Glossary

192 terms defined in plain English. Each one links to the latest coverage in the index, and to the tools and guides that use it.

By topic

A

Accident forgiveness
A policy feature that stops your premium from rising after a first at-fault crash, either earned through loyalty or bought as an add-on.
Actual cash value
What a car was worth just before a loss — replacement cost minus depreciation — and the basis of most total-loss payouts.
ADAS calibration
Re-aiming a car's safety cameras and radar after a repair or windshield replacement so features like emergency braking work correctly.
Add-on state
A state where your policy includes or offers injury benefits like PIP that pay regardless of fault, with no limit on suing the at-fault driver.
Admitted insurer
An insurance company licensed by a state's insurance department, which regulates its rates and forms and backs its claims through the state guaranty fund.
Advanced driver-assistance systems (ADAS)
Camera-, radar- and sensor-based safety features, such as automatic emergency braking and lane-keeping assist, that help drivers avoid crashes.
Aftermarket parts
Replacement parts made by companies other than the carmaker, usually cheaper than original-equipment parts and often specified in insurer repair estimates.
Agreed value
Coverage where you and the insurer set a car's value when the policy is written, and that amount is paid if the car is totaled, with no depreciation.
AM Best rating
A letter grade from rating agency AM Best on an insurer's ability to pay claims, running from A++ (Superior) down to D (Poor).
Annual mileage
How many miles a car is driven in a year, a rating factor because more time on the road means more chances of a claim.
Anti-theft device discount
A premium reduction, usually on comprehensive coverage, for cars with alarms, immobilizers, tracking systems or other theft deterrents.
Appraisal clause
A policy provision letting you or the insurer call in independent appraisers, plus an umpire if needed, to settle a dispute over the amount of a loss.
Assigned risk plan
A state program that guarantees basic liability coverage to drivers no insurer will voluntarily cover, by assigning them to insurers in the state.
At-fault accident
A crash in which you are found mainly responsible, which your liability coverage pays for and which usually raises your premium at renewal.
At-fault state
A state where the driver who caused a crash, through their liability insurance, pays for other people's injuries and property damage.
Autopay discount
A small premium reduction some insurers give when you pay by automatic withdrawal from a bank account or card.

B

Bad faith
An insurer's unreasonable handling of a claim, such as denying, delaying or underpaying without a proper basis, which can expose it to damages.
Betterment
A deduction an insurer takes when a repair replaces a worn part with a new one, leaving the car in better condition than before the loss.
Bodily injury liability
The part of auto liability insurance that pays for injuries or deaths you cause to other people in a crash, plus your legal defense.
Broad form named operator policy
A low-cost liability policy that covers one named driver in any car they drive, rather than covering a particular car and its drivers.
Bundling
Buying two or more insurance policies, such as auto and homeowners, from the same company, usually in exchange for a discount on each.
Business use
A personal policy rating for a car driven as part of your job, such as visiting clients or job sites, which costs more than commute or pleasure use.

