Auto insurance gets easier when the language gets clearer. This glossary explains common car insurance terms in plain American English, so you can understand what a policy actually does before you buy, compare, or change coverage.
If you are still figuring out the basics, start with What Coverage Do I Need for Auto Insurance? A Simple U.S. Guide. It gives broader context, while this page keeps things short and simple.
Actual Cash Value
Actual cash value is what your car is worth right before a covered loss, after depreciation is considered. In simple terms, it is the vehicle’s current market value, not the amount you originally paid for it.
Bodily Injury Liability
Bodily injury liability helps pay for injuries you cause to other people in an accident. That can include medical bills, lost wages, and some legal costs, up to your policy limits.
Claim
A claim is a request you make to your insurance company after a covered loss. The insurer reviews what happened and decides what the policy may pay for.
Collision Coverage
Collision coverage helps pay to repair or replace your car after a crash, no matter who caused it. It usually applies if you hit another car, a pole, a fence, or another object. For a clearer side-by-side explanation, see Comprehensive vs. Collision Insurance: Understanding the Difference.
Comprehensive Coverage
Comprehensive coverage helps pay for damage caused by things other than a crash. That can include theft, vandalism, hail, fire, flooding, falling objects, or hitting an animal.
Deductible
A deductible is the amount you pay out of pocket before your insurance starts paying on a covered claim. A higher deductible often lowers your premium, while a lower deductible usually makes the premium higher.
Full Coverage
Full coverage is a common phrase, not an official policy type. Most people use it to mean a policy that includes liability, collision, and comprehensive coverage, but it does not mean every possible loss is covered.
Gap Insurance
Gap insurance helps cover the difference between what your car is worth and what you still owe on a loan or lease if the vehicle is totaled or stolen. This can matter because cars often lose value faster than loan balances drop.
Liability Coverage
Liability coverage helps pay for injuries or property damage you cause to other people in an accident. It is the legal foundation of most auto insurance policies and does not pay to fix your own car. For a fuller explanation, read What Does Liability Car Insurance Cover?.
Medical Payments Coverage
Medical payments coverage, often called MedPay, helps pay medical expenses after a covered accident. It may help with costs for you and your passengers, depending on the policy.
Personal Injury Protection
Personal injury protection, often called PIP, helps cover certain injury-related costs after an accident. Depending on the state, that can include medical bills, lost wages, and some essential services.
Policy Limit
A policy limit is the maximum amount your insurer will pay for a covered loss. Some limits apply per person, some per accident, and some per type of damage.
Premium
A premium is the price you pay for your insurance policy. It can be paid monthly, every six months, or once a year, and it may change based on your driving history, location, vehicle, and coverage choices. If you want ways to reduce it without weakening the wrong parts of your policy, read Best Auto Insurance Discounts: The Smart, No-Hype Guide to Paying Less (Without Playing Games).
Property Damage Liability
Property damage liability helps pay for damage you cause to someone else’s property in an accident. That usually means another vehicle, but it can also include things like a fence, mailbox, wall, or sign.
Rental Reimbursement
Rental reimbursement helps pay for a rental car or temporary transportation while your car is being repaired after a covered claim. It usually comes with daily and total dollar limits.
SR-22
An SR-22 is not a type of insurance coverage. It is a form filed by an insurer to show the state that a driver has the required insurance.
Total Loss
A total loss means the insurer decides the car should not be repaired, usually because the damage is too severe or the repair cost is too high compared with the car’s value. In that case, the insurer will usually pay the vehicle’s actual cash value, minus any deductible that applies.
Underinsured Motorist Coverage
Underinsured motorist coverage helps protect you when the driver who caused the accident has insurance, but not enough to cover the full damage or injuries. It can help close part of that gap.
Uninsured Motorist Coverage
Uninsured motorist coverage helps protect you if a driver with no insurance causes an accident and injures you. In some states, it may also help with vehicle damage.
Why This Glossary Helps
Insurance terms can shape what your policy covers, what it does not cover, and how much you may have to pay after a claim. Understanding the language makes it easier to compare policies and avoid expensive misunderstandings later.
By PolicyQuotesUS Editorial Team
PolicyQuotesUS Editorial Team creates plain-English insurance content designed to help U.S. drivers understand coverage, compare options, and make more confident decisions without confusion or hype.
Disclaimer: This glossary is for general educational purposes only and is not legal, financial, or insurance advice. Coverage rules, limits, and availability can vary by state, insurer, vehicle, and individual situation, so always review your own policy and speak with a licensed insurance professional if you need advice about your specific coverage.