Car Insurance Terms Glossary

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NOTICE: This document is for informational purposes only and is not intended to alter or replace the insurance policy. Additionally, this informational sheet is not intended to fully set out your rights and obligations or the rights and obligations of the insurance company. If you have questions about your insurance, you should consult your insurance agent, the insurance company, or the language of the insurance policy.
A
Accident

A sudden, fortuitous event or an unexpected, unforeseen event, not under the control of an insured and resulting in a loss. Often used to refer to a collision or insurance event. See What to do after a car accident

Accident Forgiveness

In most states, customers who have not had an at-fault accident in the previous five years qualify for this program. Accident forgiveness means that some insurance carriers won't add a surcharge to your premium after your next at-fault accident. See Accident forgiveness: What's the catch?

Accident Frequency

The number of times an accident occurs. Used by actuaries (see definition below) to predict losses and appropriately base premiums.

Accidental Death Benefit (ADB)

A supplementary life insurance policy benefit that provides a death benefit in addition to the policy’s basic death benefit if the insured’s death occurs as the result of an accident.

Act of God

Natural occurrence beyond human control or influence. Such acts of nature include hurricanes, earthquakes, and floods. See Acts of God and your car insurance

Actual Cash Value

The fair market value of property; technically, replacement cost less depreciation.

Actuary

A statistician who computes insurance risks and premiums. Actuaries keep insurance carriers profitable and financially stable by setting prices, assessing trends, and determining how much to hold in reserve to pay claims.

Additional Insured or Additional Interest

A person or an organization, other than the named insured or covered person, who is protected under the named insured's auto policy.

Adjuster

See Claim Adjuster.

Admitted Company

An insurance company authorized to do business in the state.

Adverse Carrier

Term used to refer to the other party's insurance company.

Adverse Selection

The tendency of those exposed to a higher risk to seek more insurance coverage than those at a lower risk.

Aftermarket Parts

Parts or accessories that are not a part of the original factory installed parts.

Agent

An individual who acts as a representative for the company and sells insurance, usually on a commission basis. This individual could be an 'exclusive' or 'non-exclusive' agent.

Agreed Price

The price or cost of repairs agreed to by the Auto Damage adjuster or independent appraiser and the body shop representative

Agreed Value

A type of policy available for collectible, antique or custom vehicles that do not depreciate in value as the average car does.   At the inception of your policy, you and your insurance company come to an "agreed value" for your vehicle and that is what will be paid out in the event of a total loss instead of actual cash value. See Auto insurance for collectible cars

Alien Insurance Company

An insurance company incorporated under the laws of a foreign country.

Amendment

A change to the basic policy contract. An amendment alters the policy; an endorsement (see definition below) adds to it.

Anti-Lock Braking system (ABS)

A computer-controlled high pressure system that assists the vehicle's normal braking system. ABS allows all wheels to slow at the same rate, thereby preventing loss of control.

Anti-Theft Device

Devices designed either to reduce the chance an auto will be vandalized or stolen, or assist in its recovery. Examples include car alarms, keyless entry, starter disablers, motion detectors, parts of the vehicle etched with the Vehicle Identification Number, and recovery systems.

Application

A signed statement by a prospective insured requested insurance. This can be signed electronically.

Appraisal

Process that determines the value of property, or the extent of damage, usually performed by an impartial expert.

Arbitration

A process of settling a dispute through an impartial party. It is used as an alternative to litigation.

Assigned Risk

A driver or vehicle owner who cannot qualify for insurance in the regular market. He or she must get coverage through a state assigned-risk plan, which specifies that each company must accept a proportionate share of these drivers/owners.

Assured

Means the same as an insured, policyholder, or someone who has an insurance policy.

At-Fault

The party that is legally liable for the damages in an accident.

Auto Damage Adjuster

The auto damage adjuster is responsible for writing the repair estimate for your vehicle. This adjuster will also answer your questions about the repair process, your rental vehicle, or your total loss settlement.

Auto Damage Division

Division of a claims department that handles auto claims.

Auto Repair/Claim Repairs

Insurance carriers have programs that maximize convenience when you have an auto insurance claim. It allows you to complete your vehicle's repair process at one location. Some CarInsurance.com carrier's claims adjusters are on site to facilitate the repair process. Rental vehicle arrangements are available on-site through a rental car agency.

Auto Theft

The theft of an auto is a type of loss that is covered under comprehensive coverage.

Automobile Insurance

A form of insurance that protects against losses involving autos. Auto insurance provides protection from losses resulting from owning and operating an auto. The insurance covers losses to the insured's property and losses for which the insured is liable as a result of owning or operating an auto.

