Glossary of terms used in auto insurance quotes

To become fluent in insurance speak, it’s probably best to study for a law degree but, to get you started, here is a glossary of all the most commonly used words and expressions.

This is the minimum liability insurance mandated by Michigan. Every state sets the minimum using three numbers: the liability for personal injuries when one person is injured, the total amount to cover personal injuries, and the amount to cover damage to property.

Actual cash value

This is the fair market value of your vehicle if it is totaled. It is usually based on the local prices in private sales and retail sales by dealers.

At-fault states

The majority of US states rely on the law of tort to settle claims based on whether you were at fault.

Bodily injury

This is any physical injury to a third party no matter how it is caused. In at-fault states, you are liable if these injuries were caused by your negligence.

Claim

This is the notice you give to your insurer if you think you have sustained a loss covered by the policy.

Collision coverage

Optional cover to pay for repairs to your own vehicle if it is damaged in a collision.

Comprehensive coverage

Optional cover to pay for all the loss and damage to your vehicle not caused by a collision.

Deductible

This is self-insurance, i.e. the amount you agree to pay in every claim. Payment of this amount is a condition of the insurer paying the balance.

Endorsement

Also called a “rider” where the insurer agrees to add to the policy or modify one of its terms.

Exclusion

These are clauses in the contract of insurance in which the insurer refuses to accept liability for specified losses.

Liability coverage

Mandatory cover if you cause damage to anyone else by the way you drive.

Limit

The policy places a limit on the amount the insurer will pay on a given class of claims.

No-fault states

A minority of US states require people to carry insurance to cover their own losses. The law of tort is not used to decide who is at fault.

Policy

The contract between you and the insurer.

Premium

The annual amount payable to buy the coverage from the insurer. There will usually be a discount to pay it as a lump sum. Otherwise payment is by month or some other agreed period.

Quote

This is the amount estimated payable as the premium based on the information you supplied.

Surcharge

This is an additional charge imposed by the insurer if you have an accident or pick up a conviction for a serious moving violation.

Tort

A branch of civil law which decides when a person has been at fault, i.e. negligent.

Uninsured/underinsured coverage

This is optional cover should you be involved in an accident when the other driver is not insured or does not carry enough insurance to pay all your losses.