you will expect to be paid for the accident’s property damage and injuries.
A person appointed by a company to come estimate any damages that were caused to an insured’s car in an accident and make sure a fair value is given to fix the damages.
Any damage to an insured’s car that is unrelated to collision. Comprehensive coverage covers an insured when the car suffers any loss due to fire, theft, vandalism, acts of nature, and striking animal. This coverage does not pay when an insured car hits an object or car.
Any damage to an insured’s car that hits an any object (moving or non-moving) or car. Collision coverage will pay for the damages that an insured’s car has suffered. This coverage does not pay for loss due to fire, theft, vandalism, acts of nature, and striking animal.
When an insured is continuously insured, usually means that the insured has been carrying insurance without any breaks in between or lapses. Being continuously insured, will usually help you get better car insurance rates since you have insurance history.
Any damage that you, people in your car, people involved in another car, and your vehicle or vehicle that you hit that is covered under your car insurance policy or coverage.
Declarations Page (Car Declaration Page)
Many times known as the “Dec Page,” usually shows a summary of your coverages, your limits to your coverages, your costs to each coverage, vehicles that are covered under the policy, and the discounts that are being applied to your policy.
A deductible is the money that you will out of your pocket before your car insurance company will pay out for the damages that your car has suffered. Picking a high deductible will usually lower car insurance premium since you have to pay more out of your pocket than your insurance carrier.
Driver Improvement Course
In some states, taking a driver improvement course may qualify you for a discount when you 55 or older. This is a course that is designed to improve, enhance, and refresh your driving skills.
An endorsement is when your car insurance policy is changed somehow. Either, a change or addition to the policy is made when it comes to drivers, vehicles, vehicle usage, address, etc.
Exclusions are certain situations where if it were to happen your insurance policy will not cover. In other words, anything not listed in a “covered loss” will not be covered.
Full Coverage car insurance is not specifically a coverage but it is a term that most people used to imply that they have bumper to bumper coverage on their car. Meaning, that their car insurance covers more than just liability insurance or commonly known as “3rd party.”
The garaging location is the prime location to which your car is a parked majority of the times. Most of the time with insurance policyholders this will be their home, or a place where they reside.
This is a car insurance term that confuses many people. The fact that you are liable for an accident simply means that you are responsible for the accident. Its implication is that you have to pay for all expenses related to the accident including any damages, injuries (medical expenses), lawsuit costs and other costs. Depending on the your car insurance cover, your insurance company may pay all the costs or only pay part of it. It is important to choose a car insurance policy that provides cover on liability so that you are not adversely affected financially in case of an accident in which you may be liable. Car liability insurance is mandatory in some States.
An insurance coverage limit is something which is selected by the customer. This is the maximum in which your insurance carrier will pay for any damages or injuries if a covered loss.
Loan/Lease Payoff (GAP) Coverage
This coverage is commonly termed as “gap insurance.” When you are financing or leasing a vehicle and if the car is totaled, this coverage will pay the balance that is owed to the bank after the actual cash value of the vehicle is recovered. For example, your loan on your car is $30,000 and after totaling the car your insurance company found the car to have a book value of $23,000 at the time of the loss. Gap insurance will cover the balance of $7,000 owed to the bank. /p>
The name insured is the primary person the car insurance is under. You will usually find the named insured’s name first on the policy declarations page and on the insurance ID cards.
Medical Payments Coverage (MEDPAY)
Medical Payments coverage is not mandatory in your car insurance policy. However, this could vary state to state. Medpay covers for the medical expenses of any person who is covered under the auto insurance policy. This coverage will only pay out if there was an auto accident.
Motor Vehicle Report (MVR)
A record that is kept by the Department of your state’s Motor Vehicle of your driving record. Anything from when you received your license, tickets or citations, suspensions, and all other violations that will affect your driving record. Many insurance carriers use this to charge the insured a fair premium. To lower your premium even if your Motor Vehicle Report has violations and tickets.
Motor Vehicle Accident Report
A person who drives the car of the name insured less than once or twice a month but is still covered under the policy if accident.
Personal Injury Protection Coverage (PIP)
Normally in no-fault states, PIP is coverage that pays out for the injuries of the people who are in an insured’s car or a pedestrian hit by the insured regardless of the fault of the accident. PIP covers necessary medical benefits and funeral expenses specified within the limits of the insured insurance policy.
An agreement between the insurance carrier, and the insured that states what the insurance company will cover if a loss or accident. This included any covered losses, exclusions, premium, and insured’s general information.