Automobile Insurance Plans

The name for "assigned risk" plans. These are plans set up and monitored by the state to help people who are unable to secure auto insurance through standard insurance carriers. See Assigned Risk.

Automobile Insurance Premium Discounts

Discounts offered to drivers for such safeguards as air bags, seat belts, good driving record, anti-theft devices, multiple vehicles, training courses, good grades, group membership, employment or degrees, pre-purchasing, low mileage, and renewal or prior insurance.

B
Basic Auto Policy

Although still used today to insure substandard risks, two-wheel motorized vehicles, and commercial autos, the Basic Auto Policy has been primarily replaced by the Personal Auto Policy, which combines both physical damage coverage and liability insurance for claims arising out of the ownership or use of a vehicle.

Binder

A temporary agreement declaring that the policy is in effect. Used in certain cases to protect a policyholder when it is not possible to issue or endorse the policy immediately.

Blue Book

A publication used for the determination of values for used automobiles and trucks. The full name of the publication is Kelley Blue Book.

Bodily Injury

An injury sustained by a person.

C
Cancellation

Termination of an insurance contract before the end of the policy period, by the insured or insurer.

Car Insurance

A form of insurance that protects against losses involving cars. Car insurance provides protection from losses resulting from owning and operating a car or vehicle. The insurance covers losses to the insured's property and losses for which the insured is liable as a result of owning or operating a car.

Carrier

The insurance company or insurer.

Catastrophe

A disaster affecting a specific geographic area. Catastrophes often cause injury or even death; most result in extensive property damage. Hurricanes, floods, tornadoes, and even large hailstorms are typical examples of catastrophes.

Certificate of Financial Responsibility

Depending on the state and Motor Vehicle requirement, this is a form certifying that specific coverage has been purchased to meet the state's Financial Responsibility laws. This could be an SR-22, FR-44, SR-50, or any other State Requirement certification form.

Certificate of Satisfaction

A form signed by the insured when he or she takes delivery of the car from the repairer. It certifies that he or she is satisfied with the vehicle operations, appearance, and visible quality of the repairs.

Claim

Any request or demand for payment under the terms of the insurance policy.

Claim Adjuster

A person responsible for investigating and settling a claim.

Claimant

Individual or entity presenting a claim.

Clause

A section in an insurance policy that explains, defines or clarifies the conditions of coverage.

CLUE® Report

Comprehensive Loss Underwriting Exchange (CLUE) report; provides claim history information.

Combined Single Limit

Bodily Injury and Property Damage coverage expressed as one single amount of coverage.

Commercial Lines

Products designed for and bought by businesses. CarInsurance.com offers Business Auto Policies and Commercial Auto Policies.

Commission

That portion of the premium paid to the agent as compensation for the agent's services.

Comparative Negligence

A doctrine of law that, in some states, may enable claimants to recover a portion of their damages even when they are partially at fault, or negligent. Each party's negligence is compared to the others and a claimant's recovery can be reduced by the percentage of his or her own negligence.

Competitive Auto Repair Parts

Parts made by a company other than the manufacturer of the auto. Parts meet or exceed the quality of the manufacturer's parts, but cost less. Most insurance carriers guarantee these parts for as long as you own the car.

Competitive Estimate

A term used when an insurance company requests that you submit multiple repair estimates for consideration.

Conditions

The portion of the insurance contract which outlines the duties and responsibilities of both the insured and the insurance company.

Condo Insurance

A type of homeowner's insurance that meets the special needs of condominium owners.

Continuous Coverage or Continuous Liability Insurance

Continuous coverage refers to the length of time you have maintained insurance on your vehicle.

Contract

A legal agreement between two parties promising a certain performance in exchange for a certain consideration.

Contributory Negligence

A doctrine of law that, in some states, may prevent claimants from recovering any portion of their damages if they are even partially at fault, or negligent.

Coverage

Protection and benefits provided in an insurance contract.

Covered Person

This refers to the individuals (named insured, spouse, resident relatives, etc.) insured under a policy contract.

Customized Equipment/Special Equipment

Items not included in standard insurance options available for cars. These may include extra electronic equipment, special paint or exterior items, or amenities added to the inside of a van or truck.

Customized Vehicle

A vehicle that has been altered or has equipment or accessories not typically found in a personal vehicle.

D
Damage

Loss or harm to a person or property.

Declaration Page

That page of the insurance policy which lists the insurance company, its address, name of the policyholder, starting and ending dates of coverage, and the actual coverages given in the contract, including the covered locations and amounts.