C

Captive agent
An insurance agent who sells policies for only one company or insurance group, rather than comparing several insurers for you.
Car insurance quote
An insurer's estimate of what a specific policy would cost you, based on the drivers, vehicles, coverage and discounts you describe.
Choice no-fault
A system that lets drivers pick limited lawsuit rights for a lower premium or full rights to sue, used in New Jersey, Pennsylvania and Kentucky.
Claim number
The unique reference an insurer assigns when a loss is reported, used to track every call, document and payment on that claim.
Claim reserve
Money an insurer sets aside on its books to pay a claim it expects to settle, based on its estimate of the eventual cost.
Claims adjuster
The insurance company employee or contractor who investigates a claim, decides what the policy covers and sets how much is paid.
Claims history
The record of insurance claims you have filed or that were paid because of your driving, which insurers check when pricing and accepting a policy.
CLUE report
A LexisNexis database report of past auto or home insurance claims, which insurers pull to price and accept policies.
Collision coverage
Pays to repair or replace your own car after it hits another vehicle or object, or rolls over, regardless of fault, minus your deductible.
Collision deductible waiver
An option that pays or waives your collision deductible when an identified uninsured driver is at fault for damaging your car.
Combined ratio
A measure of insurer underwriting profit: claims and expenses as a percentage of premium, where under 100 means a profit and over 100 a loss.
Combined single limit
One liability limit covering all bodily injury and property damage from a crash, instead of separate per-person, per-accident and property caps.
Commercial auto insurance
Insurance for vehicles used mainly for business, covering liability and physical damage risks that a personal auto policy excludes.
Commute use
A vehicle-use rating for a car driven to and from work or school, typically priced between pleasure use and business use.
Comparative negligence
A fault rule that reduces an injured person's recovery by their own share of blame for a crash, instead of barring recovery entirely.
Comprehensive coverage
Pays for damage to your car from causes other than a crash, such as theft, fire, hail, flood, falling objects, vandalism or hitting an animal.
Continuous coverage
An unbroken history of car insurance with no gaps, which many insurers reward with lower rates and some require for discounts.
Contributory negligence
A strict fault rule that bars an injured person from recovering any damages if they were even slightly to blame for the crash.
County mutual insurance company
A Texas insurer type, exempt from many state insurance laws, that many auto insurers use to issue their Texas policies.
Credit-based insurance score
A score built from parts of your credit report to predict how likely you are to file insurance claims, used in pricing where state law allows.
Custom parts and equipment coverage
Optional coverage for aftermarket add-ons and modifications, such as custom wheels, stereos and lift kits, beyond a standard policy's small allowance.

D

Declarations page
The summary page of an auto policy listing who and what is insured, the coverages, limits, deductibles, premium and policy period.
Deductible
The amount you pay toward a covered loss before your insurer pays the rest, set per claim for coverages like collision and comprehensive.
Defensive driving course
A state-approved driving safety class that can earn an insurance discount and, in some states, reduce points or dismiss a ticket.
Demand letter
A written request to an at-fault driver's insurer that sets out your injuries and losses and asks for a specific settlement amount.
Depreciation
The loss in a car's value over time from age, mileage and wear, which insurers account for when calculating actual cash value.
Diminished value
The resale value a car loses after a crash, even when fully repaired, because buyers pay less for a car with an accident history.
Direct repair program
An arrangement between an insurer and approved body shops that accept its pricing and procedures in exchange for referred repair work.
Direct writer
An insurer that sells its own policies without independent agents; in everyday use, a company that sells online and by phone.
Direct written premium
The total premium an insurer charges on policies it writes in a period, before reinsurance, used to measure market share and company size.
Disappearing deductible
An optional program that lowers your collision or comprehensive deductible by a set amount for each claim-free period, sometimes to zero.
DUI
Driving while impaired by alcohol or drugs, an offense that brings license penalties, possible SR-22 or FR-44 filings and steep insurance increases.

E

Earned premium
The share of a policy's premium that pays for the part of the term already past; the rest is unearned and refundable on cancellation.
Electronic proof of insurance
An insurance ID card shown on a phone or other device instead of on paper, which most states accept at traffic stops and after crashes.
Endorsement
A written amendment to an insurance policy that adds, removes or changes coverage, such as rideshare use, rental coverage or OEM parts.
Excluded driver
A specific person listed on a policy as not covered to drive the insured cars, often used to keep a high-risk household member from raising premiums.
Exclusion
A provision in an insurance policy that removes specific people, vehicles, uses or causes of loss from coverage.
Expense ratio
An insurer's operating costs, such as commissions, salaries and advertising, as a percentage of premium; one half of the combined ratio.

