Auto coverage terms

Auto insurance 101

Reviewing your auto insurance policy may not be at the top of your to-do list, but maybe it should be. Why? You might be flushing your hard-earned money down the tube by paying for coverages you don’t need. Or worse, you may not have all the coverages you do need. Once you learn a little about various coverages, you’ll realize auto insurance isn’t one-size-fits-all.

Knowing what you need and want is important, so brush up on the basics before you meet with your agent.

Basic insurance terms

Here are some basic insurance terms that can help you communicate when you need to talk insurance.

  1. Policy: The written contract stating the conditions of your insurance coverage.
  2. Agent: The person who sells and services insurance policies.
  3. Adjuster: A person who investigates claims and recommends settlement options based on estimates of damage and insurance policies held.
  4. Claim: A demand made by the insured, or the insured's beneficiary, for payment of the benefits as provided by the policy.
  5. IndemnityRestoration to the victim by payment, repair, or replacement.
  6. Coverage: The scope of protection provided under an insurance policy. In property insurance, coverage lists insured perils (the cause of a loss, e.g. fire), properties covered, locations covered, individuals insured, and the limits of indemnity.
  7. Qualifying event: An occurrence that triggers an insured’s protection.
  8. Deductible: Amount of loss that the insured pays before the insurance kicks in.

What kind of coverages do I need?

When you buy an auto insurance policy, you’re actually buying a package of individual coverages. Each coverage protects you against different types of losses.

At the minimum, you will need to purchase liability coverage, which is required by law in 49 states and the District of Columbia. But there is so much more.

Bodily injury liability

This is one of the most important coverages you’ll need. If you’re held liable for a covered accident in which people are injured, medical costs could easily run into the hundreds of thousands. Bodily injury liability helps cover those costs for the victim(s) and for your legal defense.

Property damage liability

This coverage helps pay for covered claims against you and your legal defense costs if your car damages another person’s vehicle or property.

Medical payments

Although similar to bodily injury liability, medical payments coverage helps pay not only for your passengers’ injuries from a crash, it also helps pay for yours up to the coverage limits.


Collision coverage helps pay for damage to your car caused by a covered collision with another car or object. It also helps pay for repairs even when you cause the accident, up to the value of your car at the time of the accident, minus your deductible. (It is often required with a car loan.)

Comprehensive physical damage

This is sometimes referred to as Other Than Collision (OTC). Bad things can happen to your car besides fender-benders, like bad weather and vandalism. Comprehensive helps cover issues not caused by collision with another vehicle or an object.

Uninsured/underinsured motorist

Reckless drivers are everywhere, and sometimes they either don’t have insurance or they’re underinsured. If you and/or your passengers are injured by someone without proper coverage, or are the victims of a hit-and-run, this coverage can help protect you.

Talk to an agent about what’s appropriate for you and the car you drive.

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OK, I keep hearing the word “deductible.” What IS a deductible, anyway?

When you buy an insurance policy, you agree to how much you will be willing to pay if anything goes wrong. For example, if your policy has a $100 deductible, and the damage to your vehicle totals $500, you will pay $100 to the auto body shop and your insurance company will pay $400. The higher the deductible, the lower your premium (the amount you pay for your policy), which means it’s a good idea to go with a higher deductible if you can afford it.

The good news about premiums…

Still think your insurance costs are too high? Grinnell Mutual offers a variety of discounts to cut the cost, including our Mile Marker Auto Loyalty Program. An auto insurance policy with Grinnell Mutual is all it takes to save money with Mile Marker. Talk with your agent to make sure you are getting all rewards you deserve.

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Wondering what the heck some of these discounts mean? We’ve got explanations in plain English.

Auto insurance discount terms translated

Every industry has “official” terms — like our discount names — and they can be confusing. Insurance people talk in insurance language — which sometimes needs translation.

Here’s a glossary to help clarify what each auto discount means. Contact your Grinnell Mutual agent to find out if you qualify!

  • Advance quote: If you receive a complete quote (with score reports included) at least seven days before the coverage start date
  • Anti-theft: If you’ve installed qualifying devices to discourage thieves
  • Distant student: If a student on your policy lives more than 100 miles away and does not have a car with them
  • Driver improvement: If you have taken a qualifying defensive driving course
  • EFT: If you pay your bill with an electronic funds transfer (EFT), when we automatically deduct your payment from your account
  • Good student: If a student on your auto policy maintains a B average or better, or is on the Dean’s List or Honor Roll, and is a full-time student younger than 25
  • Homeowner: If you own a home, even if it’s insured with someone else
  • Layup: If you store your (land-based) recreational vehicle for part of the year (discount amount is based on number of months per year the vehicle is stored)
  • Motorcycle safety course: If you complete a qualifying course
  • Motor home limited use: If drive your motorhome fewer than 5,000 miles in a year
  • Multi-policy: If you have both your home and auto covered with us (Thanks!)
  • Multi-unit: If you have both your auto and your (land-based) RV insured with us (Thanks again!)
  • Paid in full: If you pay your personal auto and/or farm truck’s annual premium up front
  • Passive restraint: If your car has qualifying automatic seatbelts (pre-1995 vehicles) or airbags. if it has airbags on both the driver and passenger sides, you get an extra discount
  • Riding association membership: If you belong to a qualifying motorcycle riding association
  • Timely payor: If you pay your premium on time. (Yep, it’s that simple!) Applied automatically when you buy a policy; removed after one late or returned payment on a six-month policy, or after two late or returned payments on a 12-month policy

The road ahead is long and beautiful. Let Grinnell Mutual help you navigate insurance. We’ve got a whole trunk full of comprehensive auto insurance coverages, as well as a long list of discounts and incentives. Chat with your agent today.

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The described insurance coverages do not apply in the Commonwealth of Pennsylvania. Please visit this page if you're looking for home, renters, and/or auto insurance in Pennsylvania.