Declarations

The part of your policy that includes your name and address; the property that is being insured, its location and description; the policy period; the amount of insurance coverage and the applicable premiums.

Deductible

Usually, a dollar amount the insured must pay on each loss to which the deductible applies. The insurance company pays the remainder of each covered loss up to the policy limits.

Defensive Driver Course

These are classes either offered through or approved by Departments of Motor Vehicles to enhance driving skills. These courses may make drivers eligible for discounts on their premiums. Courses taken for traffic school because of a moving violation are not eligible.

Defensive Driver Discount

Certain drivers (usually over age 50) who have voluntarily taken a defensive driving course may qualify for this discount on their auto insurance premiums.

Depreciation

The decrease in value of any property due to wear, tear, and/or time. Generally, depreciation is not an insurable loss.

Discount

A reduction in your premium if you or your car meets certain conditions that are likely to reduce the insurer's losses or expenses. For example, auto insurance discounts are given for cars with auto theft devices and for drivers and passengers who use seat belts.

Domestic Insurance Company

An insurer domiciled in this state.

Drive-In Claims Office - Concierge Claims Service

An office or location that allows drivers to have simple, one-stop access for claims coverage.

Drive-Other-Car Endorsement

Optional coverage that broadens the definition of a covered auto to include non-owned vehicles the insured person operates.

Driver Education

State accredited educational course that consist of at least 30 hours of professional classroom instruction.

Driver Improvement Course

A voluntary refresher course available for drivers age fifty-five (55) and older to enhance their driving skills.

Driver Training

State accredited training course that consists of time spent behind-the-wheel with professional instruction.

Driver Training Discount

A discount for people who have taken an approved driver training course. This discount is not available in all states or for all individuals.

E
E-Bill

An electronic version of your bill that you can review online. Most utility services and banks offer these services. Some CarInsurance.com insurance companies offer this ability.

>E-Commerce/Electronic Commerce

The sale of products such as insurance over the Internet

Earned Premiums

The portion of premium that applies to the expired part of the policy period. Insurance premiums are payable in advance but the insurance company does not fully earn them until the policy period expires.

Economic Loss

Total financial loss resulting from the death or disability of a wage earner, or from the destruction of property. Includes the loss of earnings, medical expenses, funeral expenses, the cost of restoring or replacing property and legal expenses. It does not include noneconomic losses, such as pain caused by an injury.

Effective Date

The date that coverage begins on an insurance policy.

Electronic Funds Transfer (EFT)

EFT is an electronic payment method that lets you pay your premiums with automatic deductions from your checking account.

Emergency Road Service Coverage

Protection for problems that are not typically handled but your auto insurance, such as: being locked out of your car, towing not related to an accident, having a dead battery re-charged, inflating a flat tire, filling an empty gas tank. (Also referred to as Towing and Labor)

Endorsement

A document, which is attached to the policy and modifies or changes the original policy in some way.

Estimate

As assessment of the cost to repair your damaged property.

Exclusion

Section of the insurance policy, which list property, perils, person, or situations which are not covered under the policy.

Experience

Can refer to many items such as driving record history or record of losses.

Experience Rating

Determination of the premium rate for an individual risk, made partially or wholly on the basis of that risk's own past claim experience.

Expiration Date

The date your coverage ends. There is usually a time of day associated with this date, for example, an expiration date of 5/1/2002 at 12:01am. This means your coverage ends one minute after midnight on the date listed.

Exposure

Possibility of loss. Insurance companies set rates based upon exposure.

Extended Non-Owner Liability

An endorsement that provides broader liability coverage for specifically named people operating any non-owned automobile or trailer. It covers non-owned autos, use of autos to carry people or property for a fee, and individuals driving employer-furnished cars who do not own vehicles themselves.

F
Family Automobile Policy

Now replaced by the Personal Auto Policy, the Family Auto Policy was a package policy in which both liability and physical damage protection to an insured's vehicle was offered on one policy.

Field Adjuster

An insurance adjuster who works primarily outside of an office and often meets personally with the public. Field adjusters can conduct face-to-face meetings, negotiations with claimants, scene investigations, and damage inspections.

Financed Car

A vehicle financed by a loan. The lender retains a lien on the auto until it has been paid off.

Financial Ratings

Financial ratings reflect a rating organization's opinion on the financial strength and ability to meet ongoing obligations to policyholders. The ratings organizations most commonly identified with the insurance industry are AM Best, Standard & Poor's and Moody's.

Financial Responsibility Law

Financial responsibility laws require owners and operators of autos to maintain enough money to compensate those they injure. Liability insurance is the most common way to satisfy these requirements.

