Understanding Auto Insurance: A Glossary of Common Terms
Navigating the world of auto insurance can be daunting, especially with all the jargon involved. To help you make informed decisions, we’ve put together a glossary of common auto insurance terms. Whether you’re a new driver or just looking to refresh your knowledge, this guide will clarify the key concepts you need to know.
Claim
A request for payment from your insurer to cover vehicle repairs, injury treatment, or other costs resulting from an accident or other covered event.
Coverage
The protection provided by an insurance policy against specific risks. Coverage can include liability, collision, comprehensive, and more.
Collision Coverage
Pays to repair your vehicle if you cause a crash or have a one-car accident, such as hitting a tree or a guardrail.
Comprehensive Coverage
Covers non-collision incidents like theft, fire, or natural disasters. This type of coverage is optional but highly recommended for full protection.
Declarations Page
A page in your policy listing its most important details, including your car’s VIN, your address, drivers insured on the policy, liability limits, and included coverage.
Deductible
The amount you are responsible for paying out of pocket before your insurance coverage kicks in. For example, if you have a $500 deductible and your repair costs are $2,000, you will pay $500, and your insurer will cover the remaining $1,500.
Exclusion
Something your policy won’t pay for. Common exclusions include intentional damage, wear and tear, and using your vehicle for commercial purposes without proper coverage.
Liability Insurance
Covers damages and injuries you cause to others in an accident. This is typically required by law and includes bodily injury and property damage liability.
No-Fault Insurance
A type of insurance where your insurer pays for your damages regardless of who caused the accident. This is designed to reduce the need for litigation and speed up the claims process.
Policyholder
The person who owns the insurance policy. This is the individual responsible for paying premiums and making decisions about the coverage.
Premium
The amount you pay to the insurance company for your coverage. Premiums can be paid monthly, quarterly, or annually, depending on your policy terms.
Underwriting
The process by which an insurer evaluates the risk of insuring a person or asset and determines the premium. Factors considered include driving history, age, and the type of vehicle.