F

File-and-use
A rate-regulation system in which insurers can start charging new rates once they are filed with the state, without waiting for advance approval.
Financial responsibility law
A state law requiring drivers to show they can pay for injuries or damage they cause, almost always by carrying minimum liability insurance.
First notice of loss
The first report to your insurer that a crash, theft or other loss has happened, which opens the claim and starts the clock on handling it.
First-party claim
A claim you make under your own insurance policy, such as collision, comprehensive, PIP or uninsured motorist coverage.
FR-44
A certificate filed by an insurer in Florida or Virginia proving that a driver convicted of certain DUI offenses carries higher-than-minimum liability limits.
Fronting carrier
A licensed insurer that issues policies under its own name for another company and passes most of the risk to that company through reinsurance.
Full coverage
Informal shorthand for a policy combining liability with collision and comprehensive, the mix lenders usually require. It is not a defined policy type.
Full glass coverage
An option that pays for windshield and window repair or replacement with no deductible, usually added to comprehensive coverage.
Full tort
In choice no-fault states, the option that keeps your unrestricted right to sue an at-fault driver for pain and suffering, for a higher premium.

G

Gap insurance
Pays the difference between a totaled car's actual cash value and the larger balance still owed on its loan or lease.
Garaging address
The address where a car is mainly parked overnight, which insurers use to price a policy and which must be reported accurately.
Ghost broking
A scam in which someone poses as an insurance agent and sells fake, altered or fraudulently obtained policies, often at too-good-to-be-true prices.
Good driver discount
A premium reduction for drivers with no recent at-fault accidents or significant violations, mandated at 20% or more in California.
Good student discount
A discount for young drivers, usually full-time students, who keep a B average (3.0 GPA) or similar academic standing.
Grace period
Extra time after a missed premium due date, or after buying a car, during which coverage continues before a lapse or a reporting deadline.
Guaranty fund
A state safety net, funded by assessments on other insurers, that pays covered claims when a licensed insurance company goes insolvent.

H

Hard fraud
Deliberately staging or inventing a loss, such as a fake crash, arson or false theft report, in order to collect insurance money.
High-risk driver
A driver insurers expect to cost more in claims because of a DUI, tickets, crashes, a coverage lapse, little experience or similar factors.
Hit and run
A crash in which a driver leaves without stopping to share information or help, which is a crime and leaves victims relying on their own coverage.
Household member
A person who lives in your home, usually a relative, whom auto policies often cover automatically and may require you to list.

I

Ignition interlock device
An in-car breath tester that keeps the engine from starting if it detects alcohol, often required after a DUI conviction.
Independent agent
An insurance agent who represents several insurers and can quote and place your policy with whichever one fits your needs best.
Insurance binder
A temporary written agreement that puts coverage in force immediately while the insurer finishes issuing the formal policy.
Insurance commissioner
The official who runs a state's insurance department and enforces its insurance laws; elected in some states, appointed in most.
Insurance fraud
Deceiving an insurer, or a policyholder, for financial gain, from staged crashes and padded claims to fake policies and lies on applications.
Insurance ID card
The card your insurer issues showing the company, policy number, insured vehicles and coverage dates, carried as proof of insurance.
Insurance rate
The price per unit of coverage an insurer files with the state, which rating factors then adjust to produce your individual premium.
Insurance score
A number insurers use to predict how likely you are to have claims, usually calculated from your credit report, that can raise or lower your rate.
Insured
Any person a policy protects, including the named insured, household relatives and often permitted drivers, depending on the coverage.

L

Lapse in coverage
A period when a vehicle or driver has no active auto insurance, often from missed payments, which can bring penalties and higher future rates.
Liability coverage
The part of a car insurance policy that pays for injuries and property damage you cause to others, plus your legal defense, up to your limits.
Liability limits
The most a liability policy will pay for injuries and property damage you cause, usually written as three numbers such as 100/300/100.
Lienholder
The bank, credit union or finance company with a legal claim on a financed car until the loan is paid off, usually named on the insurance policy.
Limited tort
A cheaper option in choice no-fault states that gives up your right to sue for pain and suffering unless an injury is serious or an exception applies.
Loan/lease payoff coverage
Optional coverage that pays part of what you still owe on a financed or leased car if it is totaled or stolen and the payout falls short of the loan.
Loss of use
Compensation for not being able to use your car while it is repaired or replaced after a crash someone else caused, usually paid as a rental car.
Loss payee
The lender or leasing company named on your auto policy to receive claim payments for the car, alone or jointly with you, until the loan is paid off.
Loss ratio
The share of premium an insurer pays out in claims, often including claim-handling costs; a key number in rate filings and profit reports.