First Party

Term used to refer to an insured.

First Party Benefits

This pays policyholders and others covered by the policy in the event of injury, no matter who caused the accident. The benefits can include medical expenses, loss of income, funeral and death benefits. This may also be called Personal Injury Protection.

First Party Claims

A claim for damage, loss or injury made by an insured.

Flat Rate Cancellation

Termination of an insurance contract at inception. This policy is never in effect.

Forced Placed Insurance

Insurance purchased by a bank or creditor on an uninsured debtor's behalf to cover the property, so that the creditor receives payment if the property is damaged or destroyed.

Foreign Insurance Company

An insurer domiciled in another state.

Forms

This can be any part of your insurance policy. This may be an SR-22 form or a policy form like your application, declaration page or policy jacket. Typically, all are available in Adobe's PDF format.

Fraud

A false statement intended to deceive the insurer and induce it to part with something of value or surrender a legal right. May void a policy.

G
Gap Insurance

If you are making lease or loan payments and you experience a total loss, there may be a difference (gap) between the market value of your vehicle and what you still owe on it. This optional coverage pays the difference.

Garage Location

The zip code where your vehicle is parked when not in use and usually corresponds to your primary residence.

Good Student Discount

May be awarded to full-time students who maintain a grade average of "B" or better. Each carrier has specific rules that may apply.

Guarantee Funds

All 50 states, the District of Columbia and Puerto Rico require licensed insurers to assume some of an insolvent insurance company's policyholder liabilities. These funds are used to bail out the policyholders of companies that fail.

H
Hazard

Anything that increases the chance of an accident occurring.

Hit and Run

An accident caused by someone who does not stop to assist or provide information.

Homeowners Insurance

Protects homeowner's from losses to their homes, personal property, and some types of damage or injury to others for which the homeowner is liable. Homeowner's insurance is subject to the terms, limits and conditions of your policy contract.

I
ID Card

A card issued by your insurer containing basic information about your insurance policy. Some states require you to keep an ID card in your vehicle.

Inception Date

The date that coverage begins on an insurance policy.

Indemnification

The act of providing compensation for a loss with the intent to restore an individual or entity to the approximate financial position prior to the loss.

Indemnity

A principle of insurance which provides that when a loss occurs, the insured should be restored to the approximate financial condition occupied before the loss occurred, no better, no worse.

Independent Adjuster

An individual who estimates losses on behalf of an insurance company, but is not an employee of that company.

Inspection

Verification of a vehicle's physical condition.

Insurable Interest

Exists when an individual would suffer an economic loss as the result of damage to property or bodily injury.

Insurance

Insurance is a system in which groups of people who have similar chances of suffering a loss transfer their risk of loss to an insurer who pools the risk of many people together. In exchange for payment of premium, the insurer promises to reimburse the person for their covered losses.

Insurance Fraud

The act of falsifying or exaggerating the facts of an accident to an insurance company to obtain payment that would not otherwise be made. Common types of insurance fraud are staged accidents, exaggerated injuries, and inflated medical bills.

Insurance Score

Confidential ratings used for underwriting in some states as a rating tool. It may include information about the consumer's payment history, the number of open accounts and if bankruptcy has been filed. It is a measure of how financial affairs are managed and does not include assets, income information or race information.

Insured

A person or organization covered by an insurance policy.

Insurer

An organization that provides insurance.

J
Joint Underwriting Association/JUA

Insurers which join together to provide coverage for a particular type of risk or size of exposure, when there are difficulties in obtaining coverage in the regular market, and which share in the profits and losses associated with the program. JUAs may be set up to provide auto and homeowners insurance and various commercial coverages, such as medical malpractice

K

No entries for this letter

L
Lapse in Coverage

A point in time when a policy has been canceled or terminated for failure to pay the premium, or when the policy contract is void for other reasons.

Leased Vehicle

A vehicle rented under a long-term contract (lease). The leasing company retains ownership of the vehicle and must be shown on your insurance policy as an insured. See also: gap insurance.

Legal Liability

Liability imposed by law, as opposed to liability arising from an agreement or contract.

Lender

Your lender is the institution to which you make car payments.

Lessor

Your lessor is the institution to which you make your lease payments.

Liability

Any legally enforceable obligation or responsibility for the injury or damage suffered by another person.

Liability Adjuster

The liability adjuster handles the investigation of the accident. These adjusters' responsibilities can include collision payments, property damage payments, and bodily injury settlements. In some states, these adjusters may also handle the medical portion of your claim.

