Car insurance terms explained

Car insurance terms explained

Knowing what coverages you need for your car is important because you could be paying more than you have to. Or worse, you might not have the coverages you actually do need.

Insurance people talk in insurance jargon, which sometimes needs explaining. Brush up on the basics before you meet with your agent for a quote.

Basic insurance terms 

  • Actual cash value: The cost of replacing damaged or destroyed property with comparable new property, minus depreciation and obsolescence.
  • Additional insured: A general liability coverage for individuals not named in the policy.
  • Adjuster: A person who investigates claims and recommends settlement options based on estimates of damage and insurance policy terms.
  • Agent: Someone who sells and services insurance policies.
  • Carrier: The company that underwrites the policy (i.e. is responsible for paying claims covered by the policy).
  • Claim: A demand made by the insured, or the insured's beneficiary, for payment of the benefits as outlined by the policy.
  • Coverage: The scope of protection provided under an insurance policy.
  • Declarations: Also known as a Dec page, usually the first page(s) of your policy, it lists the details and terms of the policy and your coverages.
  • Deductible: Amount of money you pay out of pocket. A higher deductible will lower your premium but will cost you more out of pocket.
  • Endorsement: An amendment or addition to an existing policy that changes the terms or scope of the policy. It’s sometimes called a “rider.”
  • Indemnity: Restoration to the victim by payment, repair, or replacement.
  • Policy: The written contract stating the conditions of your insurance coverage.
  • Replacement cost (RC): The cost to repair or replace damaged property with materials of like kind and quality without a deduction for depreciation.

Insurance coverage definitions 

Bodily injury liability coverage is required by law in 48 states and the District of Columbia. Many states also have requirements for property damage liability, personal property, personal injury protection (PIP), and uninsured/underinsured motorist coverage (UM/UIM). Talk to your agent about what you’re required to carry in your state.

  • Bodily injury liability: If you’re held liable for a covered accident in which people are injured, this coverage helps pay the injured party(s) costs and for your legal defense.
  • Collision: Collision coverage helps pay for damage to your car caused by a covered collision with another car or object. It also helps pay for repairs even when you cause the accident, up to the value of your car at the time of the accident, minus your deductible. Most car loans require you to carry collision coverage.
  • Comprehensive physical damage: Sometimes referred to as Other Than Collision (OTC), it covers issues not caused by collision with another vehicle or an object (like bad weather and vandalism).
  • Medical payments: Although similar to bodily injury liability, medical payments coverage helps pay for accident injuries for both you and your passengers’ injuries up to the coverage limits.
  • Personal injury protection (PIP): A component of car insurance also known as “no-fault insurance,” covers the healthcare expenses associated with a car accident. PIP covers medical expenses for both injured policyholders and passengers.
  • Property damage liability: Helps pay for covered claims against you and your legal defense costs if your car damages another person’s vehicle or property.
  • Uninsured/underinsured motorist (UM/UIM): If you and/or your passengers are injured by someone without proper coverage, or are the victims of a hit-and-run, this coverage may help protect you.

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Grinnell Mutual car insurance discounts

Talk to a Grinnell Mutual agent to find out if you qualify for any of these discounts:

  • Advance quote: If you receive a complete quote (with score reports included) at least seven days before the coverage start date.
  • Anti-theft: If you’ve installed qualifying devices to discourage theft.
  • Claim-free: If you are accident- and claim-free.
  • Distant student: If a student on your policy lives more than 100 miles away and does not have a car with them.
  • Driver improvement: If you have taken a qualifying defensive driving course.
  • EFT: If you pay your bill with an electronic funds transfer (EFT), which automatically deducts your payment from your bank account.
  • Good student: If a student on your auto policy maintains a B average or better, or is on the Dean’s List or Honor Roll, and is a full-time student younger than 25.
  • Homeowner: If you own a home, even if it’s insured with someone else.
  • Layup: If you store your (land-based) recreational vehicle for part of the year (discount amount is based on number of months per year the vehicle is stored).
  • Motorcycle safety course: If you complete a qualifying course.
  • Motor home limited use: If drive your motor home fewer than 5,000 miles in a year.
  • Multi-policy: If you have both your home and auto covered with us.
  • Multi-unit: If you have both your auto and your (land-based) RV insured with us.
  • Paid in full: If you pay your personal auto and/or farm truck’s annual premium in full at the beginning of the policy term.
  • Passive restraint: If your car has qualifying automatic seatbelts (pre-1995 vehicles) or airbags. If it has airbags on both the driver and passenger sides, you get an extra discount.
  • Riding association membership: If you belong to a qualifying motorcycle riding association.
  • Timely payor: If you pay your premium on time. The discount is applied automatically when you buy a policy, and removed after one late or returned payment on a six-month policy, or after two late or returned payments on a 12-month policy.

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