Common Auto Insurance Terms That You Need to Know

You should be familiar with the most common terms used in car insurance before you begin shopping for auto insurance. The truth is that the more you understand car insurance, you have a better chance of finding the right coverage for you vehicle. You would love for all companies to be honest about what you need and not need. Let’s face it, every company wants to make a profit. Knowing the basics of car insurance can make a big difference in your auto coverage. Learn some of the most common terms used in auto insurance and see how much you can save.

Absolute Liability

This is also called liability without regard for fault, strict liability or liability without regard to blame. This may occur when an event is considered to be contrary to public policy, even if it wasn’t.

Liability Insurance

Liability insurance is simply risk transference. Liability insurance provides you with protection from loss caused by third parties and also covers your legal liability for injuries to others or their property.

Collision Insurance

This type of insurance can be purchased as an optional extra. Collision insurance covers the vehicle of the insured, but only if it is damaged in an accident. This covers you regardless of whether or not the accident was your fault.


This is also known as excess. It is the amount that you agree to contribute towards the total loss. The deductible is usually a fixed rate and must be paid before any policy benefits can apply to a claim.

Uninsured, and/or Underinsured coverage

This insurance provides great protection for your family and you if you are hit by someone who doesn’t have insurance. Uninsured or underinsured coverage will pay for your injuries.

Comprehensive Coverage

Comprehensive insurance protects your vehicle against non-collision-related incidents like fire, theft weather, impact with animals, vandalism, and weather.

Gap Insurance

For people who just bought a new car, this insurance is a good option. New cars lose value as soon as they leave the dealer lot. Gap insurance covers the difference in what your car is worth to you and what you actually owe.

Although gap insurance typically covers only theft and accidents it can also be used to cover other risks, the policy may have different requirements. Gap insurance can be purchased from the dealer. You can also expect to pay higher premiums.

Property Insurance

This policy covers damage to vehicles of others. It basically means that if you cause damage to another vehicle, it will be covered.


This is your request to be reimbursed for a loss that was covered under your auto insurance policy.

Full Coverage

Full coverage is not what it seems to be. Technically, full coverage refers to a combination collision and comprehensive coverage. This means that your car’s damage is covered.

Secondary Driver

This person, also known as an occasional driver is covered to drive the insured vehicle. This coverage does not necessarily mean they are the primary driver.

Search Around To Find Cheap Auto Insurance

You will be able to make an informed decision about your auto insurance coverage by becoming familiar with these terms. You can shop around for the best auto insurance company to meet your coverage requirements.

These terms are not the most common, but they affect most drivers. Although there are many more car insurance terms that are common, they are mostly state-specific. Visit your local DMV to learn more about what is required in your state.