Auto Insurance Glossary of Terms & Definitions

Before you contact an agent about auto insurance, or even request multiple online quotes, you must understand the terms used in auto insurance policies. Here are some common terms and their definitions. If you understand auto insurance, you can be sure you'll get the kind of policy you need. Keep this information handy when talking to your agent or reviewing policy details.

• Actual Cash Value: This is used in reference to the market value of your car. If your car is totaled and your insurance policy provides actual cash value for it, they will give you the current value of the car, not necessarily what you paid for it when you originally purchased the vehicle.
• Auto Insurance Score: This number represents your risk to insurance companies. It is influenced by such factors as credit score, driving record and age.
• Bodily Injury Liability Coverage (BI): Insurance that covers the physical injury or death of a person you may injure in a car accident. This coverage may pay the injured party's medical bills and replace lost wages.
• Binder: A temporary contract between you and your insurance company that covers the policyholder until the insurer can issue a permanent policy.
• Certificate of Financial Responsibility (CFR): A form that shows the state evidence of a driver having the minimum required auto insurance coverage.
• Claim: A formal request by the insured or other party to an insurance company for monetary payment.
• Collision Coverage: This coverage is for repairing your car in the event of a collision with another automobile or object.
• Comprehensive Coverage: This will insure your car for certain occurrences outside a collision such as damage from natural elements or vandalism.
• Declarations Page: This is the very first page of your policy and contains valuable information such as the coverage limits, your deductible amount, policy number and the VIN for any automobiles on the policy.
• Deductible: The amount you pay out-of-pocket before you can receive insurance benefits. A higher deductible may result in a lower premium on your car insurance.
• Exclusion: The restriction of a particular issue or type of loss from coverage by your insurer.
• Gap Insurance: Gap insurance covers the gap between what you owe on a car and its market value or actual cash value, paying the difference in the event that the car needs to be replaced.
• Liability Coverage: Insurance coverage for car accidents and any related injuries for which you are at fault.
• Limits of Liability: The maximum amount an insurance company will pay for a particular claim.
• Medical Payments Coverage: Covers medical bills of a claimant, also known as PIP.
• Personal Injury Protection (PIP): Covers the insured, passengers in insured one's vehicle, and any pedestrians involved in an accident. According to the terms of the policy, it may cover medical expenses, funeral expenses and loss of wages due to the car accident.
• Policy: Contract that outlines your auto insurance benefits and terms.
• Property Damage Liability Coverage (PD): This coverage will pay for property damaged during a car accident that you are responsible for causing.
• Premium: The amount paid to your insurance company to receive coverage. Premiums can be paid monthly, annually or semiannually.
• Rental Reimbursement: If your car needs to be repaired or replaced after an accident, this coverage will pay for the cost of a rental car during that time period.
• Uninsured Motorist Coverage (UM): Pays for injuries and damage (depending on policy terms) caused by a driver without insurance coverage.
• Underinsured Motorist Coverage (UIM): Pays for injuries and damage (depending on policy terms) caused by a driver that does not have enough insurance coverage to pay your claim.
• Vehicle Identification Number (VIN): A 17-digit number that identifies the make, model and year of the car.

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