Auto insurance glossary of useful terms

Like any other industry, the auto insurance industry has its own terminology. Some of the terms will have obvious meanings and others will seem rather obtuse and not make any sense to the layman. Since it is necessary for just about everyone to buy car insurance at some time or another, it would be useful to publish a glossary of common terms used by car insurance professionals.

Deductible - Your coverage will provide for certain compensation in exchange for your premium should an accident occur. This payment in the event of an accident is subject to a deductible, or a portion that you must pay. The deductible varies by policy and is negotiable, but it usually represents the first several hundred dollars of payment. If you have a policy with a $200 deductible and you stand to collect $10,000 in damages, you will be given $9800.

• Liability coverage - This coverage protects other drivers in the event of an accident that is caused by you. This is the most basic insurance coverage and it is required in nearly all states. The amount of liability insurance that you are required to have varies from state to state. This coverage includes property damage, medical expenses, lost wages, and more.

• Collision coverage - This protects your car in an accident that is caused by you. It isn’t usually required, but if you have a car loan, your lender may require that you carry it until your loan is paid off.
• Comprehensive - This coverage extends protection beyond that offered by liability or collision coverage to include damage from fire, flood, theft, and more. This coverage is generally optional, but may be required by your lender if you have a car loan.
• Personal Injury Protection (PIP) - Required in some, but not all, states, PIP offers medical protection for those involved in an auto accident regardless of who is at fault.
• Rental reimbursement - This optional coverage will provide you with a rental car should your car be out of service for repairs as a result of an accident.
• Uninsured or underinsured motorist - This policy offers protection to you and your property should you be involved in an accident with someone who has little or no insurance. While nearly all states require insurance, some 15% of all drivers nationwide have none. That makes buying uninsured motorist protection essential, as you have a 1 in 7 chance of being in an accident with someone who has no insurance.

These terms are common ones in the industry, but they are not terms that you are likely to encounter anywhere else. If you stop into the office of a salesman, he or she will likely begin using these terms as though you know them. It’s worth taking a bit of time to look over this glossary in order to make sure that you are at least vaguely familiar with them. Otherwise, how will you know what the agent is talking about?

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