Auto insurance terminology at your fingertips


The world of auto insurance is a simple one, one you understand what they mean when they use those ever so complicated jargon in your policy document, when they talk to you and every other opportunity they get! 

Bodily injury Liability: coverage from financial liability arising from medical bills due to bodily harm in an accident where the policyholder was responsible for the accident.

Collision cover: cover from financial liability caused due to damage to the policyholders vehicle due to collision with any other object.

Comprehensive cover: Cover from financial liability caused due to damage that doesn’t involve a collision with another vehicle. Covers common damages such as vandalism, fire, theft, earthquake, explosions, flood, falling objects, and even missiles!

No fault insurance: covers the policy holder from any financial losses regardless of whose fault it is. Generally the practice is that the person who is at fault pays the damages to the other party via their insurance policy. Be aware than no fault insurance is not available in all states.

Uninsured coverage: also includes under insured coverage and protects the policy holder in the case of hot and run incidents or collisions involving other drivers’ without insurance.

Deductible: Deductibles are fractions of the total loss suffered that you are ready to cover out of your pocket. You can set a 25% ratio as your deductible, meaning you will need to bare 25% of the financial liability in the event of an accident.

Endorsements: Any change to your insurance policy is known as an endorsement.

Full coverage: Minimum coverage requirements for the state have been fulfilled, please note that this does not mean that you have all the coverage you will or might need.

Limits: or extent of cover is the maximum value that the insurance company will pay out in the event of an accident, less the deductible ofcourse.

Claim: a claim is made after an accident to ask the insurance company to reimburse the policy holder for expenses due to an accident. 

PIP/Personal Injury Protection: covers bodily harm by paying for medical bills for the drivers and passengers of the policyholder’s vehicle. PIP covers medical bills in such a scenario

Income loss coverage: can be opted for as a part of PIP and covers lost wages while the policyholder and passengers who can’t work while recuperating from their injuries.

Extraordinary medical coverage: can be opted for as a part of PIP and protects the policyholder from long term medical treatment that may be required for any injury.

Property damage liability: cover for financial loss to any persons’ property as caused by the policy holder.

Actual cash value:  the current value of the property damaged, taking into consideration the depreciation or appreciation the property would have gone through since acquisition.

Benefit: The amount of money payable to the person the policyholder nominates as the beneficiary incase of death of the policyholder in the accident.

Beneficiary: a person the policyholder nominates as the person who will receive the pay out on their behalf if they are no more.

Exclusions: scenarios not covered under your protection plan.

SR-22: a document that provides proof of financial responsibility in the event of a traffic violation. In some states the policyholder can make a tort provision which drops your auto insurance premium and limits your rights to sue for non monetary damages such as mental trauma.

Tort: a term mostly used by attorney’s to describe the circumstances where a driver is found and proved to be at fault and responsible for property and/or bodily harm.