Auto Insurance Glossary

Bodily Injury Liability Coverage: Liability coverage is the foundation of auto insurance coverage. It ensures your financial responsibility is covered if you are involved in an auto accident. Each state has its own minimum liability coverage requirements. Liability is split into two separate categories: bodily injury and property damage.

Collision Coverage: Coverage that will pay to repair or replace your vehicle if you are at-fault in an accident. As with comprehensive coverage, collision coverage is not required under any state law. If you have a car loan, your lender may require you to purchase this coverage. Collision auto insurance is designed to protect your investment (your car) and the lender’s investment (your car loan).

Commercial Vehicle Insurance: When a vehicle is driven for business purposes, it usually falls under the category of Commercial Vehicles. Usually, they transport goods and/or passengers for compensation, such as pizza delivery and florist vehicles. They can range in size from small (such as a taxi) to extra-large (such as a semi delivering stock to your local supermarket), as well as everything in between.

Comprehensive Auto Coverage: Comprehensive coverage pays for damages to your car that were not the result of an accident. This includes damages caused by fire, certain natural disasters, vandalism, falling objects, and theft. Comprehensive coverage is sometimes referred to as Other than Collision coverage.

Death Indemnity Coverage: Coverage that provides a limited life insurance policy (usually between $5,000 and $10,000) to a specifically named beneficiary in the unfortunate event that the insured driver is accidentally killed as a direct result of an automobile accident.

Deductible: A deductible is the amount that the insured person must pay after a qualifying event, before the insurance company will cover any costs for repairs, medical benefits, or liability. For example, if your insurance deductible is $500, and you sustain damages costing $5,000 to your car, you must pay the first $500 in repairs out of your own pocket, before your insurance company will cover the remaining $4,500. In general, buying insurance with a higher deductible will lower the cost for insurance premiums. 

Lease or Loan Gap Coverage: Coverage designed to protect an investment on a car for which payments are still being made. Cars begin depreciating in value as soon as they are driven off the lot. If your car is stolen or wrecked in an accident, your auto insurance policy will only compensate you for the car's actual cash value.

Limits: Most insurance policies have a maximum amount that they will pay to cover damages, medical benefits or liability costs. The limits are often stipulated per incident as well as for a given period of time.

Different types of coverage often come with different limits, called split limits. The maximum payouts for bodily injury insurance may differ from the maximum for property damage costs, for example.

Medical Payments Coverage: This coverage protects the policyholder and/or passengers in the event of an accident, no matter who was at fault. Medical payments coverage pays for funeral costs and/or medical expenses, including emergency room visits, x-rays, doctor care, hospital stays and more.

Personal Injury Coverage: Also known as Personal Injury Protection (PIP), is an extension of an auto insurance policy available in certain states, where it is often a mandatory element of an individual's auto insurance policy -- especially in states with "no-fault" laws.

Personal Vehicle Insurance: A private automobile is any vehicle constructed primarily for the carriage of passengers and is taxable for private use only.

Premium: The insurance premium is your cost to purchase insurance, usually paid in monthly or annual installments. The cost of your premium varies depending on the specific coverage purchased and the period of time covered. Other factors affecting the premium include the drivers' age and driving record, the area where the vehicle will be driven and the age and value of the vehicle.

Principal Driver: A vehicle's principal driver is the person who drives the car most often. Usually this is the main driver listed on the insurance policy. Other drivers may also be listed on an insurance policy as "occasional drivers." The cost of insurance will be affected by the driving record and age of the principal driver and in some cases also by those of occasional drivers, especially for drivers under 25 years of age.

In some cases, it might also be appropriate for the same person to be listed as the principal driver for more than one vehicle in the same household.

Rental Reimbursement Coverage: A very inexpensive option to add onto your general auto insurance policy that can save you a few headaches. Coverage usually kicks in when you are unable to drive your vehicle for reasons of theft or damage: for example, if your vehicle has been stolen or is being repaired after an accident.

Special Equipment: Sound System or other Special Equipment Coverage is an optional add-on to a basic auto insurance policy. This type of coverage will help to protect your aftermarket sound or video system in your vehicle, as well as any other item “attached and added to your car”, like expensive wheels or rims.

SR–22: An SR-22 is a certificate required by the state in certain situations to verify that a driver has enough auto insurance liability coverage. These are most often required for high–risk drivers who have been in accidents when they did not have insurance coverage, or those who have been involved in a DUI, reckless driving, serious moving violations or have had a suspended license.

Drivers who need to have a SR-22 will be notified by their state's Department of Motor Vehicles (DMV).

Tape/CD Coverage: This coverage will pay you for your collection in the unfortunate event that your tapes and/or CDs are either damaged by an accident or stolen out of your car. This coverage is in addition to your current comprehensive and collision auto policy.

Tort States: Under the tort system, if a car accident occurs, someone must be determined to be at fault. The at-fault party is responsible for the damages from the accident. Specific details tend to vary from state to state.

Towing and Labor Costs Coverage: In cases of roadside breakdowns, you can protect yourself by opting into Towing and Labor Coverage on your auto insurance policy. If your car breaks down, will not start, or encounters some other issue that requires professional mechanical help, simply call a pre-designated phone number, and a truck and driver will be off to assist you.

Uninsured Motorist Coverage: An auto insurance policy option which covers the policyholder and his/her passengers for bodily injury and property damage incurred in an accident caused by a driver with no car insurance, or in a hit-and-run accident.

Underinsured Motorist Coverage: An auto insurance policy option which covers the policyholder, authorized drivers, and his/her passengers for bodily injury and property damage incurred in an accident caused by a driver who has insufficient auto insurance coverage to cover the total damages.

Waiver: An insurance waiver proves that a driver had the option for a certain type of insurance coverage and chose to decline the insurance protection.

Some insurance policies also will waive certain rules about the policy in an exceptional situation. For example, the Waiver of Collision Deductible is an option that will waive your collision deductible, if your vehicle is damaged by an uninsured or hit–and–run driver. This particular coverage is limited to policyholders who buy collision insurance, and the driver must be able to identify the at-fault vehicle or driver.

If you have more questions that haven't been answered here, refer to our FAQs section. Hopefully anything else you may be wondering about can be answered there.

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**Auto Insurance Finder is not an insurance broker or carrier. Content on this site is for comparison and informational purposes only. The products and services listed on this site may not be available in all states.

Last Updated: November 10, 2009