How to Use This Glossary

Auto insurance policies are filled with precise legal and insurance-industry language. Misreading even one term — say, confusing your deductible with your out-of-pocket maximum — can lead to unexpected costs after a claim. This glossary defines more than 30 terms you're likely to encounter when shopping for, reading, or adjusting an auto insurance policy in the US.

Terms are organized into four groups: the core financial structure of a policy, coverage types, claims-process language, and specialty or situational terms. For a broader introduction to how policies work as a whole, see Car Insurance Explained.

States requiring auto insurance 49 out of 50 (New Hampshire allows alternatives; Virginia changed its law in 2024)
Typical coverage types in a standard policy 6–8 (Liability, collision, comprehensive, PIP, UM/UIM, medical payments, and optional add-ons)
Common deductible range $250–$2,000 (Higher deductibles generally reduce premium costs)
SR-22 filing requirement duration Typically 3 years (Varies by state and violation type)
At-fault vs. no-fault states 12 no-fault states (No-fault states generally require personal injury protection (PIP))

Policy Structure and Cost Terms

These terms describe the financial mechanics of your policy — what you pay and how your insurer calculates its risk.

  • Policy period: The dates your coverage is active, typically six or twelve months.
  • Coverage limit: The maximum dollar amount your insurer will pay for a covered claim. Expressed as a single limit (e.g., $100,000) or split limits (e.g., 25/50/25 — bodily injury per person / per accident / property damage).
  • Split limits: A format for expressing liability coverage as three separate numbers: per-person injury cap, per-accident injury cap, and property damage cap.
  • Combined single limit (CSL): A single total amount covering all bodily injury and property damage liability per accident, rather than separate caps.
  • Surcharge: An increase to your premium added after an at-fault accident or violation.
  • Discount: A reduction in premium offered for qualifying factors such as bundling policies, maintaining a clean driving record, or completing a defensive driving course.
  • Telematics / usage-based insurance (UBI): Programs that track driving behavior or mileage via an app or device to calculate personalized rates. Learn how these programs work in our telematics insurance guide.

Coverage Types and Claims Terms

Understanding coverage labels prevents surprises when a claim is filed. For a detailed breakdown of the three main coverage types, see Liability, Collision, and Comprehensive Explained.

  • Personal injury protection (PIP): Pays for your medical expenses, lost wages, and related costs after an accident regardless of fault. Required in no-fault states.
  • Medical payments (MedPay): Similar to PIP but narrower — covers medical bills for you and passengers regardless of fault, without the wage-replacement component.
  • Actual cash value (ACV): The market value of your vehicle at the time of loss, accounting for depreciation. This is the basis for payouts on totaled vehicles unless you have replacement-cost coverage.
  • Total loss: When the cost to repair a vehicle exceeds a threshold (often around 75–80% of its ACV, varying by state and insurer), the insurer declares it a total loss and pays out ACV instead of repair costs.
  • Subrogation: After paying your claim, your insurer may recover costs from the at-fault party. This process happens behind the scenes and generally does not require action from you.
  • First-party claim: A claim you file with your own insurer for your own losses.
  • Third-party claim: A claim filed against another driver's liability insurance for damages they caused you.
  • Add-on coverages: Optional protections such as roadside assistance, rental reimbursement, and gap insurance. See optional auto insurance add-ons for a full breakdown.
  • Proof of insurance: Documentation — physical or digital — confirming your policy is active. Required to register a vehicle in most states.
  • Financial responsibility laws: State statutes requiring drivers to demonstrate they can cover costs from an accident, typically satisfied by carrying insurance.

When you're ready to read an actual policy document, Reading an Auto Insurance Policy Without Getting Lost walks through how each section is structured.