M

Major violation
A serious driving offense, such as DUI, reckless driving or driving with a suspended license, that brings large surcharges and can lead to nonrenewal.
Managing general agent
A specialized agency with authority to underwrite, price and often handle claims for an insurer, which carries the risk and issues the policies.
Medical payments coverage
Coverage that pays medical and funeral costs for you and your passengers after a crash, whoever was at fault, usually in limits of a few thousand dollars.
Mini-tort
Michigan's rule letting a driver recover up to $3,000 from an at-fault driver for vehicle damage their own insurance did not pay, such as a deductible.
Minimum coverage
The least car insurance a state lets you carry to drive legally, usually liability coverage at set limits and sometimes PIP or uninsured motorist coverage.
Minor violation
A common traffic offense, such as most speeding tickets, running a stop sign or an illegal turn, that brings a smaller premium surcharge.
Monetary threshold
In some no-fault states, the amount of medical expenses an injured person must exceed before suing the at-fault driver for pain and suffering.
Motor vehicle report (MVR)
Your official state driving record, listing tickets, convictions, suspensions and license status, which insurers check to set your rate.
Moving violation
A traffic offense committed while a vehicle is in motion, such as speeding or running a red light, that can add license points and raise premiums.
Multi-car discount
A price cut for insuring two or more vehicles with the same company, usually on one policy, applied to each car's premium.
Multi-policy discount
A reduction for buying more than one type of insurance, such as auto plus home or renters coverage, from the same company.
Mutual insurance company
An insurer owned by its policyholders rather than by shareholders, which can return surplus to members as dividends or lower rates.

N

NAIC
The standard-setting organization of the chief insurance regulators of the 50 states, D.C. and five U.S. territories, founded in 1871.
NAIC complaint index
A score comparing an insurer's share of consumer complaints with its share of premiums; 1.00 is the national baseline and lower is better.
Named driver policy
A car insurance policy that covers only the drivers specifically listed on it, rather than anyone who borrows the car with permission.
Named insured
The person or business listed by name on the declarations page as the policy's owner, with the broadest coverage and most rights under the contract.
National Insurance Crime Bureau (NICB)
A nonprofit funded by member insurers that investigates insurance fraud and vehicle theft, works with police and runs the free VINCheck lookup.
Negligence
Failing to use the care a reasonable person would use, causing harm to someone else; the legal basis for most car accident claims.
New car replacement
Optional coverage that pays for a brand-new car of the same make and model if a recent car is totaled, instead of its depreciated value.
No pay, no play
A state law that bars uninsured drivers from suing for pain and suffering after a crash, even when the other driver caused it.
No-fault insurance
A system in which your own policy pays your injury costs after a crash regardless of who caused it, with limits on suing the other driver.
Non-owner car insurance
Liability coverage for people who drive but do not own a car, often bought to keep coverage continuous or to carry an SR-22 filing.
Nonrenewal
An insurer's decision not to offer a new term when the current one ends, regulated by states through advance notice requirements.
Nonstandard auto insurance
Coverage sold to drivers that standard insurers decline or price steeply, such as those with DUIs, many tickets, lapses or little license history.
Nuclear verdict
A jury award far larger than the proven economic losses would suggest, most often defined as one over $10 million.

O

OEM parts
Replacement parts made by or for the vehicle's own automaker, as opposed to aftermarket parts from other makers or recycled parts.
Owner-retained salvage
Keeping your car after the insurer declares it totaled; the payout drops by the car's salvage value and the title is usually branded.

