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Common Car Insurance Terms to be Familiar With

Actual Cash Value - This is the cost to replace a vehicle or property at the time it was damaged. It takes into account the depreciated value, not the original cost.

Benefit - The amount the insurance company pays when you file a claim.

Bodily Injury Liability - This covers the medical expenses for injuries caused to other people.

Claim - Request for reinbursement for damages or loss.

Collision Coverage - Covers damage caused to your car during an accident with another vehicle or stationary object.

Comprehensive Coverage - Covers damage that isn't caused due to an accident - such as theft, fire, or natural disasters.

Deductible - This is the amount you agree to pay out of pocket in the event of an accident. The higher your deductible, the lower your premium.

Discount - Anything that will lower your premiums. Common discounts include multi-car discounts, good driving discounts, and safety devices discounts.

Emergency Road Service - Pays for the cost of having your car towed or jumped in the event of a breakdown.

Endorsements - These are changes to the original insurance contract, such as adding a driver to the policy.

Exclusion - Anything that is not covered by the insurance policy.

Extraordinary Medical Coverage - This coverage protects you in case you suffer injuries that require serious or long-term medical care.

Full Coverage - This means that you have met all the minimum coverage requirements for the state you reside in. This doesn't necessarily mean you will be covered in all accident situations.

High-Risk Driver - Someone that has several accidents or tickets on their driving record. The definition of high risk driver dffers from company to company.

Income Loss Coverage - Covers you in case you can't work due to accident-related injury. Sometimes it's a part of personal injury protection.

Indemnity - A predetermined amount paid for a covered loss.

Liability Insurance - Covers injuries and damage caused to other people and property in an accident which you are at-fault. This includes legal expenses.

Limits - The maximum amount the insurance company will pay for your losses.

Medical Payments Coverage - Pays for the medical expenses and lost wages for you and any passengers in your vehicle after an accident. Also known as personal injury protection (PIP).

No-fault Insurance - Certain states have no-fault insurance regulations where the car insurance company will pay for your injuries no matter who is at fault.

Personal Injury Protection (PIP) - See Medical Payments Coverage

Premium - The amount charged for an insurance policy.

Property Damage Liability - Pays for damages caused to someone else's property.

Rental Reimbursement - Pays for the cost of a rental car while your car is in the shop for repairs.

Surcharge - Charge added to your policy after a traffic violation or accident where you were at fault.

SR-22 - Document that shows proof of insurance.

Underinsured Driver Coverage - Covers injuries or damage caused by a driver without enough insurance to pay for your medical expenses.

Uninsured Driver Coverage - Covers injuries or damage caused by a driver with no insurance.

My Recommendation for Car Shoppers

TrueCar No-Haggle and Edmunds Price Promise are the quickest way to see the lowest car prices in your area. These sites show you no-haggle prices from dealers closest to you - and the deals are usually really good. This should be the first step you take when negotiating your car price. Follow this up with my checklist to make sure you squeeze out every last bit of savings.
- Gregg Fidan

Gregg Fidan

About: Gregg Fidan

Gregg Fidan + is the founder of RealCarTips. After being ripped off on his first car purchase, he devoted several years to figuring out the best ways to avoid scams and negotiate the best car deals. He has written hundreds of articles on the subject of car buying and taught thousands of car shoppers how to get the best deals.

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