Automobile Insurance Terms
Automobile insurance terms can be confusing. We're here to help with definitions of auto insurance terms that you will hear frequently when shopping for car insurance. Not all auto insurance policies are the same. Some of these terms may not apply to your policy. Talk to your local agent to learn more about different types of automobile insurance coverage and for personal advice about coverage that's right for you.
Auto Insurance 101
So below you’ll find a glossary of auto insurance terms. When we speak with you, we will be happy to explain in layman’s terms anything that might be confusing. Don’t be afraid to ask questions! That’s what we’re here for.
Actual cash value
Actual cash value is determined by calculating the cost of repairing or replacing damaged property, less depreciation and the effects of wear and tear over time. If an item is damaged beyond repair, actual cash value reflects the market value of the item before the damage took place, less depreciation and the effects of wear and tear over time.
Bodily injury liability
Helps pay for bodily injury expenses, like hospital bills and medical care, that you may be held responsible to pay if you cause an accident that injures someone else.
Liability limit is the maximum dollar amount your automobile insurance policy will cover for liability. For example, if your auto insurance has liability limits of 25/50/25, the maximum dollar amount your policy will pay is $25,000 for a person injured in an accident, a combined total of $50,000 for all people injured in a single accident, and $25,000 for property damage. Minimum liability limit is the compulsory, or the minimum amount of auto liability insurance you're required to have in your state.
Uninsured/underinsured motorist (UM/UIM)
Helps pay for damages associated with bodily injury or death from an accident caused by an uninsured, underinsured or hit-and-run driver. Specifics of what is covered by these terms can vary from state to state. It may also cover you if you are hit as a pedestrian.
Personal injury protection (PIP)
Personal injury protection or PIP helps pay for hospital bills and medical care expenses for you and your passengers injured in an accident, no matter who was at fault. Some states require personal injury protection as part of your auto or motorcycle insurance coverage.
Medical payments (MedPay)
For auto, classic car, boat, motorcycle and RV: Medical payments helps cover hospital bills and medical care expenses for you or your passengers injured in an accident, no matter who is at fault. MedPay for boat also includes injuries from water-skiing and wake-boarding.
Pays to repair damage to your vehicle that is caused by an accident involving other vehicles and objects like guard rails, sign posts, trees and buildings. It does not cover damage to another driver's vehicle.
Pays to repair or replace your vehicle if it is stolen, vandalized or damaged in some way other than in a collision. Includes loss or damage from fire, flood, falling objects, wind, hail and collision with an animal.
The amount of money you agree to pay out-of-pocket for each claim is called your deductible. The deductible you choose often affects how much you pay for your automobile insurance. A higher deductible usually means a lower insurance bill. In the case of a covered loss, you'll only be required to pay your deductible, and the insurance company will cover the excess, up to the amount specified in your policy. For example, if the total cost to repair your car is $1,000 and you have a $500 deductible on your car insurance policy, you'll need to pay $500 of the $1,000.
Guaranteed auto protection (GAP)
GAP is loan and lease protection. It covers the difference between how much is left on your loan or lease and how much your car is actually worth if it's declared a total loss.
Physical damage coverage
For auto, motorcycle, classic car and RV: Physical damage is a general term that includes both comprehensive and collision coverage.
A total loss is declared when the cost of repairs will be greater than the total current market value of your vehicle. Model, year, mileage, condition, options, and your local market area are all factors in deciding if your vehicle is a total loss. Sometimes a total loss is simply called totaled, as in "My car was totaled."
An umbrella insurance policy is an additional layer of liability coverage that may cover you when your other insurance policies, such as homeowner's and auto, have exhausted the maximum amount they will pay for liability claims.
Underlying liability coverage
When an umbrella policy is adding protection to another insurance policy, like your automobile insurance policy for example, the underlying liability coverage is the maximum amount your auto policy will pay for liability claims.
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We provide auto insurance quotes in Baltimore, Cecil County, Harford County and Southern PA!
In Harford County we service the following towns: Harford County, Aberdeen, Abingdon, APG, Baldwin, Bel Air, Belcamp, Benson,
Churchville, Darlington, Edgewood, Fallston, Forest Hill, Gunpowder, Havre de Grace, Jarrettsville, Joppa, Kingsville, Magnolia, Monkton,
Perryman, Pylesville, Street, Whiteford, Whitehall