Liability Insurance

Insurance providing money on behalf of the policyholder to pay because of bodily injury or property damage caused to another person and covered in the policy.

Liability Investigation

The process of gathering information to determine the cause of an accident.

Lien

A claim, charge, or encumbrance on property as a security for the payment of a debt.

Lien holder

A person or organization with a financial interest in property up to the amount of money borrowed or still owed on the property.

Limit

The maximum amount of protection purchased by the insured for a specific coverage.

Limits of Liability

The maximum amount of insurance the insurance company will pay for a particular loss, or for a loss during a period of time.

Line of insurance

The type or kind of insurance such as personal lines, life insurance or homeowners

Loss

Any measurable dollar cost of damage and/or injury suffered by a person.

Loss of Use

Compensation to a third-party claimant for financial consequences resulting from the inability to use property as the result of accident-related damage.

Loss Payee

A person or entity with a legally secured insurable interest in another's property, usually a financial institution that loaned money to buy a car. The car is the loan collateral. If the auto is damaged in an accident, loss payments will be made to you and to the loss payee on your policy.

M
Malicious Mischief

Intentional damage of personal property with malice of forethought.

Material Damage

All property-related damage losses covered by the policy. This includes the following: Property Damage (PD), Comprehensive damage (COMP), Collision damage (COLL), Fire/Theft Combined Additional Coverage (FTCA), Rental Reimbursement (RREUN), or Uninsured Motorist Property Damage (UMPD).

Material Misrepresentation

The policyholder / applicant makes a false statement of any material (important) fact on his/her application. For instance, the policyholder provides false information regarding the location where the vehicle is garaged or fails to disclose all the residents in a household.

Mechanical Breakdown Insurance

Covers repairs to all mechanical parts of the car.

Medical Adjuster

The medical adjuster is responsible for reviewing all medical bills, replacement/essential services, and lost wages submitted to the company for injuries sustained by you and/or the passengers in your vehicle (depending upon the state in which you live and the coverage on your policy).

Medical Payments Coverage

Pays medical expenses related to an automobile accident. This coverage is subject to the terms, limits and conditions of your policy contract.

Minimum Limits of Liability

The least amount of liability coverage that can be purchased, which is generally equivalent to the minimum amount required by state law. In determining rates, a carrier will use the basic limits to develop the base rates. If an insured person wants higher limits, the carrier applies an increased limits factor to the base rate in calculating the new premium for the increased coverage.

Misrepresentation

To make written or verbal statements that is untrue or misleading.

Motor Vehicle Record (MVR)

A report from the agency that issues your driver's license, listing accidents and violations that appear on your driving record. This report is used to verify information provided by insurance applicants and policyholders.

Motorcycle Safety Foundation (MSF)

An international non-profit organization dedicated to motorcycle safety training, research and awareness. Some applicants who complete MSF courses qualify for discounts for motorcycle insurance.

Multi-car discount

A discount offered by some insurance companies for those with more than one vehicle insured on the same policy. In some cases, if you drive a company car insured by your company, your own insurance company may give you the multi-car discount.

N
Named driver exclusion

Endorsement on your auto policy that excludes a particular driver who has access to your car from coverage.

Named Insured

Any person, firm or corporation designated by name as the insured person(s) in a policy. Others may be protected by policy definition even though their names aren't on the policy, such as other drivers operating (with consent) the named insured's covered auto.

Named Non-Owner Policy

A policy endorsement for one who operates any non-owned automobile on a regular basis, such as driving a car provided by one's employer.

National Insurance Crime Bureau (NICB)

A not-for-profit organization that partners with insurers and law enforcement agencies to facilitate the identification, detection, and prosecution of insurance criminals. The NICB receives support from over 1,000 property/casualty insurance companies.

Negligence

The failure to exercise the care that is expected of a reasonable person in similar circumstances.

No-Fault Insurance

May pay for your medical treatment, lost wages, or other accident-related expenses regardless of who caused the accident. This coverage is subject to the terms, limits and conditions of your policy contract and is not available in all states.

No-Loss Form

A statement that is a signed form telling the insurance company there have not been any losses since a certain date. The document usually includes a cancellation date, expiration date, and reinstatement date. etc.

Non-Owned Auto

Any vehicle that is not owned, borrowed, or leased by the insured, and which is used primarily for a business purpose.

Non-Owner Car Insurance

A policy providing liability coverage to a driver who does not own a vehicle, used to avoid gaps in continuous coverage, provide rental-car liability or to satisfy state requirements to reinstate a driver's license or SR-22 filing.

Non-Renewal

When an insurer decides not to renew a policy at the end of its policy period.

