Car Insurance Jargon Explained

Are you baffled by words and phrases in your car insurance documents and want to know what they mean? Find out here with Savvy!

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, updated on February 16th, 2024       

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Whether you're a seasoned driver or a new car owner, understanding the language used in car insurance policies is essential for making informed decisions and ensuring you have the right coverage to protect your vehicle and yourself. However, with an extensive range of terms, words and phrases, navigating the world of car insurance can be overwhelming. This comprehensive glossary is designed to demystify the confusing jargon often found in car insurance documents.

Glossary of common car insurance terms in Australia

Accessories are additions or alterations to your car that do not enhance its performance or change it structurally.

An accident is an unexpected event involving a motor vehicle that results in damage or injury.

Agreed value is the pre-determined value at which you and your insurer agree to insure your vehicle. This will be shown on your Certificate of Insurance.

An anti-theft device is a security feature installed in a vehicle to reduce the risk of theft, such as an alarm system or immobiliser.

An at-fault accident is a car accident for which you are deemed responsible or determined to have caused.

Business use is when a vehicle is used for business-related purposes, such visiting clients.

A Certificate of Insurance is a document issued by an insurance company as proof of insurance coverage, detailing the policyholder's name, policy number, effective dates and the type of coverage provided.

A claim is a formal request made to an insurance company for compensation due to a covered loss or damage.

Commercial use is when a vehicle is used exclusively for business purposes, such as transporting materials or delivering goods.

Comprehensive car insurance is a type of car insurance that covers damage to your vehicle caused by incidents such as accidents, theft, vandalism or natural disasters. It is the most extensive level of car insurance cover available in Australia.

Compulsory Third Party (CTP) insurance is mandatory insurance in Australia that provides coverage for personal injury caused to others in a motor vehicle accident.

The cooling-off period is the specified time frame during which a policyholder can cancel an insurance policy and receive a full refund of premiums paid.

Cover/coverage is the protection provided by an insurance policy against specified risks or events.

Damage is the physical harm or loss to a vehicle caused by accidents, collisions or other events covered by the insurance policy.

A discount is a reduction in insurance premium offered by insurers based on factors like safe driving history or through deals such as introductory offers or bundling multiple policies.

A driving record is a record of a driver’s history, including past accidents, traffic violations and claims.

An excess is the amount the policyholder must pay towards a claim before the insurer covers the remaining costs.

Exclusions are specific events or circumstances not covered by an insurance policy.

An incident is any event or occurrence that involves a motor vehicle and may result in a claim.

An insurance provider is the company that offers and administers insurance policies.

An insured event is an event or incident covered under an insurance policy.

Legal liability is the legal responsibility of a person to compensate others for harm or damages caused by their actions.

Listed drivers are the individuals named in the insurance policy as authorised drivers of the insured vehicle.

Market value is the current worth of a vehicle in the open market, used to determine its value for insurance purposes.

Modifications are alterations or enhancements made to a vehicle that deviate from its original manufacturer specifications.

New-for-old replacement is a policy feature that replaces a damaged vehicle with a new one of the same make and model, usually applicable for newer vehicles.

A no-claim bonus is a reward given to policyholders for not making any claims during a specific period, resulting in a discount on premiums.

A no-fault accident is an accident where no single driver is considered at fault.

Optional extras are additional coverage options that can be added to a basic insurance policy for an extra cost.

A policy is a legal contract that outlines the terms, conditions and coverage of an insurance agreement.

A premium is the amount paid by the policyholder for insurance coverage.

Private use is the personal use of a vehicle, excluding business-related activities.

A product disclosure statement (PDS) is a document providing essential information about the car insurance product to potential customers or clients, including details about its features, benefits, risks and costs.

Registered is when a vehicle is officially listed with the relevant government authority, allowing it to be legally driven on public roads.

Renewal is the process of extending an insurance policy for another term, usually 12 months

Roadworthy refers to a vehicle meeting the safety and mechanical standards required to be legally driven on the roads.

A substitute vehicle is a temporary replacement vehicle provided by the insurance company while the insured vehicle is being repaired, but not a hire car.

Third party refers to other individuals or entities not involved in the insurance contract.

Third party fire and theft (TPFT) insurance is car insurance that covers damage to a third party’s property and provides limited coverage for fire and theft of the insured vehicle.

Third party property damage (TPPD) insurance is car insurance that covers damage to a third party’s property caused by the insured vehicle. This is the most basic form of optional car insurance available in Australia.

A Vehicle Identification Number (VIN) is a unique 17-character code assigned to each vehicle, used for identification and tracking purposes.

A write-off is when an insurer deems a vehicle damaged beyond repair (also known as a ‘total loss’).

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Savvy’s comparison service includes selected products from a panel of trusted insurers and does not compare all products in the market. Any advice presented above or on other pages is general in nature and doesn’t consider your personal or business objectives, needs or finances. It’s always important to consider whether advice is suitable for you before purchasing an insurance policy. We always recommend readers to consult the Product Disclosure Statement (PDS) of different policies before purchasing your car insurance.