What Those Confusing Car Insurance Terms Really Mean

For many consumers, sifting through the jargon in an auto insurance policy is only slightly less confusing than reading a Klingon translation of “Ulysses.” There are lots of numbers. Way too many acronyms. And just how full is “full coverage”?

To help you better understand your car insurance policy, here are no-nonsense definitions of common — and commonly frustrating — insurance terms.

Term	Definition
At-fault accident	A car crash that you cause (either partially or completely). After an at-fault accident, your liability insurance helps pay what you owe toward other people's injury and property damage bills, plus your legal defense costs if you're sued.
Car insurance quote	An estimate of how much a company will charge you for car insurance.
Claim	A request you make for payment from your car insurer to cover vehicle repairs, injury treatment or other costs. In other words, using your insurance.
Collision coverage	Pays to fix your vehicle if you cause a crash or have a one-car accident, such as hitting a tree.
Comprehensive coverage	Contrary to its name, this coverage doesn't pay for everything. It pays to repair your car after animal collisions, and also covers a specific list of noncollision issues — including car theft, falling objects and fire, among others.
Covered incident (or covered accident or covered risk)	Something your policy will pay for.
Deductible	Predetermined amount your insurer deducts from your settlement for collision and comprehensive claims. If your car repairs cost $5,000 and your deductible is $500, you'll get a claim check for $4,500. Choosing a lower deductible means your insurer pays more, but your rates will be higher. Choosing a higher deductible means cheaper rates, but your insurer pays less if a claim occurs. Deductibles do not apply to liability claims (which are claims made against you for damage you cause).
Effective date	The exact day your auto policy starts. You're not covered for accidents that happen before this date.
Exclusion	Something your policy won't pay for.
Full coverage car insurance	A policy that includes liability insurance plus collision and comprehensive coverage. It does not (repeat, does not) mean you're covered against any and all events.
Liability insurance	Pays for others' injury treatment and property damage if you cause a crash. It also helps pay for your legal defense costs if you're sued. Your limits often appear in shorthand numbers — for example, 100/300/50 means you have up to $100,000 bodily injury coverage for each injured person, up to $300,000 bodily injury coverage per crash and up to $50,000 property damage coverage per crash.
Limit	The maximum amount your policy will pay for a given accident. Each coverage type has its own limits.
Medical payments coverage (MedPay)	Pays for your injury treatment and that of your passengers no matter who caused the crash (up to your policy limit for MedPay).
Personal injury protection (PIP)	Similar to MedPay, PIP pays for your injury treatment and that of your passengers regardless of who caused the accident. It also pays for some costs that MedPay won't, such as lost income and physical therapy.
Primary use	How you most commonly use your vehicle, such as for commuting, pleasure or business.
Premium	The cost you pay for your auto insurance.
SR-22 insurance form	Official document some states require to prove you have sufficient car insurance. The SR-22 allows you to keep or reinstate your driving privileges after serious or repeated traffic-related offenses, such as DUIs or driving without insurance.
State-required minimum	The car insurance coverages and limits that states require their residents to carry. These limits are often very low and would be insufficient if you caused a large accident.
Underwriting	The insurance company's process of evaluating how risky you are, based on factors such as your vehicle, location, accident history, credit and age. An insurers uses its underwriting findings to calculate your rates.
Uninsured motorist coverage	If you're hit by a driver who lacks car insurance or has insufficient insurance, your coverage for uninsured/underinsured motorist bodily injury (or UMBI/UIMBI) pays for treatment of your injuries and those of your passengers, while coverage for uninsured/underinsured motorist property damage (or UMPD/UIMPD) pays to repair your car.

» MORE: What does car insurance cover?

Alex Glenn is a staff writer at NerdWallet, a personal finance site. Email: aglenn@nerdwallet.com.

This article was updated July 1, 2016. It was originally published March 31, 2015.