O
Occasional Driver

The person who is not the primary or principal driver of the vehicle.

Occurrence

An event, or repeated exposure to conditions, which unexpectedly causes injury or damage during the policy period.

Original Equipment Manufacturer Parts

Auto parts obtained from the original manufacturer of the car or the supplier of the original part.

P
Passive Restraint System

A passenger safety system, such as an air-bag, that activates automatically in the event of an accident.

Payment Plans

Your auto insurance premium can be paid using one of our installment payment plans; you make several smaller payments but incur a service fee.

Payment Recovery

If your car is damaged because of another driver's negligence and you ask your insurance carrier to settle the claim for damage to your vehicle, we will seek to recover your deductible and our payments from the other party. This process of payment recovery is also called subrogation.

Per Occurrence Limit

This refers to the cap amount an insurance company will pay for all claims arising from a single incident. In an automobile accident, it comprises bodily injuries sustained by all parties. When Bodily Injury coverage is purchased in split limits, the second limit is the "per occurrence" limit: e.g. $100,000(per person)/$300,000(per occurrence)

Per Person Limit

This refers to the cap amount an insurance company will pay for any one person's injuries arising from a single incident. In an automobile accident, it comprises bodily injuries sustained by each person. When Bodily Injury is purchased in split limits, the first limit is the "per person" limit: e.g. $100,000(per person)/$300,000(per occurrence)

Peril

A danger or hazard that can cause a loss, for example, a car collision with an object, or a fire.

Personal Auto Policy

The most common auto insurance policy sold today. Often referred to as "PAP," this policy is written in simple wording and provides coverage for liability, medical payments, uninsured/underinsured motorist coverage, and physical damage protection.

Personal Injury Protection

May pay for your medical treatment, lost wages, or other accident-related expenses regardless of who caused the accident. This coverage is subject to the terms, limits and conditions of your policy contract

Personal Property

Property that is not land or connected to land (real estate), such as furniture or jewelry.

Physical Damage

Damage to your covered vehicle from perils including (but not limited to) collision or upset with another vehicle object, fire, vandalism and theft.

Physical Damage Coverage

Pays for damage to your car this could be through Collision Coverage or Comprehensive Coverage (Also referred to as Other Than Collision)

Policy

The written documents of a contract for insurance between the insurance company and the insured. Such documents include forms, endorsements, riders and attachments.

Policy Change

Any change made to your insurance policy during the period that the policy is in force.

Policy Lapse

A point in time when a policy has been canceled or terminated for failure to pay the premium, or when the policy contract is void for other reasons.

Policy Limit

The maximum amount a policy will pay, either overall or under a particular coverage.

Policy Period

The period of time in which a policy is in effect. (For example, six months or one year).

Policy Term

The length of time that the policy is in force. Most companies offer annual and semi-annual policies.

Policyholder

One who maintains ownership in an insurance policy. This may refer to the policy owner or those covered under the policy. See also Named Insured.

Pre-accident Condition

The state of the vehicle before the accident, including damage not related to the accident, mileage, options, and other factors.

Preferred Risk

Any risk considered to be better than the standard risk on which the premium rate was calculated.

Premium

The price of insurance an insured person pays for a specified risk for a specified period of time.

Premium Financing

When a policyholder contracts with a lender to pay the insurance premium on his/her behalf. The policyholder agrees to repay the lender for the cost of the premium, plus interest and fees.

Primary Insurance

Insurance that must be maintained as a condition of the most Personal Umbrella Policies. Primary insurance acts as the first layer of coverage on common types of losses. This usually includes auto, motorcycle and homeowner insurance, but may also include boat insurance, commercial liability or some other policy. Please check your insurance policy documents for more detailed information.

Primary Use

What your vehicle is mainly used for (pleasure, to and from work, business, commercial, or farm).

Principal Driver

The person who drives the car most often.

Private Passenger Automobile

A four-wheeled motor vehicle that is subject to motor vehicle registration and used for private personal use.

Private Passenger Autos

Ordinary cars, station wagons and jeeps, utility autos (pick-ups, panel trucks and delivery vans of 1,500 lbs. or less, not used commercially) and utility trailers designed to be pulled by a private passenger auto.

Pro Rata Cancellation

Termination of an insurance contract before the policy expiration date on which the premium returned to the insured person is adjusted in proportion to the amount of time the policy was in effect.

Proof of Loss

A statement made regarding the extent of the claim; it may be requested in accordance with the conditions of the policy.

Property Damage Liability Coverage

Pays for damage to someone else's property resulting from an accident for which you are at fault and provides you with a legal defense. This coverage is subject to the terms, limits and conditions of your policy contract.