Policy Expiration Date
In the Policy Declarations page, you will see a date in which will show you when your car insurance policy expires. This is the date where your coverages are no longer covered unless it is renewed (usually has automatic renewal.) Policy Expiration dates are usually 6-months or 12-months from the effective date of the policy. It is very common to misinterpret this date with the payment date.
This is the time frame of how long the policy lasts. The policy term varies from insurance carrier to insurance carrier. Some insurance companies have 6-month insurance policy, and some have 12-month policies. Both have its advantages and disadvantages.
Car insurance Premium is the cost of insurance that an insured has to pay an insurance company to get the insurance you want for your vehicle. You will see this on your Policy Declaration’s page as, “Total Six-Month Premium” or “Annual Premium” depending on the policy term.
Primary use refers to how you use your car. When an insurance carrier asks this question to an application normally it regards to how the car is used, if it’s being used to drive to work, school, or just for pleasure usage. Generally, when you drive less, your car insurance premiums are lower too.
The individual who drives the car the most is referred to as the, “principal driver.”
Property Damage Liability (PD)
Property Damage Liability, is the coverage that will pay out to the other’s person’s car when you are in an accident when you are at-fault. For example, when you rear-end someone, you are 100% At-Fault, in most cases, your property damage liability coverage will pay out for the damages to the other person’s vehicle that you hit in accident. It doesn’t necessarily have to be a car. If you hit something else with your car this is the same coverage that will pay out for the damages.
Rental Reimbursement (RR)
Rental reimbursement coverage comes with different limits with every insurance company. This coverage will pay for a rental car if an accident while your car is being fixed. This coverage will usually pay a maximum amount per day and a maximum amount per claim. For example, you can have rental reimbursement coverage such as, “$50/day $1,500/max.” Rental reimbursement coverage is an optional coverage that you can add for an additional fee. This coverage does not come standard on your car insurance policy. If you have rental coverage through your dealer, you may want to get rid of this coverage to help you save some money on your car insurance.
Sometimes known as, “Emergency Roadside Assistance,” is a coverage similar to AAA just without the benefits you get from AAA. When you are stalled on the road, you can call your insurance company to use this coverage which can help when you have a flat tire, locked out of your car, need a jump start, etc. You may want to check with your insurance company to check the limits for this coverage if you are carrying it. It is an optional coverage for an additional fee and does not come standard on your car insurance policy. If you have AAA, you may want to get rid of this coverage to save a couple of dollars from your premium. It is advisable to carry AAA instead of roadside assistance since carrying this coverage through your insurance company or carrier may go in as a claim when you intend to use it. With AAA, it’s a third party, you get benefits such as discounts at many places for different activities and attractions and won’t affect your claims history.
A salvage title is a title that a car may get if the vehicle has suffered a total loss and was recovered and fixed to be driven back on the road again. Different states have different guidelines on when a vehicle can qualify for a salvage title. You may want to refer to your state’s salvage title requirements.
Second Name Insured
The primary insured of a car insurance policy may appoint another person or company to be listed on their policy. The Second Name Insured will also carry the same coverages and limits.
SR-22 Certificate of Financial Responsibility
An SR-22 is a legal document required by most states for drivers who were involved in an accident where they were uninsured. Other instances an SR-22 may be required is when a driver is convicted of a DUI or a major traffic violation. It is a document issued by an insurance carrier certifying that the driver now carries at least minimum vehicle liability requirements for a particular state to have their license reinstated.
Uninsured/Underinsured Motorist Coverage (UM)
This coverage is on almost ALL liability insurance policies. When an insured is hit by a driver who doesn’t have any insurance or doesn’t have enough coverage on their car insurance policy to pay for damages and or injuries, uninsured/underinsured motorist coverage from the insured’s policy will pay for these damages or injuries. Refer to your Policy Declaration’s page, some states will only cover injuries while others will cover both injuries and property, such as, Uninsured/Underinsured Motorist Property Damage. (See What is Uninsured/Underinsured Motorist Coverage (UM))
Vehicle Identification Number (VIN)
The vehicle identification number, or more commonly known as, VIN number, is a unique mix of numbers and letters 17 digits long to determine an insured’s vehicle. VIN numbers for every car is unique and different. VIN numbers are also used by insurance companies to know what year, model, and type of car you have. It also helps insurance carriers apply any vehicle discounts since the VIN will usually tell insurance company softwares the safety features of your vehicle. Furthermore, VIN numbers are used to relay information from the insurance company to the Department of Motor Vehicle for any car insurance matter.
Please Note: With every state or insurance company these terms may be different. However, these are the terms that most commonly used by most insurance companies that will guide you in understanding these terms better.