Auto Insurance Glossary (Terms-Definitions)

To help cut through all the legalese found in an insurance policy, AutoInsuranceMonitor has provided drivers this easy to read auto insurance glossary listing many common terms and definitions to help them understand the difference between collision insurance and a claim.

ABS (Anti-lock Braking System) – Brake system that helps a car’s regular brakes by allowing all the tires to slow simultaneously which helps drivers keep control of their car.

Amendment – Any changes or alterations to an insurance policy.

Anti-Theft Device – System installed which helps minimize a car getting stolen.

Auto Theft – Duh right?

Bodily Injury Liability – Covers policy holder when they are responsible for a car wreck and covers either injuries or death of other driver.

Claim – Notice to insurance carrier that a driver is seeking reimbursement or coverage for a loss.

Collision Insurance – Optional coverage that protects drivers in an accident by paying for their own car’s damages. Owners with older cars sometimes drop it since the coverage is cash-value. May be required if vehicle is financed or leased.

Collision Deductible Waiver – Eliminates deductible when driver crashes with an uninsured driver.

Comprehensive Insurance – Optional coverage that covers a driver for damage to a vehicle from natural disasters or theft. May be required if vehicle is financed or leased.

Conditions – Limits on the insurance agreement showing what the car insurance provider covers; responsibilities are also outlined here.

Credit Rating – A driver’s credit worthiness as estimated by one of the three major credit rating agencies.

Deductible – Dollar amount a driver has to pay when a claim is sent to an insurance carrier.

Declaration Page – Part of an insurance policy describing who and what is covered.

Definitions – Portion of insurance policy detailing specifics of the policy.

Depreciation – Dollar amount a car’s value decreases due to wear and tear or market factors.

Effective Date – This is the date when car coverage begins and is usually determined at the time of purchase.

Endorsements – Any modification to an existing insurance policy. For example, it may be an increase to a deductible.

Exclusions – Portion of car coverage agreement stating what is not covered in you’re the insuring agreement portion of a driver’s car insurance coverage. Using a personal car for business is a common example of an exclusion.

Extraordinary Medical Coverage – Coverage for costs from major injuries after a wreck; provides long term rehab and care after any other medical insurance runs dry.

Gap Insurance – Covers the difference between what a driver may still owe on a financed car and the car’s fair market value in case the car is totaled; also recommended for leased cars.

Garaging Location – Indicates where a driver typically parks the insured car and is usually a driver’s home address. Unbeknownst to many drivers is that the garaging location sometimes determines insurance rates.

Insurance Premium – The agreed dollar amount a driver pays their car insurance provider to secure protection for losses or damage in case of a car wreck or other damage.

Insurance Score – A rating used by car insurance companies to assess a driver’s risk of insuring and is computed by looking at several factors including past claim history, credit scores and age.

Liability Insurance – Forms the nucleus of a car insurance policy and covers drivers from property damage claims or claims for injuries and is mandatory in almost all states.

Limits – Maximum financial amounts stated in a car insurance policy that cover a driver.

No-Fault State – States requiring car insurance providers to offer coverage to drivers for damages or injuries regardless of fault.

Personal Injury Protection – Coverage for losses due to an inability to work, hospital bills, funeral bills.

Policy Period – Amount of time a driver is covered by their insurance company.

Property Damage Liability Coverage – Coverage that protects a driver from costs arising from property damage after a wreck.

Stacking – Term used to describe the practice of adding up insurance policies to expand coverage thresholds.

Term – The amount of time an insurance policy is effective for and is typically for one year.

Uninsured Motorists Coverage – Offers coverage to drivers if they wreck with a driver having no car coverage or when they’re victims of a hit and run driver.

Vehicle Identification Number (VIN) – Unique identification number on vehicle which is used to distinguish and identify cars.