Car insurance jargon-buster

The word 'insurance' highlighted in a dictionary

If you’re not familiar with the lexicon of insurance, you’re not alone. After all, it’s drenched in legalese and complex terms which are enough to make the average person’s head spin. 

However, it’s really important when you’re deciding on any kind of insurance that you’re aware of what different terms mean. Otherwise, looking at a product disclosure statement (PDS) when you compare car insurance will be like reading a Latin dictionary, while hanging upside down in a pitch-black room – difficult to grasp. 

Anyway, here’s our car insurance jargon-buster, for your referential pleasure.

Accident

While it may seem obvious at first, ‘accident’ in car insurance terms typically applies to a sudden or unexpected event – like a car crash or other insurable incident. 

Related: What to do if you are involved in a car accident: A guide

Agreed value

When it comes to car insurance, ‘agreed value’ is the maximum compensation limit if your car is written-off. 

For example, let’s say you and your insurance provider agree that your car is worth $30,000. If your vehicle is written-off in an accident, then the maximum amount of money you may receive will be capped at $30,000. 

Car insurance providers will either insure your vehicle for agreed value or market value.

Anti-theft device

In car insurance, anti-theft devices are those designed to deter theft or vandalism. They’re usually fitted to the insured vehicle and can include:

  • Car alarms
  • Immobilisers
  • Motion detectors
  • A Vehicle Identification Number (VIN)
  • Tracking devices (GPS)

Benefits

Insurance benefits are the payments, compensation, or services provided by the insurer, as agreed in the contract, and outlined in the product disclosure statement (PDS) of a car insurance policy.

Car hire cover

Some car insurance policies will cover some or all of the cost of hiring a temporary replacement car if your vehicle has been stolen, or if it’s undergoing repairs.

With some car insurance providers, this will be a feature of their comprehensive policies, but with others, it may be an optional extra. If it’s an optional extra, then you may have to pay a premium to get car hire cover.

Claim

When something goes wrong with your car, such as getting in an accident or dealing with flood damage, you will need to make a claim. 

A claim is essentially a request for payment, if you’re covered under the relevant benefits of your policy. 

Related: Making a Claim on Your Car Insurance

Comprehensive car insurance

Comprehensive car insurance is typically considered the top of the range, as far as cover for your wheels goes. 

Generally, this type of policy has more inclusions and benefits, which does mean it is usually more expensive than other policy tiers. 

This tier of cover sits above compulsory third party (CTP) and third party property

Comprehensive is the only type of policy that will pay out for the repair or replacement of your car in the event of an accident that was your fault.

Compulsory third party (CTP)

Compulsory third party (CTP) car insurance (also known as a ‘green slip’) is the minimum level of cover required by law.

It covers you in case you’re liable for personal injury to another person in the event of an accident.

Contract

In car insurance terms, a contract is a legally binding document between you and the provider, regarding what is expected of both parties.

Coverage

Your car insurance coverage are the protections and benefits included in your policy, and agreed upon in your contract.

Damage

Damage, in car insurance, refers to loss or harm to another person or property.

Discount

In car insurance, a discount refers to a reduction of the insurance premium.

These are good to look out for when you compare car insurance, as some providers will offer online discounts when you purchase a new policy.

Other discounts include:

  • Multi-policy discounts
  • Multi-car insurance discounts
  • Restricted driver discounts 
  • No claims bonuses
  • Family discounts
  • Loyalty discounts
  • Fuel efficiency discounts
  • Pay-as-you-drive plans
  • One-off specials

Driving record

In car insurance, your driving record refers to your driving history, including any accidents you’ve been involved in, or driving offences you have on file.

Your driving history can affect how your premium is calculated, as you’ll be seen as more likely to make a claim in the future.

Excess

In car insurance, your excess is the amount you’ll need to pay after your claim is approved.

Paying excess is a standard practice across most, if not all, forms of insurance. The idea is that you share part of the financial responsibility, which will (theoretically) make you drive safer. 

You’re essentially contributing a portion of the cost of repair or replacement, after which the insurance provider pays the remainder.

Some car insurance policies allow you to choose how much excess you pay, which may lower your premium if you choose to raise your contribution amount.

Extras

When you take out a car insurance policy, you may have the option to pay for extras.

Extras are optional inclusions, which extend the scope of your policy to include things like:

  • Car hire cover
  • Windscreen and window cover
  • New for old car replacement 
  • Key replacement 
  • Excess choices

Fire and theft cover

Some car insurance policies allow you to purchase (or automatically include) fire and theft cover as an optional extra. 

This sort of car insurance cover could help you out with any losses relating to fire damage, or the theft of your vehicle. 

Perfect for situations where your car is stolen, used in a crime, then burnt out underneath an overpass.

Insurance provider

A car insurance provider is simply the company that issues your policy.

When it comes to car insurance, legal liability is the responsibility you have to pay for damage, loss, or injury to another person or their property.

Usually, a car insurance policy will cover the cost of your legal liability, up to the benefit amount, if your policy includes this sort of coverage.

Market value

When it comes to car insurance, ‘market value’ is the maximum compensation limit if your car is written-off. 

The valuation is determined by what the market says your car is worth, based on demand and sales history. It also takes into account the car’s condition, age, make, and model. 

Car insurance providers will either insure your vehicle for market value or agreed value.

No claims bonus

Some insurance policies come with a no claims bonus, which rewards drivers who don’t make an at-fault claim on their policy, for a certain period of time, with a discounted premium.

Personal injury cover

Some car insurance policies offer compensation for medical treatment, lost income, or other accident-related expenses as part of the policy benefits.

Personal property cover

In the realm of car insurance, personal property cover refers to compensation for the loss of, or damage to, personal belongings, such as:

  • Jewellery
  • Cash
  • Mobile phones

Premium

Premium, in insurance, is a word you’ll hear a lot. 

In car insurance, your premium is the amount of money you pay for coverage under a policy. 

You’ll have to pay your premium for your car insurance policy to come into effect and reap the benefits of having insurance benefits.

Third party

Third party, in terms of car insurance, refers to a person or entity affected by a collision or accident that you were involved in. They are a ‘third’ party to the agreement between you and your insurance provider.

Vehicle Identification Number (VIN)

A Vehicle Identification Number (VIN) is a unique identifier that is assigned to a vehicle during manufacturing. Its purpose is to provide details relating to the car’s origins and aims to discourage re-selling stolen vehicles.

A VIN is made up of 17 characters, with both numbers and letters, and contains information related to where and when the vehicle was manufactured. 

You’ll need to provide your car’s VIN when you get your car registered.

Now that you’re versed in the lingo of car insurance, check out what different levels of car insurance covers, or head over to our car insurance comparison page to start delving into some of your options.