Auto Insurance Policy Legal Terms - The Basics


Purchasing automobile insurance is actually pretty easy. Reading the policy that comes in the mail after you make your purchase is a completely different story. It's a maze of jumbled legal terminology, most of which you'd have to be a licensed agent to understand. Here are a few auto insurance policy legal terms and their definitions written in a way that will help you understand your policy and coverage!

Bodily Injury Liability

One of the most commonly used auto insurance policy legal terms is bodily injury liability. This is because bodily injury coverage is required in almost every single state. Bodily injury liability coverage is the coverage you purchase to pay for the medical bills of those you might injure in an accident if you are found to be responsible for causing it. This coverage will not only pay the other person's medical bills but in many cases will also pay for a lawyer from your insurance carrier to help defend you in court.

Property Damage Liability

Property damage liability coverage will pay for damages you cause to another person's property if you are responsible for causing an accident. Property, for all intensive purposes, includes another vehicle, a house, a telephone pole, or any other tangible property you might cause damage to.

Personal Injury Protection (PIP)

Personal Injury Protection, or PIP, is another popular auto insurance policy legal term very few people understand. PIP coverage is included on many policies and is used to pay medical bills incurred by you or your vehicle's passengers if you are in an accident. PIP coverage is used in no-fault states states in which the law says your PIP coverage must pay for medical bills regardless of who caused an accident. You can only sue the other person for payment under their aforementioned bodily injury liability coverage if your PIP coverage isn't sufficient.


The term threshold, also referred to as tort, is used to describe the limits that are placed on your ability to sue another party for damages in a state that is considered "no-fault." If you have a limited threshold you can only sue for physical damages to your body or property. If you have a full threshold you may be able to sue for pain and suffering, especially if you or one of your family members die or are permanently injured or disfigured.

There are dozens of other complicated auto insurance policy legal terms included in your policy and if you ever have trouble understanding them you should contact your agent as soon as possible for an explanation. You have the right to understand your coverage!

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