Learn how to reduce your auto insurance costs.

Actual Cash Value

The amount awarded for property damage losses, usually equal to the cost of replacing the damaged item, minus depreciation.

Assigned Risk

If an applicant for auto insurance cannot find a company able to insure him or her voluntarily, the applicant can use this alternative marketplace in which the state assigns him/her to an insurance company doing business in that state.

Bodily Injury Liability

Coverage that protects you against financial loss and pays legal defense costs when you are legally liable for injuring other persons in an auto accident. In auto insurance, both Bodily Injury and Property Damage liability are usually required by state law. The two are often referred to jointly as liability insurance.

Claim

A policyholder’s request to recover losses covered by an insurance policy.

Collision Insurance

Coverage that reimburses you for damage to your own car resulting from a rollover or collision with another object (not necessarily another vehicle, subject to a deductible).

Comprehensive Insurance

Coverage that reimburses you for damage to your own car from causes other than collision, rollover or general wear-and-tear. It covers dangers such as hail, flood, theft, fire, glass breakage, falling objects, missiles, explosions, earthquakes, windstorms, vandalism or malicious mischief, and damage from a bird or animal. Subject to a deductible.

Deductible

The amount you must pay before your insurance coverage begins paying. For example, if you had a $250 deductible and a loss of $800, you would pay the first $250 and the insurance company would pay the remaining $550. However, if the loss were less than or equal to $250, you would pay the entire amount and the insurance company would pay nothing.

Depreciation

The decrease in the value of your car or its parts due to age and general wear-and-tear.

Exclusion

A type of loss your policy will not cover.

Insured

A person covered by a policy.

Liability Insurance

Covers accidental losses resulting from injury to the body or damage to the property of someone else for which the insured is legally responsible (legally liable). If the loss is covered by the insurance policy, the payment is made directly to the party that suffered the loss.

Limits

The maximum amount of insurance that can be paid for a covered loss. For example, if you have a $5,000 loss and the limit on your policy is $2,500, then $2,500 is the maximum your insurance company will pay.

Loss

The basis for an insurance claim. For example, a loss occurs when the quality or value of an automobile is reduced due to an accident. Insurers also refer to losses as payments made on behalf of the insured.

Medical Payments Insurance

Coverage that reimburses you and your passengers – regardless of legal liability – for medical or funeral expenses stemming from bodily injury or death by accident.

No-fault Insurance

Each insured person’s insurance company pays for certain financial losses, such as medical expenses and lost wages, regardless of who caused the accident. In exchange for these benefits, the right to sue may be restricted in some cases.

Peril

The cause of a loss. Perils include theft, glass breakage, flood, hail and fire.

Personal Injury Protection (PIP)

A broader form of medical payments insurance coverage under the no-fault concept. PIP offers protection for expenses actually incurred, up to a specific, per-person dollar amount. States with no-fault laws require drivers to buy PIP. It also is offered as an optional coverage in some states without no-fault laws. Coverage varies from state to state.

Policyholder

The person who pays a premium to an insurance company in exchange for the protection outlined in an insurance policy.

Premium

The amount of money paid for an insurance policy.

Property Damage Liability

Insurance that protects you against financial loss if you are legally liable to others for auto-related damage to their property.

Renewal

A policy renewal takes place when the coverage of a policy or standard certificate are to continue by the insurance provider in exchange for your payment for another policy period (typically six months or one year).