Accident forgiveness is a policy perk offered by some insurance companies that promises not to increase your premium after your first at-fault accident. This feature is included with some policies and costs extra for others, but most require a clean driving record for it to apply.
Actual Cash Value
The actual cash value, or ACV, is the value of your vehicle according to the insurance company. It’s determined by taking the market value of your vehicle and subtracting wear and tear costs, aka depreciation. If you’re in a total loss situation, your ACV is how much money you’ll get from your insurer to replace your damaged vehicle.
An adjuster, or claims adjuster, is the person you’ll be working with if you have to file a claim with your auto insurance company. It’s their job to look at your accident and policy and decide how much money you’ll need to settle, or adjust, the claim and get back on the road.
An agent is someone who sells and services insurance policies. Independent agents can offer quotes from multiple insurance companies, while exclusive agents represent only one company. You don’t pay the agent — the insurance company does, typically through a commission of some sort.
Automobile insurance, or car insurance, is a contract between you and an insurance company that says they’ll protect you financially if you have an automobile-related accident or incident, in exchange for you paying a regular premium, or fee.
A claim is a request for payment and/or support from your auto insurance company following an accident or incident involving your vehicle.
Collision insurance covers your car when you’re involved in a collision, whether it’s with another car or an object like a tree or guardrail. If the accident is caused by someone else, their insurance may pay for your repairs, or you can file a claim with your own provider. It only covers the cost of repairing or replacing your own car, minus the deductible. Collision is an optional coverage option, although some lenders may require it.
Comprehensive insurance steps in to cover any damage to your car caused by incidents like a tree falling on your car, someone taking it for a joy ride, or a hail storm. Sometimes it’s called “other than collision” coverage. Comprehensive coverage is optional, but may be required by your lender.
These are the nitty gritty details about what protection your insurance policy offers you, including whom and what is covered, where and what you’re covered against, and what’s not covered.
Also called the Information Page or Binder — or simply “dec” if you’re in a hurry — the Declarations Page of your policy includes all those details you need to know such as your policy period, coverage limits, and other key information about your policy.
The deductible is how much money you’ll pay out of pocket before your insurance company hops in to help you out. You’ll decide on your deductible when choosing a policy. Typically a higher deductible equates to a lower premium.
Anything that isn’t covered by your auto insurance policy is an exclusion. A list of exclusions should be explicitly listed in your policy documents. Common exclusions include damage that’s caused intentionally or a nuclear explosion.
Indemnity is a fundamental insurance concept that refers to compensation for or protection from loss, financial burden, or legal responsibility.
The company selling you an auto insurance policy.
If you’re responsible (i.e. liable) for an accident, liability auto insurance helps pay for damage you’ve caused to other people or property. Most liability coverage includes coverage for Bodily Injury (BI) as well as Property Damage (PD). Liability coverage is mandatory in most states.
Motor Vehicle Report
Abbreviated to MVR, a Motor Vehicle Report (or Record) is an official record of your driving history as reported by the Department of Motor Vehicles. This allows insurance companies to assess any violations and accidents to determine your premium.
If you live in a state with no-fault auto insurance laws, this policy will cover you for damages whether the accident was your fault or not. In these states, drivers must also purchase Personal Injury Protection as part of their policies.
Personal Injury Protection
Personal injury protection (PIP) can help pay medical expenses for you and your family following an accident, as well as help with work-related financial losses.
The official agreement between you and your insurance company about how they’ll protect you, for how long, and how much it’ll cost you.
Your premium refers to how much money you’ll pay your insurance company every month to cover you. Basically, it’s your bill.
An auto insurance quote refers to the specific policy and premium offered by an insurance company. It’s a good idea to compare quotes from multiple companies to find the best deal available.
An SR-22 is a state filing that some drivers may need to submit to the government to prove that they’re properly insured. It may be required of drivers who have had their license suspended or revoked, or who have previously been found driving without insurance.
If the costs to repair your vehicle will be more than its actual cash value, the insurance company considers it a total loss. In this case, they will only pay you the actual cash value of your vehicle at the time of your accident.
Umbrella insurance is excess liability coverage that kicks in when you exceed the limits of your basic liability policy.
Uninsured Motorist Coverage
Uninsured motorist coverage is a policy option that will protect you if you’re in an accident with someone who is uninsured or underinsured — i.e. someone who doesn’t have enough insurance to pay for damages to you or your vehicle.