Getting the best deal on the car insurance you need starts with getting familiar with the many terms used to describe available policies. Understanding the lingo can also help you better compare policies to make sure you are getting the coverage you need.
Actual Cash Value (ACV)
The amount of money an insurer will pay if after a covered incident your car is declared a loss or totaled. This amount takes into account the car’s original price as well its current age and condition.
This typically includes other licenced drivers within your household who may also drive your car. Excluding them may lead to slightly lower rates, but they will not be covered if they do for some reason drive your car.
A request for financial compensation made by a car insurance policy holder regarding a covered loss, such as a car accident or stolen vehicle.
Pays to fix your vehicle if you have a vehicle collision or one-car accident, such as hitting a lampost. Generally required if your car is financed.
Pays for damage to your car for things other than traffic accidents such as damage from animals, weather, theft, fire or vandalism. This coverage is generally optional—not mandated by law—but may be required if you have a car loan. In some cases comprehensive coverage is automatically bundled with collision coverage.
A document issued by your car insurance company that explains in detail your premium costs for the policy, deductible amounts and the policies benefits and limitations.
The amount of money you are required to pay to have your vehicle repaired before your auto insurance kicks in. This amount generally ranges from $250 to $1,500. Policies with higher deductibles are usually less expensive.
Circumstances under which a car insurance policy may not pay benefits. These include the car being driven by an excluded or unregistered driver, unapproved customizations that lead to safety issues and using the car for non-disclosed purposes (such as using a personal vehicle for business).
Coverage that pays the difference between the estimated current value of the car and the amount you owe on the loan (if the car is totalled or stolen). This coverage can be protective for people who buy new cars that lose a considerable amount of their value when they drive off the lot. Sometimes required with car loans.
Pays for the medical treatment and property damage of others if you are found to be at fault for an accident. These policies may also cover some of the costs of your legal defense if you are sued. This is generally the minimum coverage required for legal driving. Also known as “state required minimum”
Medical Payments Coverage (Med Pay)
An optional type of coverage that can help pay for medical expenses you may incur in an auto accident.
Motor Vehicle Report (MVR)
The report—generated by your state’s Department of Motor Vehicles—used by car insurance companies to evaluate your driving history. This report includes your driver’s license information, points history, driving violations, and convictions. Findings are used to determine potential policies discounts and rates.
Personal Injury Protection (PIP)
Pays for medical expenses of car accident victims, regardless of who is at fault. A certain amount is generally required in state minimum requirements, but extra coverage can also be purchased. This coverage can also be used to pay for lost wages, services you can’t perform due to injury—such as child care or housekeeping—and funeral costs. This is also known as “personal injury protection” or “no fault insurance.”
The cost of maintaining your car insurance policy. Usually paid monthly, bi-monthly or in six months increments.
Additional coverage that is added onto a policy. Examples include roadside assistance, medical coverage, rental car coverage and uninsured motorist. Also known as an endorsement.
State required minimum
Minimum amount of coverage required to legally operate your car. Includes categories for bodily injury and property damage. These amounts vary by state. Only Virginia and New Hampshire do not require auto insurance of any kind for legal driving.
A type of policy that protects you if you get into an accident caused by an uninsured or underinsured driver. Policies can offer coverage for the medical treatment of drivers and passengers as well as repair of your vehicle.
Process insurance companies use to evaluate the financial risk of offering auto insurance policies to particular drivers. Factors considered include driving history, age, gender, location, type of vehicle and credit history. Findings of the underwriting process impact if a policy will be offered and what the premiums will be.
You will see numbers in this format—such as 25/25/50—when you are shopping for liability insurance policies . They represent—in the $ thousands—your liability limits for per-person bodily injury, bodily injury for all persons injured in any one accident, and property damage liability. Most states require a mandatory minimum amount and insurance companies offer the option to purchase more.