Sometimes the insurance language can be hard to understand. We’re here to clarify some of the most common terms.
Adjuster - A person hired by the insurance company to investigate and settle insurance claims.
Anti-Theft Device - A device that attempts to prevent vehicle theft. Active anti-theft devices can track and recover a vehicle. Passive anti-theft devices attempt to prevent theft by using alarms, steering wheel locks, etc.
Application – The form you fill out with information regarding the item you’re insuring. The insurance company will use this to decide whether to issue you a policy and how much to charge.
Binder – Proof of coverage in the form of a temporary insurance contract that can be used until you receive a permanent policy.
Bodily Injury Liability Coverage (BI) – This coverage pays for injuries/death to people involved if an insured person is legally liable for an accident. BI also pays for legal defense costs if you are sued. Refer to your policy for full details and exclusions.
Collision Coverage - Pays for damage to your car if an accident with another vehicle occurs.
Companion Credit – By combining auto and home/condo/renters policies with the same carrier or agency, you may be eligible for a discount on one or both policies.
Comprehensive Coverage (physical damage other than collision) - Pays for damage to or loss of your automobile from causes other than accidents, including hail, vandalism, flood, fire, and theft.
Declarations Page – A summary page of your policy which includes the insurer’s name and address, the policy coverage period, a vehicle description, premium amount, and coverage amount.
Deductible - The amount the insured must pay in a loss before the company issues payment.
Driver Improvement Course – A voluntary driver improvement course for drivers over the age of 55. If eligibility requirements are met, these drivers may qualify for a discount.
Earned Premium – The portion of a policy premium that has been used to actually buy coverage, or that the insurance company has "earned." For example, if an insured pays in full at the beginning of the policy coverage, six months into the policy, there would be six months of earned premium. The remaining six months of premium is called unearned premium.
Endorsement - A written agreement attached to a policy expanding or limiting the benefits otherwise payable under the policy. Can also be referred to as a "rider."
Gap Insurance - Coverage that pays the difference between the actual cash value of a vehicle and the amount still to be paid on the loan. The amount of the deductible may also be covered on some gap policies.
Garaging Location - The place you primarily park your vehicle when you're not using it. Generally, this is your primary residence.
Good Student Discount – Student drivers who are under the age of 25, enrolled full-time in high school or college and can provide documentation of at least a B grade point average or 3.0 GPA may be eligible for a discount on their auto insurance.
Lapse - Termination of a policy due to non-payment of premiums.
Liability Insurance – If you cause an accident, this coverage pays for injuries to the other party and damages to the other vehicle. If the accident was caused by someone covered by your policy, including a driver operating your car with your permission, this policy will pay.
Liability Limits - The maximum amount your liability policy will pay. Basic coverage is known "25/50/25" coverage. Your policy must pay at least $25,000 for each injured person, up to a total of $50,000 per accident, and $25,000 for property damage per accident.
Limits – This defines the most an insurance company will pay for damages or injuries that apply to the coverage. Limits are selected by the insured. Minimum limits, or the minimum amount of coverage, may be effective in your state.
Loan/Lease Payoff Coverage - Loan/Lease Payoff coverage pays the difference between the remainder of your vehicle loan and what your insurance pays if your vehicle is declared a total loss or stolen and not recovered, less your deductible. Can also be referred to as gap insurance.
Loss - The amount an insurance company pays on a claim.
Low Mileage Discount – A discount may be applied for drivers who drive under a certain number of miles per year. The number of miles can vary by insurance provider.
Mature Driver Discount – Drivers who have completed eligible safety courses may be eligible for a discount on their auto insurance.
Medical Payments and Personal Injury Protection (PIP) - Limited medical and funeral expenses paid by an insurance company if you, a family member, or a passenger in your car is injured or killed in a motor vehicle accident. Lost-income benefits are also covered by PIP.
Motor Club Discount – Drivers may be eligible for a discount on their auto insurance if they belong to a motor club, such as AAA.
Multi-Car Discount – Similar to a companion credit, a multi-car discount can be applied for drivers who have multiple vehicles.
Non-Renewal - A decision by an insurance company not to renew a policy.
Occasional Driver - A person who is not the primary driver of the insured vehicle.
Paid in Full Discount – Some insurance companies provide a discount for policy holders who pay their premium in full.
Policy Expiration Date – The date that your current insurance policy ends. It can be found on your current policy documents, Declarations Page (Dec Page), insurance identification card or recent cancellation notice.
Premium - The amount paid by an insured to an insurance company for policy coverage.
Primary Residence – The residential place where you will live for the majority of your policy term.
Primary Use – This describes how you will primarily use your vehicle. Primary use options include to/from work, business, pleasure or farm-use.
Principal Driver - The principal driver is the person who drives the car most often.
Property Damage Liability Coverage (PD) – This coverage pays for damage to others' property resulting from an accident for which you’re legally liable. Refer to your policy for full details and exclusions
Rental Reimbursement Coverage – Set daily amount for a rental car paid by your insurance company if your car is being repaired because of damage covered by your auto policy.
Rider - A written agreement attached to the policy expanding or limiting the benefits otherwise payable under the policy. Also referred to as an "endorsement."
Reinstatement - The process by which an insurance company reissues coverage after it lapsed because of nonpayment of renewal premiums.
Roadside Assistance Coverage - Roadside Assistance provides services such as towing, flat tire change, locksmith service and battery jump-start to customers. This is an elective coverage for an additional premium under your auto insurance policy.
Safe Driver Discount – This discount may apply to drivers who have not had an accident or violation in the last six years.
Student Away at School Discount – Student drivers under the age of 25 who attend a school that is over 100 miles away may qualify for this discount.
Surcharge - An extra charge, usually caused by at-fault accidents, added to your premium by an insurance company.
Towing and Labor Coverage – Towing coverage pays for towing charges when your car can´t be driven. Labor coverage pays for charges, such as changing a flat tire, at the place where your car broke down.
Underwriter – This person reviews insurance applications and determines whether the company should insure the applicant, and at what premium.
Underwriting – The insurance company’s review process for accepting or rejecting an application for an insurance policy.
Uninsured/Underinsured Motorist (UM/UIM) Coverage – If you’re involved in an accident caused by a hit-and-run driver or a motorist without liability insurance, this coverage will pay for your injuries and resulting property damage. If your medical or car repair bills are higher than the other driver’s liability coverage, this coverage will pay.