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Glossary of Auto Insurance Terms

It is important that each driver understands the basics of auto insurance before buying coverage for a specific vehicle. Knowing exactly what you are buying, and what your policy will include could mean the difference between having just the right amount of coverage, and being under-insured. An underinsured policy could mean being forced to pay more than you expected in the unfortunate event of an accident. It is also important to consider that each state has its own set of insurance guidelines. Take the time to not only refresh and educate yourself with common terms used by auto insurance companies, but also to understand how each term will affect your policy.

Purchasing and maintaining the right amount of auto insurance is absolutely essential in providing peace of mind for not only the driver or drivers of your vehicle, but also for the other drivers with whom you share the road. Remember that everyday you drive, you are sharing the road with the uninsured as well as the underinsured. Help protect yourself with the right policy for your situation and your vehicle. Below is a list of common terms chosen to help drivers make a more informed decision when purchasing an auto insurance policy.

Common terms

• Accidental Death Benefit (ADB): This supplemental coverage option offers additional life insurance coverage in the unfortunate event of an auto-related death.
• After-Market Parts: Parts or accessories not included in the original manufacturing of a vehicle. Certain after-market options will effect the cost of insurance.
• Anti-Theft Device: Devices that help prevent or recover a stolen vehicle. Some of these devices include alarms, ignition kill switches, wheel locks, hood locks, motion detectors and theft recovery systems
• Deductible: The amount the insured is responsible for paying before the auto insurance covers the rest of the policy limit.
• Defensive Driver Course: A course that teaches drivers defensive driving techniques. Most be approved by the state and may result in a discount on insurance premiums.
• Endorsement: Any change or modifier of the original policy.
• Gap Insurance: In the event of the total loss of a vehicle, there can sometimes be a difference (gap) in what the car is worth and what you owe. This type of insurance covers the gap.
• Good Student Discount: Depending on the specific insurance carrier, a discount may be given to full-time students who maintain a superior grade point average.
• Indemnity: An insurance term that refers to the insured being returned to their original financial condition after an accident has occurred.
• Lapse in Coverage: When an insurance policy has been cancelled or terminated there is considered to be a lapse in coverage until a new policy is agreed upon.
• Lien: claim or hold on personal property until a debt is fulfilled.
• Negligence: The failure to perform reasonable duties in a typical circumstance.
• Passive Restraint System: A safety device, such as an air bag, that automatically activates upon collision.
• Tort: A wrongful act, other than a breach of contract, for which relief may be obtained in the form of damages or an injunction.
• Umbrella Insurance: Optional insurance coverage purchased to provide additional high-limit benefits or to provide coverage in areas not included in your liability policy.
• Usage: Refers to the primary use of a vehicle. Examples include business or pleasure.
• Vehicle Identification Number (VIN): Since 1980, all cars made in the United States possess a 17- digit number used for identification purposes.
• Waiver of Collision Deductible: In certain states, it is possible to be refunded you collision deductible if you are hit by an "at fault"and uninsured driver. This refund is only possible with proper documentation and only after the repair work to your car has been performed.