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Auto Insurance Terms Glossary A-M

We've created this simple dictionary of car insurance term definitions to help you sort through some of the more confusing lingo you may encounter while shopping for your policy.

For additional help, see our extensive FAQ files, as well as our guide to auto insurance basics, and how to choose car insurance.


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Click on a letter to quickly jump to that part of the alphabet.

A B C D E F G I L M N O P R S T U V W 


A

Accident
What auto insurance is designed to cover. Accidents may be considered either at fault or not at fault. If you have at fault accidents on your driving record, your rates will be higher.

Additional Insured or Additional Interest
A person or entity, other than the named insured or covered person, who is protected under the named insured's auto policy. If an auto is leased, the leasing company may want to be listed as an Additional Insured as well as a lien holder or loss payee. This protects the leasing company if it's named in a lawsuit for an accident caused by a policyholder.

Anti-Theft Device
Devices intended to prevent theft or vandalism, or to assist in the recovery of a stolen vehicle. Some examples include etched VIN numbers, car alarms, the "Club" and other such devices, etc.

Assigned Risk
A poor risk that an insurance company is compelled to cover under state laws.

Automobile Insurance
Insurance designed to protect against losses involving automobiles. All types of policies, including basic liability, collision and comprehensive, etc. come together to constitute automobile insurance.
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B

Basic Limits of Liability
These vary locally, they are the lowest amounts of liability coverage that you can legally buy in your state.

Bodily Injury Liability
The legal definition for causing physical harm to another person.
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C

Classic Car Insurance
A special type of coverage, which applies to collector cars, that could not be otherwise insured through regular channels.

Collision Insurance
A policy that covers the damage to your own vehicle in the event of an accident.

Combined Single Limit
Bodily Injury and Property Damage coverage combined into one single amount of coverage.

Comprehensive Coverage
A policy that covers the damage to your own vehicle in caused by an event other than an auto accident. For example, theft, vandalism, etc would be covered by such a policy.

Continuous Coverage or Continuous Liability Insurance
The length of time you have had your vehicle insured without a break in coverage (some insurers require at least six months.)

Covered Person

The person(s) insured under a policy contract.
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D

Deductible The minimum amount you will have to pay before your own insurance policy begins to reimburse you for your loss. Normally, policies with a higher deductible will have lower premiums (they'll be cheaper.)

Defensive Driver Course
Courses offered by your own state's DMV or by an approved entity that promote safe driving. Upon completion of such a course, you may become eligible for lower insurance rates. A good deal if you can get it.

Discount Auto Insurance
A policy is eligible for premium discounts if something about the driver or car that makes the policy a better-than-average risk.

Drive-Other-Car Endorsement
A part of your policy that extends coverage to any other car you might be driving (for example, a rental car.)

Driver Education
A course accredited by your state's DMV, consisting of at least 30 hours of professional classroom instruction. Often required for teen car insurance.

Driver Training
A course accredited by your state's DMV, consisting of at least 6 hours of behind-the-wheel training.
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E

Earned Premium
The part of your premium used up by any given point in the life of your policy. After six of coverage on a twelve-month policy, one half of your premium will have been "earned".

Effective Date/Inception Date
The actually date on which your policy begins to cover you against losses (not necessarily the day you pay, or sign, etc.)

Expiration Date
The date your coverage ends. There is also usually a time involved, for example Midnight of such and such day.
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F

Financial Ratings
Ratings, similar to credit ratings, of insurance providers meant to accurately represent a carrier's ability to meet claims. Often mentioned ratings are by agencies such as Standard and Poor's and AM Best.

Financial Responsibility Filing (SR22)
A requirement by a state regulatory entity (usually the state Motor Vehicle Department) for an insurance company to certify on a driver's behalf that the driver has the ability to pay future claims up to the state required limit. The certification is done by means of a form called an SR-22.

Financial Responsibility Laws
State laws requiring drivers to maintain enough insurance to cover accidental losses to others. Law and limits vary state-by-state.

First Party Benefits
Often also know as Personal Injury Protection (PIP) or Medical Coverage, this policy pays for physical injuries sustained by the occupants of your car in the event of any accident, regardless of who was at fault. This is generally not a good deal, as a good health insurance policy would cover these injuries anyway.
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G

Gap Auto Insurance
A gap car insurance policy insures you for the difference between what you owe on your car and what your insurance company says it's worth. Often required when buying or leasing a new car.

Garage Address
Where you park your car at night.

Good Driver Discount
Better insurance companies offer discounts to customers with good driving records. If you have a good driving record, get a quick quote from Electric Insurance or find the car insurance providers in your state.

Good Student Discount
A discount which sometimes applies to teen car insurance when the driver maintains at least a "B" average at school.
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I

ID (Identification) Card
A document identifying you as having liability coverage for the vehicle that you are driving. Liability insurance is required in most states.

Installment Fee
A fee often required if you prefer to spread your payments over time.

Insured Person
The person(s) insured under a policy contract. (Same as a covered person.)
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L

Lapse in Coverage
Also known as policy lapse. The point in time when a policy is canceled for any reason, including failure to pay, change of provider, etc.

Lender
The lender is the entity (usually a bank) which lends you the money to purchase a car. They are usually the loss payees, until you pay off the balance of the loan.

Lessor
Similar to the lender, the lessor is the entity which leases your vehicle to you. This is quite often the financial arm of the car company itself.

Note: both lenders and lessors may require that you purchase gap auto insurance to fully protect the value of your car.

Liability Insurance
Insurance coverage to protect against claims alleging that one's negligence or inappropriate action resulted in bodily injury or property damage.

Loss Payee/Lien holder
Usually your lender or lessor, this is the person or entity to whom loss payments are made, in addition to you. Liability Coverage
Insurance that provides compensation for a harm or wrong to a third party for which an insured is legally obligated to pay.

Longevity
Insurance companies often reward their long-time customers with premium discounts. An insurer may provide a discount after an insured has been with the company for a specified amount of time. Electric Insurance has great longevity discount programs.
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M

Medical Payments Coverage
Medical payments coverage, also called personal injury protection, or PIP, covers the cost of injuries to you, your family, and your passengers.

Minimum Liability Limits
These vary locally, they are the lowest amounts of liability coverage that you can legally buy in your state.

Multi-car discount
Discount often given when insuring multiple vehicles under the same policy. By choosing this option, you will almost always save over having separate policies for each car. More on discount car insurance.
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Learn how to set responsible but affordable coverage amounts in our in-depth guide to choosing car insurance coverage.

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This wrebsite provides general information for educational purposes only and is not intended to be legal advice. We make no guarantees as to the validity of the information presented. Your particular facts and circumstances, and changes in the law, must be considered when applying insurance law. You should always consult with a competent auto insurance professional licensed in your state with respect to your particular situation.