Proximate Cause

An act or omission initiating an unbroken sequence of events resulting in injury to a person or damage to property.

Q
Quote

A statement of the premium that will be charged for insurance coverages based on specific information provided by the person requesting the quote including drivers, vehicles, and driving record.

R
Rate

Often used as a synonym for premium but actually refers to the base rating units that are used to determine the final premium.

Rating Plan

The rules that determine the cost of your insurance premium. These rules modify the base rates by applying discounts and surcharges based on your personal characteristics, for example, using your seat belt.

Rebate

A reduction of a premium.

Red Book

A publication used for the determination of values for used automobiles and trucks.

Reinspection

A review of an estimate or appraisal done by an adjuster during or after repairs to a vehicle. This is done to guarantee the accuracy of staff or independent auto damage personnel, and to guarantee that the work required in an estimate or appraisal is being completed by the body shop.

Reinstatement

The restoring of a cancelled policy to full force and effect. The reinstatement may be effective after the cancellation date, creating a lapse of coverage. Some companies require evidence of insurability and payment of past due premiums plus interest. They may also require a signed no-loss form.

Reinsurance

A form of insurance that insurance companies buy for their own protection, used and required to pay for losses and claims.

Release

Legally binding contract stating that all obligations past, present or future arising from a particular accident or occurrence have been fulfilled.

Renewal

The process of keeping an active policy in force through the issuance of a renewal policy.

Renewal Date

The date that your insurance policy expires and the date that your renewed policy will begin.

Rental Reimbursement

Optional coverage that helps pay rental vehicle costs when your insured vehicle is disabled as the result of a covered accident or loss. Available to most policyholders for an additional premium.

Renter's Insurance

Insurance that provides protection from losses that arise out of the rental of a home. Protection covers losses to the insured's property, not to losses that occur as a result of owning a home.

Replacement Cost

The cost to repair or replace an insured item. Some insurance only pays the actual cash or market value of the item at the time of the loss, not what it would cost to fix or replace it. This will pay the full cost to repair an item or buy a new one to replace the damaged item.

Replacement Parts

Several types of parts may be used when your vehicle is repaired: new parts, both original equipment manufacturer and after-market; and recycled parts. New or after-market parts will be used if a carrier can't find like-kind and quality recycled parts. A 5-year-old car, for instance, would be repaired with parts at least as good as the parts that had been in the car.

Replacement Value

The full cost to repair or replace the damaged property with no deduction for depreciation, subject to policy limits and contract provisions.

Resident Adjuster

Staff adjuster who handles claims in remote areas of a region.

Rider

In motorcycle insurance, a rider is someone who will operate the insured motorcycle. In life and health insurance, the term "rider" is often used to refer to an endorsement to an insurance policy.

Risk

The chance of suffering a loss.

S
Safe Driver Plan

A rating system that assigns points for traffic convictions and certain accidents. Similar to a merit-rating plan, each point increases the surcharge percentage to the baseline rates.

Salvage Title

A title of ownership on a car that was once deemed a total loss by an insurance company, but has since been repaired and allowed back on the roadways.

Select Repair Shop

Body shops chosen by your insurance carrier that are authorized to handle the repair of insured vehicles without the need for an inspection by an assigned adjuster. Vehicle owners should always have the right to choose the body shop of their choice.

Self-Insured Retention

In umbrella insurance, self-insured retention is similar to a deductible in other types of insurance. The self-insured retention is the amount of damages for which the policyholder is responsible before the umbrella coverage begins to cover a loss.

Short Rate Cancellation

A policy termination in which the refunded premium is not proportional to the amount of time remaining in the policy period due to the fixed expenses incurred by the company. The insured will generally pay more for each day of coverage than if the policy had remained in force throughout the entire policy period.

Special Investigation Units

Your insurance carrier helps fight fraud through its special investigation unit, staffed with experts in fraud detection and investigation. Sounds official.

Split Limit

Any insurance coverage with separately stated limits for different types of coverage. Example: an automobile liability policy of 100/300/50 provides a maximum of $100,000 bodily injury coverage per person, $300,000 bodily injury coverage per accident, and a property damage limit of $50,000 per accident.

SR-22

An SR-22 (CFR) is a certificate mandated by the state to verify that an individual is maintaining auto insurance liability coverage. If a person needs an SR-22 (CFR), they will usually be notified by their state's Motor Vehicle Department.

