CAR INSURANCE GLOSSARY: 5 TERMS TO KNOW

By Justin Stoltzfus
Car Insurance Glossary: 5 Terms to Know
Wondering about some of the language in your auto insurance policy? Everyone who has to purchase car insurance should be familiar with the common but sometimes complicated language used in the industry. Make sure you understand these five car insurance terms so you can determine how well you are covered and what you might pay if you have to file a claim.

  1. Deductible
    The deductible is a big fancy word for a simple idea. The deductible is how much you must pay up front on a claim before the insurance company agrees to cover the rest. You can save money on your policy payments by agreeing to pay a bigger deductible. Find out more about deductibles by watching Liberty Mutual's What is a Deductible? video.
  2. Bodily Injury and Property Damage Coverage
    Nearly every U.S. state has required coverage you must buy for a car — this is called "basic liability" and it consists of three numbers. The first two are for bodily injury. They specify how much coverages is included to cover medical costs for those injured in an accident caused by the policy holder, both per individual and total for the accident. The third number is for property damage. You'll see coverage amounts like 50/100/25, which would mean that there's $50,000 available per person for injuries per claim and $100,000 total, along with $25,000 for any damage to vehicles or other property. You can learn more about Bodily Injury Coverage and Property Damage Coverage on our website.
  3. Comprehensive Coverage
    A lot of us are familiar with what collision insurance covers, because it's simple: collision coverage is for damage to your car when you hit another vehicle or object. But there's also comprehensive coverage. What does that cover?

    Comprehensive coverage includes all other covered damages to a car that collision doesn't cover, including fire, theft, vandalism, wild animal damage and more, according to the specific rules of the policy. Learn more about this coverage with Liberty Mutual's What is Comprehensive Coverage? video.
  4. Gap Insurance
    If a new car is purchased with financing, it's possible to have a situation where the amount owed on the car loan is more than what an insurer will pay to replace it. That's where gap insurance comes in. In a wreck, it covers that difference, so that the insurer doesn't come after the driver for extra money. Ask your rep how to get this much-needed coverage for just a few dollars extra.
  5. Personal Injury Protection
    This term is a little harder to understand. Personal injury protection, sometimes referred to as "PIP", pays out to cover a policy holder's own injuries, no matter who is at fault. It's a way to ensure better support for car accident injury victims, while also helping state court systems.

    Quite a few states have what is known as a "no fault" auto insurance system, which requires that injury victims be paid by their own insurance companies to limit lawsuits and court proceedings. In these states, PIP becomes the go-to payer for any situation where the policyholder has medical bills to pay.

    Covering health care costs after an accident is important. Have a conversation with your insurer about how to get the coverage you need to be cared for after a collision.
Learn more about insurance terminology with our "Shining a Light on Insurance" series. Knowing more about these and other common terms in auto insurance can help you choose a policy that's right for you.


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