Car insurance glossary

The words to know

Last updated:

It’s a lot easier to understand car insurance when you know exactly what everything means.

You can probably guess what most of these words mean in general, but for car insurance they can have more specific meanings.


Note: The following definitions may vary between insurers and policies. These definitions are intended to be generally useful, rather than a guide to a specific policy or insurer.

Girl-lying-oncar (1)


  • Accident. An unintentional incident that results in damage to your vehicle. For example, if you slide on ice and drive into a tree,or if you have a crash with another car.
  • Agreed value/Market value. Agreed value is when a car is insured at a specific sum insured. Market value is when a car is insured at its current reasonable market value, including depreciation. Many insurers will let you choose between either of the cover types, while some might only offer one or the other.

Learn more about picking between agreed and market value here.

  • Anti-theft device. Any device that reduces the chance of a car being stolen. For example, steering wheel immobilisers or theft alarms.


  • Car hire cover. A policy feature that covers some or all of the costs of a rental car hire while your car is being repaired or replaced following a claim.
  • Claim. This is when you ask the insurer to make a payout in line with your policy terms.

Learn more about how to make a claim and how it works here.

  • Comprehensive cover. The type of car insurance that offers the widest range of damage cover. Typically this is the only type of car insurance which will pay out in the event of a car accident.

Learn more about comprehensive cover and compare policies here.

  • Compulsory third party (CTP) car insurance. This is mandatory car insurance that every licensed car which drives on public roads needs to have.

Learn more about CTP insurance, and how to find the cheapest CTP cover, here.

  • Cooling off period. This is a period of time, such as 15 days, after buying a policy where you can change your mind for a full refund, minus processing fees.


  • Damage/Loss. The result of an incident. Depending on the type of car insurance, you might be claiming for different types of damage. For example, CTP covers injury damages, while comprehensive car insurance can cover damage to your car. Loss can refer to the cost of the damage.
  • Depreciation. When a car (or other item) gets less valuable over time. For example, it’s said that as soon as you drive a new car off the lot it’s worth about 20% less than it used to be. This is depreciation. Not all cars will depreciate. Collectors items or limited edition vehicles might actually increase in value over time. This is known as appreciation.
  • Discount. Lowered car insurance premiums. For example, a discount might take the form of 10% lower premiums per month.

See what kinds of car insurance discounts you can get here.

  • Drive less pay less. Also known as pay as you drive car insurance, this is a policy type that lets you enjoy lower premiums if you drive less distance per year.

Compare drive less pay less car insurance options here.

  • Driving record. A history of your driving. For example, recent traffic tickets and previous accidents. Your driving record can affect your car insurance premiums.

Learn more about car insurance for bad driving records here.

  • Duty of disclosure. Your obligation to let insurers know about anything which increases the risk they take in offering you cover. For example, if you have previously had a suspended driver’s license then you may need to inform insurers of this.


  • Excess. The portion of a claim that you are required to contribute before the insurer will pay out. The excess can vary between policies and claim types, and you will often be able to pick a higher excess for lower premiums, or vice versa.
  • Exclusions. Things that aren’t covered by your car insurance. For example, drunk driving or disobeying the road rules are common exclusions. This means an insurer may not pay out for claims resulting from drunk driving or disobeying road rules, or other exclusions.

Learn more about car insurance exclusions here.

  • Extras/options. Additional cover features, such as replacement locks and keys, cover for a trailer that’s beign towed by the insured vehicle, and more. These might be available as free extras, or optional extras that you can add to your policy at extra cost.


  • (At) fault. The at fault party in an accident is the one who is found to be responsible for it. If another driver was at fault for an accident then you may not have to pay an excess for your claim. Note that you might be found at fault, regardless of how an accident happened, if you fail to get the other driver’s name, address, license and contact details.
  • (Third party) fire and theft. The cover type that insured your vehicle with third party liability cover, as well as fire and theft damage.

You can learn more about third party fire and theft cover and get quotes here.


  • Green slip.

See CTP insurance.


  • Insurer. The company that you buy the policy from. This is not always the same as the underwriter, but not always different either.


  • Liability. One’s legal obligation to pay for or otherwise compensate another party for damage or loss. This can be covered by car insurance. See third party property car insurance for more information.


  • Market value/Agreed value. Agreed value is when a car is insured at a specific sum insured. Market value is when a car is insured at its current reasonable market value, including depreciation. Many insurers will let you choose between either of the cover types, while some might only offer one or the other.

Learn more about picking between agreed and market value here.

  • Modifications. Aftermarket upgrades or changes to your vehicle that were not offered by the manufacturer. For example, if you install your own sound system rather than use the one provided by the manufacturer.

Learn more about car modifications and how it affects car insurance here.

  • Multi-policy discount. A commonly found discount for holding multiple policies or cover types from the same insurer. For example, if you have home insurance and car insurance with the same provider.


  • New car replacement. A policy term that can replace your vehicle with a brand new equivalent, or identical, model if your insured car is written off. This policy term is usually only available when insuring a brand new vehicle, and will only be available for the first 12 or 24 months of the policy.

Learn more about this cover type here.

  • No claims bonus. A discount for not making any at-fault claims. It usually grows over time, and reaches its limits after several years of continuous cover. Not all insurers offer this discount.

Learn more about the no claims bonus here.

  • Nominated (listed) driver. The person listed as a the driver on your car insurance policy, and the person whose risk factors primarily determine the premiums. Sometimes you might have more than one listed driver.


  • Overinsurance. When the sum insured of a car is more than its actual value. A policy will typically not pay more than the actual cost of damage, so overinsurance means you’re probably paying too much for cover.