Stacking of Limits

The application of more than one policy limit to the same loss or occurrence. In some jurisdictions, courts have required stacking of limits when multiple policies, or multiple policy periods, cover an occurrence. For example, Uninsured motorist bodily injury limits of $100,000/300,000 on two policies owned by the same person may be added together to pay a loss. In this event, the total amount of coverage available for an accident would be $200,000/600,000.

Staff Adjuster

A non-contract or per-job adjuster that is typically employed by your insurance carrier to handle claims.

Subrogation

If your car is damaged because of another driver's negligence and you ask your insurance carrier to settle the claim for damage to your car, we will seek payment recovery (including your deductible) from the other party. This process of payment recovery is called subrogation.

Supplement/Supplemental Estimate

Used to cover damage not included in the original estimate. Most claims settlements do their best to estimate costs, if they are wrong you are entitled to any additional money to settle your claim. This is paid with a supplement.

Surcharge

An extra charge applied by the insurer. For automobile insurance, a surcharge is usually charged for items like accidents, moving violations, or specific risks not handled by normal rating factors.

T
Term

The length of time for which a policy or bond is in force.

Theft

The unlawful taking of another's property with the intent to permanently deprive the owner of its use or possession.

Third Party

Person or entity not party to an agreement but with an interest in the agreement.

Third Party Claim

Claims for injury or damage to property of a third party alleged to have been caused by the insured.

Threshold Level

Under some no-fault insurance laws, the threshold level represents the degree of injury a claimant must establish before being allowed to sue the negligent party. The threshold may be verbal (regarding the severity of the injuries) or a dollar amount ($10,000), or both. For example, with a threshold of $5,000, an injured person may sue if his/her injuries and other economic damages (rehabilitation expenses, loss of income, etc.) exceed $5,000.

Tort

A private wrong or harm (other than a breach of contract) committed against another, resulting in legal liability. A tort is either intentional or accidental (negligent). Automobile liability insurance is purchased to protect one from suits arising from unintentional torts.

Tort Feasor

One who commits a tort (see the definition of tort).

Total Loss

The condition of an automobile or other property when damage is so extensive that repair costs would exceed the value of the vehicle or property.

Towing and Labor Costs

This endorsement, which is added to the physical damage coverage, provides reimbursement up to a specified limit to tow your vehicle or pay for on-site labor costs.

Transportation Expenses

Subject to a daily and maximum dollar limit, this coverage (under the physical damage portion of an automobile policy) pays for transportation expenses incurred by the named insured only in the event of theft of an entire covered auto. Coverage generally begins after a stated minimum waiting period.

U
Umbrella Insurance

Provides high limits of additional liability coverage above the limits of your homeowner's and auto policy. In addition, it provides coverage that may be excluded by other liability policies.

Underinsured

The result of the policyholder’s failure to buy sufficient insurance. An underinsured policyholder may only receive part of the cost of replacing or repairing damaged items covered in the policy.

Underwriting

The process an insurer goes through to determine whether or not it will provide coverage for an applicant.

Unearned Premium

The portion of your premium remaining on your policy term. For example, with a six-month premium, at the end of the first month of the premium period, five-sixths of the premium is unearned by the insurance company.

Uninsured Motorist Coverage

A type of car insurance coverage that protects you if you're hit by a driver without insurance. If you don't have uninsured motorist, and you're hit by an uninsured driver, you may need to pay out of pocket for damages to your car.

Unsatisfied Judgment Fund

Some states have established laws to reimburse those injured in auto accidents that have been unable to collect from the responsible party.

Usage

This refers to the primary function or purpose in which you intend to operate your vehicle. For example, if you primarily drive your car to and from work, the usage is considered "commute; "if you're self-employed and you primarily drive to see customers, the usage is considered "business;" if you're retired, your usage is considered "pleasure."

V
Vandalism

Destruction or defacement of property.

Vehicle Identification Number (VIN)

A 17-digit number assigned to each vehicle manufactured in the United States after 1980. This number is used for identification purposes and is visible on the dashboard when viewed from the outside of the car. It indicates many identifiers including make, model, options, and year in official records (like a Social Security number for your car).

Void

A policy contract that for some reason specified in the policy becomes free of all legal effect. One example under which a policy could be voided is when information a policyholder provided is proven untrue.

W
Waiver of Collision Deductible

This option pays your collision deductible when you carry collision coverage on a vehicle that is damaged by an uninsured or hit-and-run motorist who is at fault. Coverage applies only when there is actual physical contact and when you can identify the uninsured driver or vehicle.

Whole Dollar Premium

Generally, insurance premiums are rounded to the nearest dollar; an amount of 51 cents or more being rounded up to the next dollar, and any amount less than that the cents are dropped.

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