Auto Insurance Terms and Definitions

Understanding the language of auto insurance is essential for making informed decisions about your coverage. Here are important auto insurance terms and their definitions to help you navigate the world of car insurance:

• Actual Cash Value (ACV): The value of a car considering its age, mileage, make, model, and overall condition. ACV is used to determine the payout for a vehicle in the event of a covered loss.
• Appraisal: An estimate of the value of a vehicle or property, or the extent of damage resulting from an accident at the time of loss. Appraisals are often conducted by impartial appraisers.
• Bodily Injury Liability Coverage: Coverage that pays for damages related to injury or death resulting from a covered accident for which you are at fault. It may also provide funds for legal defense.
• Carrier: The insurance company providing coverage.
• Certificate of Satisfaction: A form signed when taking delivery of an insured vehicle from a repair shop, indicating satisfaction with the repairs.
• Claim: A request for payment under the terms of an insurance policy, typically filed to cover damages or losses.
• Declarations Page: A page in your insurance policy containing basic information, including your name, vehicle description, policy effective dates, coverage amounts, and premiums.
• Deductible: The portion of a claim that you must pay out of pocket before your insurance coverage kicks in. A higher deductible generally results in lower premiums but higher costs in the event of an accident.
• Endorsement: A modification to your insurance policy that amends specific coverage, potentially adding, modifying, reducing, or removing coverage or policy terms.
• Exclusion: A provision in an insurance policy that limits or excludes specific coverages.
• Expiration Date: The date when your insurance coverage ends, typically followed by a new policy or renewal.
• Field Adjuster: An insurance representative who conducts accident scene investigations, damage inspections, and face-to-face meetings with policyholders outside of the office.
• Financial Responsibility Law: A legal requirement for vehicle owners and drivers to have sufficient funds or liability insurance to compensate those injured in an accident.
• Indemnification: The process of providing financial compensation to restore a person or entity to their financial position before a loss occurred.
• Insurable Interest: A right or relationship under an insurance contract that would cause an individual to suffer an economic loss due to property damage or bodily injury.
• Insurance ID Card: A card issued by your insurance company containing basic policy information.
• Insurance Score: A rating assigned by the insurance company, influenced by factors like credit history, used to determine policy eligibility in some states.
• Leased Vehicle: A vehicle rented under a long-term contract or lease, with the leasing company listed on the insurance policy as an insured party.
• Liability: Legal responsibility for any injury or damage suffered by another person.
• Limit: The maximum coverage amount provided by an insurance policy.
• Loss: The amount of damage to property, vehicle, or injury suffered by a person, often used interchangeably with “claim.”
• Medical Payments Coverage: Coverage that reimburses for medical or funeral expenses incurred in a covered accident, up to the policy limits. It may also cover medical costs for injured pedestrians.
• Motor Vehicle Report (MVR): A report from the Department of Motor Vehicles that lists accidents and violations on your driving record.
• No-Fault Insurance: Coverage that pays your own medical expenses, lost wages, or accident-related expenses, regardless of fault, in states with no-fault laws.
• Non-Renewal: The decision by an insurance company to not renew a policy at its expiration date.
• Personal Injury Protection: Coverage that pays for medical treatment, lost wages, or other medical expenses related to an accident, regardless of fault.
• Premium: The cost of insurance coverage, which can be paid in various installments (monthly, quarterly, semi-annually, or annually).
• Re-Inspection: A review of an estimate or appraisal by an adjuster to ensure that the necessary work has been completed by a repair shop.
• Release: A legal document confirming the fulfillment of all financial obligations arising from an accident or occurrence.
• Replacement Cost (RC): The amount it would cost to replace a damaged or destroyed vehicle, in contrast to its actual cash value (ACV).
• Risk: The likelihood of a specific loss occurring.
• Total Loss: The condition of a vehicle or property so extensively damaged that repair costs exceed its value.

Understanding these auto insurance terms is crucial for making informed choices when selecting and managing your car insurance policy. This knowledge helps ensure you have the appropriate coverage to protect yourself and your assets in case of unexpected events.