P

Paid-in-full discount
A lower price for paying the whole six- or 12-month premium up front instead of in monthly installments.
Paperless discount
A small price cut for agreeing to get policy documents, bills and notices by email or online account instead of by mail.
Pay-per-mile insurance
A policy priced as a monthly base rate plus a few cents for each mile driven, tracked by an app, plug-in device or the car itself.
Peer-to-peer car sharing
Renting your personal car to other people through an app such as Turo, where the platform's insurance usually replaces your own during trips.
Permissive use
Coverage for someone who drives your car with your permission but is not listed on your policy, typically on an occasional basis.
Personal auto policy
The standard contract form behind most U.S. car insurance, with parts for liability, medical payments, uninsured motorists and damage to your car.
Personal injury protection (PIP)
Coverage that pays medical bills, part of lost income and related costs for you and your passengers after a crash, no matter who caused it.
Pleasure use
A vehicle-use rating class for cars driven for errands and recreation, not for a regular commute to work or school or for business.
Policy cancellation
Ending an insurance policy before its term is over, either by you or by the insurer, as opposed to letting it expire or not renew.
Policy limit
The most an insurer will pay for a covered loss under a coverage, stated per person, per accident or per vehicle on your declarations page.
Policy limits demand
An injured person's offer to settle for the at-fault driver's full liability limit by a deadline; mishandling it can expose the insurer to bad faith.
Policy period
The span of time a car insurance policy is in force, usually six or 12 months, from its effective date to its expiration date.
Policy renewal
The start of a new policy term with the same insurer when the current one expires, often with an updated price and terms.
Policyholder
The person or business that owns an insurance policy and pays for it, with the right to change or cancel it.
Premium
The amount you pay for an insurance policy over its term, built from the insurer's rate, your rating factors, coverage choices and discounts.
Primary insurance
The policy that must pay first when more than one could cover the same loss; other policies pay only after its limits are used up.
Prior approval
A rate regulation system in which insurers must get the state regulator's approval before using new rates or rating rules.
Prior insurance
Your record of having been insured before you apply, which insurers use to set rates and which can earn a discount when unbroken.
Pro rata cancellation
A cancellation in which the insurer refunds exactly the unused share of the premium, with no penalty for ending the policy early.
Proof of insurance
Evidence that a vehicle meets the state's insurance requirement, usually a paper or digital ID card shown at stops, crashes and registration.
Property damage liability
The part of liability coverage that pays for damage you cause to other people's cars and property, such as fences, buildings and poles.
Proposition 103
The 1988 California ballot measure that requires approval of auto rates before use, mandates a Good Driver Discount and made the commissioner elected.

R

Rate filing
The package of proposed rates, rating rules and supporting data an insurer submits to a state regulator when it wants to change prices.
Rating factors
The characteristics insurers use to price a policy, such as driving record, location, vehicle, mileage and, where allowed, age and credit.
Reciprocal insurance exchange
A policyholder-owned insurer in which members, called subscribers, insure one another through a manager known as an attorney-in-fact.
Reinstatement
Restoring a car insurance policy after it was cancelled, usually for a missed payment, sometimes with a gap in coverage and a fee.
Reinsurance
Coverage that insurance companies buy to pass part of their risk to another company, helping them pay large or clustered losses.
Release of liability
A document an injured person signs to accept a settlement and give up further claims against the at-fault party for that accident.
Rental reimbursement
Optional coverage that pays for a rental car or other transportation while your car is repaired after a covered claim, up to daily and total limits.
Replacement cost
What it would cost to replace damaged property with new property of like kind and quality, with no deduction for depreciation.
Residual market
State-created arrangements that guarantee car insurance to drivers no insurer will cover voluntarily, such as assigned risk plans.
Rideshare endorsement
An add-on to a personal auto policy that covers a rideshare driver during gaps in the platform's insurance, especially while waiting for a request.
Roadside assistance
Optional coverage or service that sends help for breakdowns, such as towing, jump-starts, flat-tire changes, lockouts and fuel delivery.

