Car Insurance Glossary
Car insurance comes with a lot of confusing terms. Whether you’re shopping for a new policy or reviewing your coverage, this glossary explains every common phrase and industry term in plain English.
Accident Forgiveness
Prevents your rate from increasing after your first at-fault accident. Usually available as a policy add-on.
Actual Cash Value (ACV)
The value of your vehicle at the time of a loss, minus depreciation.
Adjuster
An insurance company employee who investigates and settles claims.
Aggregate Limit
The maximum amount your insurer will pay for all claims during a policy period.
Agent
A person who sells insurance policies and helps customers with coverage needs.
At-Fault
The determination that you were responsible for causing an accident.
Binder
A temporary insurance contract that provides coverage until the full policy is issued.
Bodily Injury Liability
Covers injuries to other people if you’re at fault in an accident.
Broker
An independent party who shops insurance policies from multiple companies on your behalf.
Carrier
Another term for the insurance company providing your coverage.
Claim
A request made to your insurance company to cover a loss under your policy.
Claimant
The person making the claim, which could be you or another driver involved in an accident.
Collision Coverage
Pays to repair or replace your vehicle after a collision, regardless of who is at fault.
Comparative Negligence
A legal concept where fault is shared between drivers in an accident, which can affect claim payouts.
Comprehensive Coverage
Covers non-collision events like theft, weather damage, fire, or vandalism.
Coverage
The types and amounts of protection provided by your insurance policy.
Declarations Page
A summary page of your insurance policy showing coverages, limits, and premiums.
Deductible
The amount you pay out-of-pocket before insurance pays for a covered loss.
Depreciation
The loss of value in your car over time, which affects how much insurance will pay.
End of Term
The date when your current insurance coverage expires.
Endorsement
An optional addition or change to your policy, also called a “rider.”
Exclusion
Specific situations or items your policy does not cover.
First-Party Claim
A claim you file with your own insurance company.
Gap Insurance
Covers the difference between what you owe on your car loan and its actual cash value if it’s totaled.
Grace Period
The extra time after your payment due date when your policy remains active before cancellation.
High-Risk Driver
Someone who is considered more likely to file a claim, often due to accidents, tickets, or poor credit.
Indemnity
The principle of restoring you to your financial position before a loss, without profit.
Insurance Score
A score based on your credit and claims history used to help set premiums.
Insured
The person(s) covered by the policy.
Insurer
The insurance company that issues and backs your policy.
Lapse in Coverage
A period when you do not have active insurance, often leading to higher rates later.
Liability Insurance
Covers damage or injuries you cause to others in an accident you’re responsible for.
Limit
The maximum amount your insurance company will pay for a specific type of claim.
Loss Ratio
The percentage of premiums an insurer pays out in claims.
Material Misrepresentation
Providing false or incomplete information that could affect your coverage.
Medical Payments (MedPay)
Covers medical expenses for you and your passengers, regardless of who’s at fault.
Minimum Coverage
The least amount of insurance required by your state law.
Multi-Policy Discount
A discount for buying more than one type of insurance (e.g., auto and home) from the same company.
Named Driver
A person specifically listed on the policy as a covered driver.
No-Fault Insurance
Covers your medical expenses regardless of who caused the accident, required in some states.
Non-Renewal
When the insurance company decides not to continue your policy after the current term ends.
Per Occurrence Limit
The maximum your insurer will pay for a single claim.
Personal Injury Protection (PIP)
Pays for medical costs, lost wages, and related expenses after an accident, regardless of fault. Required in some states.
Policy
Your written insurance contract that outlines your coverage and responsibilities.
Policyholder
The person who owns the insurance policy.
Premium
The amount you pay for your insurance coverage, usually monthly, semiannually, or annually.
Primary Driver
The main person who drives the insured vehicle.
Quote
An estimate of how much your insurance will cost based on your info and coverage needs.
Reinstatement
Restoring a policy after it has lapsed or been canceled.
Replacement Cost
What it would cost to replace your car with a similar one, without subtracting depreciation.
SR-22
A form your insurer files with the state to prove you have the required coverage, often after a serious driving offense.
Stacking
Combining coverage limits across multiple vehicles or policies, where allowed.
Subrogation
When your insurer seeks reimbursement from the at-fault party’s insurer after paying your claim.
Surcharge
An extra charge added to your premium due to accidents, tickets, or other risk factors.
Telematics
Technology that tracks your driving habits to determine personalized rates.
Total Loss
When the cost to repair your vehicle is more than its value — the insurer pays out instead of repairing.
Umbrella Policy
Extra liability coverage that kicks in after your auto policy limits are exhausted.
Underinsured Motorist Coverage
Covers your costs if the at-fault driver doesn’t have enough insurance to fully pay your damages.
Underwriting
The process insurers use to assess risk and set your premium.
Uninsured Motorist Coverage
Pays if you’re hit by a driver with no insurance.
VIN (Vehicle Identification Number)
A 17-digit code that uniquely identifies your car.
Waiver of Deductible
A provision where your deductible is waived under certain conditions, such as not-at-fault accidents.