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Glossary of Auto Insurance Terms

Understanding the terms in an auto insurance policy can often be confusing. We’ve defined many of those difficult terms for you in our glossary below.

Just click on the beginning letter of the word you would like defined.

Index

A | B | C | D | E | F | G | I | L | M | N | P | R | T | U

A

Auto Replacement Coverage
A supplemental auto insurance coverage that guarantees your car will be completely repaired or replaced.
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B

Bodily Injury Liability Coverage
In a car accident for which you are at fault, bodily injury liability coverage pays for the medical and rehabilitation expenses for the other party you injure.

Binder
A temporary auto insurance contract that provides proof of coverage until you receive a permanent policy.
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C

Cancellation
Termination of an auto insurance policy before its normal expiration date.

Claim
A request for payment from the auto insurance company on an insured loss.

Collision Coverage
Collisions coverage pays repair damages to your car as a result
of an accident with another vehicle or object. Most banks and lenders require this coverage to receive a car loan.

Comprehensive Coverage
Comprehensive coverage pays for theft or damages to your car caused by fire, flood, vandalism, or hitting an animal. Most banks and lenders require this coverage to receive a car loan.
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D

Declarations Page ("dec page")
The declarations page of your policy shows your auto insurance premium and coverages.

Deductible
The deductible is the amount you must pay out-of-pocket for each claim before the insurance company begins payment.
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E

Emergency Road Service
Optional car insurance coverage that pays for towing or roadside assistance if your car becomes disabled.
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F

Financial Responsibility (FR)
Liability insurance or bond that promises to pay other people if you are at fault.
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G

Gap Insurance
Gap insurance pays the difference between what you owe on your auto loan and your car’s market value if it is totaled.
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I

Insured
The insured is the person and/or property covered by the auto insurance policy.

Insurer
The company that provides the auto insurance. Insurers must be licensed in the state in which are you buying insurance.

Insurance Policy
The printed form, which serves as the contract between an insurer and an insured.
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L

Liability Insurance
Liability insurance pays another person for injuries or damages caused to their property by the insured.

Limit
The amount of insurance for a specific coverage that the insurance company pays up to.
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M

Medical Payments Coverage
This pays the medical bills for you and others covered on your auto insurance policy regardless of fault.
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N

Negligence/Negligent
When your inattention or carelessness causes an accident, you are considered to have been at fault.

Non-renewal
A notice of the car insurance company’s refusal to renew your policy prior to the end of the policy term.
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P

Personal Injury Protection (PIP)
Personal injury protection is usually required in no-fault states as a mandatory part of your auto insurance policy. PIP pays for medical expenses, lost wages and essential services for you and/or persons in your vehicle.

Property Damage Liability
In a car accident for which you are at fault, property damage liability coverage pays for the other party’s property damages.

Premium
The amount you pay for the auto insurance policy.
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R

Rental Car Reimbursement Coverage
Optional coverage that helps you pay for a rental car if your car is damaged or stolen.
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T

Territory
The geographical area where the auto insurance company charges the same premium for drivers with similar characteristics.

Total Loss
When the cost to repair a vehicle exceeds the vehicle’s actual cash value.
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U

Uninsured Motorist (UM)
Uninsured motorist coverage pays for medical expenses for you and/or your family if you are hit by an uninsured motorist.

Underinsured Motorist (UIM)
Underinsured motorist coverage pays for medical expenses for you and/or your family if you are hit by a motorist who does not have enough insurance to cover your claims.
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