  • Pay as you drive. Also known as drive less pay less car insurance, this is a policy type that lets you enjoy lower premiums if you drive less distance per year.

Compare drive less pay less car insurance options here.

  • Personal injury cover. Insurance that can cover or help with the cost of injuries, disability or even death. CTP insurance can be considered a type of personal injury cover, but there are also some other types of cover that can provide it. For example, you might have event cover that offers personal injury benefits if you are injured while participating in a driving event, such as on a racetrack. Or you might have another type of insurance, such as life insurance, that pays out for personal injuries in the event of a road accident.
  • Personal property cover. A cover feature that pays out for damage to your personal property kept in the car that was damaged in a claimable event. Sometimes referred to as valuables cover.
  • Policy. The insurance contract that you sign up to, and whose terms you agree with. This is the actual product that you buy when you get car insurance, and the exact benefits you can receive and the situations in which you can get them.
  • Policyholder. The person who own the car insurance policy. Typically the policyholder will be the car’s owner, and the main driver. The policyholder is the only person who can adjust the terms and conditions of the cover. There might be more than one policyholder per policy.
  • Premium. The ongoing cost of maintaining your car insurance cover. The premium might be the price per month, or the price per annum, depending on how often you pay your car insurance premiums.

Learn more about the cost of car insurance here.

  • Price match/price beat. A type of offer where an insurer offers to match or beat a competitor’s price.

See how to get this deal and how it works here.

  • Product disclosure statement (PDS). The document which lays out what you’re buying in a policy. It’s important to consult it for the cover, the options and the exclusions before buying.

It’s not the same thing as your actual policy document.


  • Rating. Drivers get a rating which determines what kind of premium they might get. For example, an insurer might rate drivers from 1-5 based on their likelihood of making a claim.
  • Regular driver. This is the person who mostly drives a car. If a policy lets you nominate a driver, then the regular drivers will generally be the nominated drivers. A policy that doesn’t let you nominate drivers will also typically differentiate between regular and occasional drivers.
  • Repairs. This can specifically refer to the repairs carried out by an insurer following a claim. Sometimes not all damage will be repaired under a policy. For example, an insurer might repair a car’s bodywork, but not cover wheels or tyres, depending on the situation.
  • Replacement vehicle. A vehicle that you’re using while your vehicle is being repaired. It might be a borrowed car or a rental, for example. Policies will often specify that a replacement vehicle is covered under your policy in the same way as your original car. Or, it might be a new car that you’re getting following the selling or writing off of and old one.

Learn more about car replacement cover here.

  • Risk. In insurance, this can specifically refer to the chance of you making a claim and how much it’s likely to cost. This can directly affect your premiums. Your risk factors include things like age, the type of car you drive and how much it costs.


  • Safety features. This can broadly refer to any safety features you might find in a vehicle, like seatbelts or airbags. But these days it might more commonly refer to electronic safety and crash avoidance features, like reversing cameras, automatic emergency braking and other technologies. Have more of these crash-avoiding safety features in your car can reduce the risk, and lead to lower premiums.

Learn more about car safety features here.

  • Substitute car.See replacement car.
  • Sum insured. This is the total amount your car is insured for, and the most that will be paid out in the event of a total loss where your car is written off. If your sum insured is more than your car is actually worth, you might be overinsured. If your sum insured is less than your car is actually worth, you might be underinsured.


  • Third party. A third party can refer to anyone else who’s involved in an incident, but doesn’t otherwise have any real connection to you. A third party might be a pedestrian you hit, or another driver you’ve rear-ended. “Third party liability” refers to your liability for damaging a third party’s property.
  • Third party property cover. This type of car insurance is mostly all about the third party property damage liability cover. This is the cover type that can pay for damage caused by your vehicle to other people’s property. Sometimes it will also include “uninsured driver cover,” which can pay out in the event of a driver without liability insurance of their own damaging your car.

Learn more about this cover type here.


  • Underinsurance. This is when your sum insured is less than the value of your car. In the event of a total loss, you might not get paid out the full value of the car.
  • Underwriter. This is the actual insurance company that calculates the risks and writes the policies. The underwriters create the actual insurance products, while the insurers are the companies that sell them. Sometimes the underwriter and the insurer might be the same company. Other times they might be different.
  • Uninsured driver. A driver without third party property damage car insurance of their own.


  • Valuables. Property kept inside your car, such as watches, handbags and other items which might be covered as “personal belongings by a car insurance policy.”
  • Vehicle identification number (VIN). A unique identifying number you can find on every vehicle. It can be used to track stolen cars, trace a car’s history and identify an individual car among others of its make and model.


Write-off. This is when the cost of repairs exceeds the value of the car. If a car is written off, an insurer will typically opt not to repair it but will instead just pay you the sum insured and close the policy.

Windscreen and glass damage. This is exactly what it sounds like; damage to your car windscreen, windows or mirrors. Some policies will offer an option for excess-free windscreen and glass replacements. Typically, in order to actually claim for a broken window, it needs to have suffered significant damage. Policies will usually define this is a complete breakage, a crack that stretches a certain length, or a crack of any length the goes through the entire thickness of the window or windscreen. A chip or small crack to one layer of the glass might not be claimable on car insurance, even with this option.

Learn more about windscreen and glass replacement cover.


  • Young driver. This usually refers to drivers under the age of 25.

Learn more about car insurance for young drivers here.

Get the latest car insurance news

Ask an Expert

You are about to post a question on

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder only provides general advice and factual information, so consider your own circumstances, or seek advice before you decide to act on our content. By submitting a question, you're accepting our Terms of Use, Disclaimer & Privacy Policy and Privacy & Cookies Policy.
Ask a question
Go to site