Navigating automobile insurance can feel like decoding a foreign language. Whether you’re a first-time buyer or reviewing your current policy, understanding common terms empowers you to make informed decisions and avoid surprises. Below, we’ve defined 25 essential automobile insurance terms to demystify your coverage.
Automobile Insurance Glossary
- Actual Cash Value (ACV)
The current market value of your car, accounting for depreciation. Used to determine payouts for totaled vehicles. - At-Fault Accident
An accident where you’re deemed legally responsible for damages or injuries. - Bodily Injury Liability (BIL)
Covers medical expenses, lost wages, and legal fees for others injured in an accident you cause. - Claim
A request to your insurer for payment after a covered loss (e.g., accident, theft). - Collision Coverage
Pays for repairs to your car after an accident, regardless of fault. - Comprehensive Coverage
Covers non-collision damage (e.g., theft, fire, vandalism, animal strikes). - Declarations Page
A summary of your policy details, including coverage limits, premiums, and named drivers. - Deductible
The amount you pay out-of-pocket before insurance covers the rest (e.g., $500 deductible). - Endorsement
A modification to your policy to add, remove, or adjust coverage. - Exclusion
Specific situations or damages not covered by your policy (e.g., intentional acts). - Gap Insurance
Covers the difference between your car’s ACV and the remaining loan balance if it’s totaled. - Liability Insurance
Covers costs if you’re at fault for injuring others or damaging their property. - Lapse in Coverage
A period when your insurance expires, which can lead to higher future premiums. - Medical Payments Coverage (MedPay)
Pays medical bills for you and passengers, regardless of fault. - Named Driver Exclusion
Excludes a specific driver (e.g., high-risk individual) from your policy. - No-Fault Insurance
In no-fault states, your insurer pays for your injuries regardless of who caused the accident. - Personal Injury Protection (PIP)
Expands MedPay to include lost wages and rehabilitation costs (required in no-fault states). - Premium
The amount you pay for insurance, typically monthly or annually. - Property Damage Liability (PDL)
Covers repairs to others’ property (e.g., cars, fences) if you’re at fault. - Rental Reimbursement
Pays for a rental car while your vehicle is being repaired after a covered claim. - SR-22
A certificate proving you carry minimum liability coverage (required after serious violations like DUIs). - Telematics
Usage-based tracking (via app or device) to personalize premiums based on driving habits. - Total Loss
When repair costs exceed the car’s ACV, prompting the insurer to declare it “totaled.” - Underwriting
The process insurers use to evaluate risk and set premiums. - Uninsured/Underinsured Motorist Coverage (UM/UIM)
Protects you if the at-fault driver lacks sufficient insurance.
Why Understanding These Terms Matters
Insurance policies are binding contracts—knowing these terms helps you:
- Avoid coverage gaps or denied claims.
- Compare quotes accurately.
- Negotiate better rates by demonstrating knowledge.
Need Help Finding Affordable Coverage?
If you’re ready to shop for a policy that fits your needs (and budget!), compare personalized quotes here. Our partners at B2B Connector simplify finding trusted insurers, saving you time and money.
Call to Action:
- Bookmark This Guide for quick reference when reviewing your policy.
- Share with Friends to help them decode their insurance jargon.
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