A plain-English glossary of auto insurance terms
Every term you'll meet on a policy, a quote, or a claim call, translated into sentences a human would say.
Insurance language was not designed to be understood. Bookmark this page for the next time a document pretends otherwise.
The money words
Premium. What you pay for the policy. Monthly or every six months.
Deductible. What you pay out of pocket on a claim before the carrier pays the rest. Higher deductible, lower premium, more risk held by you.
Limit. The most a coverage will ever pay. The word “most” is doing heavy lifting; nothing above the limit is the carrier’s problem.
Actual cash value (ACV). What your car was worth right before the loss: age, mileage, and condition included. Not what you paid, and not what a new one costs.
The coverage words
Liability. Pays for the damage you do to other people and their property. Legally required almost everywhere, and the coverage that protects your savings.
Collision. Pays to fix your car after a crash, regardless of fault.
Comprehensive. Pays for the non-crash stuff: hail, theft, fire, the deer.
Uninsured/underinsured motorist (UM/UIM). Pays when the at-fault driver has no insurance or not enough. Roughly one in eight US drivers is uninsured, so this is less optional than it sounds.
Gap coverage. Pays the difference between your loan balance and ACV if the car is totaled. Cheap, and essential early in a loan.
The process words
Declarations page (dec page). The one-page summary of your policy: drivers, cars, coverages, limits, premium. The only page most people ever need to read.
Binding. The moment coverage legally takes effect. “Bound” means you are covered, even if paperwork is still in the mail.
Endorsement. A mid-term change to the policy: a new car, a new driver, an added coverage.
Renewal. The end of your policy term, when the carrier re-prices you and quietly hopes you do not shop around. Shop around.
Persistency. Industry jargon for how long customers stay put. High persistency is why loyalty gets priced the way it does.
Met a term that is not here? Send it over via the contact page and we will add it, in plain English.