S

Safe driver discount
A lower rate for drivers with no recent at-fault accidents, major violations or claims, usually measured over three to five years.
Salvage title
A branded vehicle title issued after a car is declared a total loss, warning future buyers of serious damage; it must be rebuilt to drive legally.
Salvage value
What a damaged or totaled car is worth as a wreck, usually the amount an insurer expects to get for it at a salvage auction.
Short-rate cancellation
A cancellation in which the insurer refunds less than the full unused premium, keeping an early-termination charge when you end a policy mid-term.
Social inflation
The rise in insurance claim costs beyond general economic inflation, attributed to litigation trends, larger jury awards and broader legal theories.
Soft fraud
Opportunistic insurance fraud by otherwise honest people, such as padding a real claim or giving false details to lower a premium.
Special investigations unit (SIU)
The team inside an insurance company that investigates suspected fraud in claims and applications and refers cases to authorities.
SR-22
A form an insurer files with the state to certify that a high-risk driver carries the required liability coverage, often for about three years.
Stacking
Combining uninsured or underinsured motorist limits across several vehicles or policies to raise the total available for one injury claim.
Staged accident
A crash deliberately caused or faked to file fraudulent insurance claims, often by organized rings of drivers, passengers and complicit providers.
State department of insurance
The state agency that licenses insurers and agents, reviews rates and policy forms, monitors solvency and handles consumer complaints.
Statute of limitations
The legal deadline for filing a lawsuit after a crash, set by each state and often different for injury and property damage claims.
Stock insurance company
An insurer owned by shareholders, who receive its profits, rather than by its policyholders; many are publicly traded.
Subrogation
An insurer's right, after paying your claim, to recover that money from the party who caused the loss, often getting your deductible back too.
Surcharge
An extra charge added to your premium after an at-fault accident, traffic violation or claim, usually lasting three to five years.
Swoop and squat
A staged-crash scheme in which one car swerves in front of a victim and a second car brakes hard, causing a rear-end collision.

T

Telematics
Technology that records how, when and how much a car is driven, through an app, plug-in device or the car itself, so insurers can price on behavior.
Territory rating
Pricing based on where a car is garaged, with each area assigned a factor that reflects its local claim costs.
Third-party claim
A claim you make against another driver's insurance for damage or injuries that driver caused, rather than against your own policy.
Tort
A civil wrong, such as careless driving, that injures someone and gives the injured person the right to sue for money damages.
Tort threshold
The level of injury or medical cost a crash victim in a no-fault state must reach before suing the at-fault driver for pain and suffering.
Total loss
A car so badly damaged that repairs would cost more than it is worth, or more than a state threshold, so the insurer pays its value instead.
Total loss threshold
The point, set by state law or insurer practice, at which a damaged car is declared totaled rather than repaired, often a percentage of its value.
Towing and labor coverage
Optional coverage that reimburses towing and on-the-spot repair labor when your car breaks down, up to a set amount per incident.

U

Umbrella policy
Extra liability insurance, usually sold in amounts of $1 million or more, that pays after your auto or home liability limits run out.
Underinsured motorist coverage
Coverage that pays your injury costs when the at-fault driver has insurance, but not enough to cover what you are owed.
Underwriting
The process an insurer uses to decide whether to accept an applicant, on what terms, and in which pricing tier or company.
Uninsured motorist coverage
Coverage that pays injury costs for you and your passengers when a driver with no insurance, or a hit-and-run driver, causes the crash.
Uninsured motorist property damage (UMPD)
Coverage that pays to repair your car when a driver with no insurance damages it, often with a small deductible and caps set by state law.
Usage-based insurance
Car insurance priced partly on how and how much you actually drive, measured by an app, plug-in device or the car's connected services.

V

Vehicle history report
A record compiled from a vehicle identification number showing a used car's title brands, reported accidents, odometer readings and ownership history.
Vehicle identification number (VIN)
The unique 17-character code assigned to every modern car, used by insurers, motor vehicle agencies and history reports to identify the exact vehicle.
Vehicle symbol
A code insurers assign to each make, model and trim to reflect its expected claim costs, used as a rating factor in pricing.
Verbal threshold
A no-fault rule that lets crash victims sue for pain and suffering only if the injury fits a legal description, such as permanent injury or death.