Auto Insurance Terms and Definitions

A glossary of terms related to auto insurance coverage an an auto insurance policy.

Auto Insurance - An auto insurance policy is a contract between you and the insurance company for you to pay a premium and in exchange, the insurance company promises to pay for specific car related financial losses during the term of the policy

Premiums - The amount you pay for the contract of insurance with a particular company

Deductible - The amount you pay before your policy kicks in. For example, if you have an auto insurance policy with a $500 collision deductible, you must pay the first $500 of the cost to repair damage to your car that resulted from an automobile accident
Auto Insurance Coverage Terms
Bodily Injury Liability - Covers accidental injury or death of another person if caused by you in an automobile related accident. Also referred to as BI.
Collision Coverage - If your automobile collides with another vehicle or object, this coverage pays to repair the damage to your auto, regardless of whose fault it was. It also may cover damage to a rental car that you use. Check with insurance company for details.
Comprehensive Coverage - Pays for damage to your car caused by fire, theft, windstorm, glass breakage and many other non-collision occurrences.
Defense Costs - Covers court costs, legal expenses and attorneys fees accrued by an automobile related incident. Check with insurance company for details.
Liability Coverage - Pays for damage to other party's property and any injury to them if you or someone else driving your car cause an accident. It protects your assets in the event you are held liable for damage to others.
Medical Expense Coverage - If you and your passengers are injured as the result of an auto accident, this coverage pays your medical expenses. Also referred to as Medical Payments or Medpay.
Personal Injury Protection (No-Fault Coverage) - If you or passengers in your car are injured in an auto accident, this pays for medical expenses, loss of wages and death benefits. Also referred to as PIP.
Property Damage Liability - Covers accidental damage to other people's property in an automobile related incident if caused by you. Also referred to as PD.
Other Than Collision - Covers your car against damage from fire, lightning, flood, theft, glass breakage, falling objects, and other specified perils. Also referred to as Comprehensive, COMP, and sometimes incorrectly referred to by the limited term 'Fire and Theft'.
Rental Car Reimbursement Coverage - Pays the cost of a rental car, up to your policy limits, if your car becomes disabled and you need to rent a substitute.
Replacement Cost Coverage - If you have a total loss on a new vehicle within a certain time period after your purchase, some companies will replace your car, or pay you the amount needed to do so.
Supplemental Death Benefit - An amount paid automatically if the insured dies as a result of an automobile accident and the insured and all passengers in the vehicle were wearing seat belts at the time of the crash.
Towing and Labor Coverage - If your car becomes disabled, this coverage pays for towing and the labor to repair your car, up to your policy limits. Some companies provide emergency roadside assistance to make it easy for you to get help when your car becomes disabled. Also referred to as roadside assistance.
Uninsured and Underinsured Motorists Coverage - Pays bodily injury claims if you or your passengers are injured by a negligent uninsured motorist, a negligent driver without adequate insurance, or a hit-and-run vehicle. Also referred to as UM.
The policy coverage definitions listed above are in the most general terms and are subject to actual policy exclusions and conditions. For specific coverage details and policy exclusions, refer to your policy itself or the policy issuer.
Auto Insurance Discounts Defined
Anti-lock Brake Credit: Anti-lock brakes are an automatic safety feature that reduces risk, therefore qualifying you for a credit on your policy.
Anti-theft Credit: Security features qualifying you for credit due to the reduced risk by installing: alarms and active disabling devices (systems that you need to turn on) keyless devices (like a remote door lock on your key chain) a passive disabling device (automatically kicks in when you remove the key from the ignition) tubular locks (bars that lock on your steering wheel).
Car Pool Credit: Commute to work in a car pool with other people and save more than the cost of gas and car maintenance, for you could also qualify for a credit on your auto policy, too! The idea behind this is that you will use your car less, especially during the busy morning and evening hours when chance of accidents is greater.
Defensive Driver Credit: Drivers who have completed a state-approved defensive driver or accident prevention course could qualify for savings. This credit may be good for only a certain number of years from the completion date of the course.
Driver Training Credit: A driver under the age of 21 who has taken a driver training course could qualify for savings.
Forgiveness Credit: Usually available to drivers who have maintained their auto policy with the same insurance carrier for many years. Rewarding loyalty, the first minor traffic accident (estimated below a certain dollar amount) may not be marked against them and raise the cost of their insurance either.
Good Student Credit: If a driver in your household is younger than 25 years old and is a full-time student with a good grade point average, they could qualify for a credit.
Loss Free Credit: Being a good customer and a low risk helps here, for some insurance companies will give a credit if you haven't made any claims during the first few years of your policy.
Low Mileage Credit: Depending on how low the amount of miles you travel in a year is, you could earn a credit on your policy. The lower the miles on the road, the less risk of an accident.
Mature Driver Discount: Some companies give credits for drivers over the age of 55.
Multi-car Credit: Insuring more than one car with your auto insurance company may make you eligible for savings.
Multi-Policy Credit: More than one type of policy with the same insurance company (for example, both an auto policy and a homeowner's policy), could mean savings.
Passive Restraint Credit: Most insurance companies will give you credit if your car has air bags, automatic seat belts, or other safety features that you don't have to turn on or buckle up manually. These features automatically reduce your risk of injury.
Renewal Credit: After a certain number of years of renewing your policy with the same company, you may get a credit with renewals. A good customer is valuable and they want to reward it.
Student Away Credit: Credit may be given if a driver in your household is a student living away at a school. If your student is more than 100 miles from home and doesn't have a car, that driver's risk is lowered because time behind the wheel is reduced.