Insurance Glossary

Understanding insurance terms is the first step to making informed decisions about your coverage.

Insurance Terms

18 terms

A

Actual Cash Value (ACV): The replacement cost of your vehicle minus depreciation. This is typically how insurance companies value your car when determining a payout for a total loss.
At-Fault Accident: An accident where you are determined to be partially or fully responsible for causing the collision, which usually results in increased insurance premiums.

B

Bodily Injury Liability: Insurance coverage that pays for injuries to others if you are at fault in an accident. In California, minimum requirements are $30,000 per person and $60,000 per accident as updated by Senate Bill 1107.

C

Collision Coverage: Insurance that pays for damage to your vehicle caused by a collision with another vehicle or object, regardless of fault.
Comprehensive Coverage: Insurance that covers damage to your vehicle from non-collision incidents such as theft, vandalism, fire, natural disasters, or hitting an animal.

D

Deductible: The amount you pay out of pocket before your insurance coverage kicks in. Higher deductibles typically result in lower premium payments.
Depreciation: The decrease in your vehicle's value over time due to age, wear and tear, and market conditions. Insurance companies consider depreciation when calculating actual cash value.

E

Endorsement: An addition or amendment to your insurance policy that changes your coverage. Also known as a rider.

F

Full Coverage: A term that typically refers to an auto insurance policy that includes both comprehensive and collision coverage in addition to liability coverage.

G

Gap Insurance: Coverage that pays the difference between your car's actual cash value and the amount you still owe on your auto loan if your car is totaled or stolen.

L

Liability Coverage: Insurance that covers damage or injury you cause to others. In California, this includes bodily injury liability and property damage liability.

M

Medical Payments Coverage: Optional coverage that pays for medical expenses for you and your passengers after an accident, regardless of who was at fault.

N

Non-Owner Insurance: A policy that provides liability coverage for drivers who don't own a vehicle but occasionally drive borrowed or rented cars.

P

Premium: The amount you pay to your insurance company for coverage, typically on a monthly, semi-annual, or annual basis.
Property Damage Liability: Insurance coverage that pays for damage you cause to someone else's property while driving. The minimum requirement in California is $15,000, updated from $5,000 through Senate Bill 1107.

S

SR-22: A certificate of financial responsibility that your insurance company files with the state to prove you have the required minimum insurance coverage after serious violations.

U

Underinsured Motorist Coverage: Insurance that protects you if you're in an accident caused by a driver who has insurance but not enough to cover all your damages.
Uninsured Motorist Coverage: Insurance that protects you if you're in an accident caused by a driver who has no insurance or in a hit-and-run situation.

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