A-Z Auto Insurance Glossary

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Actual Cash Value

Cost to repair or replace damaged property with materials of like kind and quality, less depreciation.

Additional Insured

A person or organization for whom insured status is arranged by endorsement.

Adjuster

A person who investigates and settles insurance claims.

After-Market Parts

Aftermarket parts are replacement vehicle components made by a company other than the vehicle’s manufacturer. In general, these after-market parts cost less than original equipment parts.

Agent

An individual who sells insurance coverage and acts as the authorized representative of an insurance company or several companies.

Aggregate

The maximum amount an insurance company will pay during the policy.

All Risk Coverage

Property insurance covering loss arising from all causes except those specifically excluded.

Amendment

A change to the basic policy contract.

Anti-lock Braking System (ABS)

A computer-controlled high pressure system that allows the wheels to maintain positive contact with the road surface according to driver inputs while braking, preventing the wheels from locking up and avoiding uncontrolled skidding.

Anti-Theft Device

A device that discourages auto theft. Vehicles using these devices may receive a discount on insurance premiums.

Appraisal

Process that calculates a property’s value, or the degree of damage, usually carried out by an independent expert.

Arbitration

A process of resolving a disagreement through a neutral party. It is used as a substitute to legal action.

Assigned Risk (AIP)

A vehicle owner or driver who cannot qualify for insurance in the regular market. He or she must obtain coverage through a risk plan assigned by the state, usually at increased rates.

Assured

Has the same meaning as policyholder or insured.

At-Fault

The party who’s considered legally responsible for damages caused in a car accident.

Auto Insurance

A car insurance policy provides financial protection from the expenses (personal liability and property damage) arising from a car accident.

Auto Theft

Vehicle theft is a category of loss that covered under comprehensive coverage.

Binder

A legal agreement issued on behalf of insurance companies to provide temporary evidence of insurance until a policy can be issued.

Bodily Injury

An injury sustained by a person resulting from an accident.

Bodily Injury Liability Coverage

If an insured person is legally liable for an accident, this coverage pays damages for bodily injury or death other than the insured driver. In addition, it also pays for legal defense costs if you are sued.

Cancellation

The termination of an insurance policy at a date before its stated expiration date.

Carrier

The insurance company which provides coverage.

Catastrophe

A severe calamity or disaster (such as hurricanes, floods, or tornadoes) affecting a widespread geographic area and causing considerable financial loss.

Certificate of Financial Responsibility (CFR)

See SR-22

Certificate of Satisfaction

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

Claim

A request by a policyholder or a claimant for payment under a policy of insurance.

Claimant

The person presenting a claim.

Claim Examiner

A person responsible for conducting an investigation and settling a claim.

CLUE® Report

CLUE reports contain a history of losses on personal property experienced by an individual policyholder.

Collision Insurance Coverage

Provides for payment to a covered automobile resulting from the striking of another object by a moving vehicle.

Comparative Negligence

In an accident where property damage or bodily injury results, comparative negligence laws determine how the responsibility will be divided between the parties directly involved.

Competitive Estimate

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

Comprehensive Physical Damage Coverage

Covers an automobile for loss or damage for all causes except for those specifically excluded.

Conditions

Things agreed upon in an insurance policy that state the rights and the requirements of the insured and the insurer.

Condo Insurance

A type of homeowners insurance that’s specifically designed to meet the requirements for condominium owners.

Contributory Negligence

A rule of law followed in some states, that bars claimants from recovering any part of their damages if they are found to be even partially at fault, or negligent.

Coverage

Protection and benefits provided in an insurance contract.

Customized Vehicle

A vehicle that has been modified mechanically or visually by equipment or accessories not usually included in a personal vehicle.

Damage

Loss or harm resulting from injury to a person or property.

Damages

Compensation that one party legally owes to another party.

Declarations

The page of the insurance policy that generally includes your name, address, the location and description of the insured property, the policy period (how long the coverage is in effect), the amount of the insurance coverage and the premiums.

Deductible

The amount of loss on a claim which is paid out of pocket by the insured.

Defensive Driver Discount

Some companies offer discounts to older drivers (usually over age 50 or 55) who have voluntarily taken a defensive driving course.

Depreciation

The decline in a property’s value over a period of time. Usually from the effects of age, wear and tear, or economic obsolescence.

Direct Pay

See Electronic Funds Transfer.

Discount

A decrease in your premium based on you or your vehicle meeting certain conditions (such as anti-theft devices, anti-lock brakes) that are likely to reduce the insurer’s losses.

Driver Training Discount

As with some companies that offer discounts to drivers who take a defensive driving course, a discount for motorists who have taken an approved driver training course may also be offered.

Electronic Funds Transfer (EFT)

Your premiums are paid with automatic deductions from your checking account through an electronic payment method.

Emergency Road Service Coverage

Protection for vehicle-related problems that are not typically covered with auto insurance, such as:

  • being locked out of your car
  • vehicle towing not related to an accident
  • re-charging a dead battery
  • changing/inflating a flat tire
  • delivering emergency gas to your car

Endorsement

A document attached to an insurance policy that changes the original policy provisions.

Estimate

A calculation of the cost to repair/restore your damaged property.

Exclusion

A circumstance or peril that is not covered by the policy.

Expiration Date

The ending date of an insurance policy.

Field Adjuster

An insurance adjuster who works mostly away from an office and often travels to meet one-on-one with the public. Field adjusters also negotiate with claimants, lead scene investigations and damage inspections.

Financed Car

A vehicle financed by a loan. The lender is named on the vehicle’s title until the loan has been paid off.

First Party

Term identifying an insured.

First Party Claims

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

Gap Insurance

Gap or loan/lease insurance – can protect you if your vehicle is financed or leased. If your vehicle is totaled due to an accident or via theft, Gap typically covers the difference between what your car is worth and what you still owe on it.

Good Student Discount

May be available to full-time students who keep a grade average of at least a “B”.

Hazard

A condition that encourages or increases the possibility that a loss will happen.

Homeowners Insurance

Protects homeowners from losses to their homes, personal property, and some types of damage or injury to others for which the homeowner is liable; also protects homeowners if they are legally liable for someone’s injuries on their property,

Indemnification

indemnification is the part of an agreement that provides for one party to pay the monetary costs, either directly or by reimbursement, for losses incurred by a second party.

Indemnity

An indemnity is a sum paid by party A to party B by way of compensation for a particular loss suffered by B.

Independent Adjuster

A claims adjuster who provides adjustment services to insurance companies, but is not employed by them.

Insurable Interest

Exists when an individual would undergo a substantial economic loss as the result of bodily injury or property damage.

Insurance Card

See Insurance ID Card.

Insurance Fraud

Insurance Fraud occurs when people deceive an insurance company to collect money to which they aren’t entitled. It is a criminal act requiring a material and intentional misrepresentation in order to obtain a benefit, or cause a benefit due someone to be denied. Examples of these are staged accidents and inflated medical bills.

Insurance ID Card

Also called an Insurance Card, this card is issued by your insurance carrier, provides basic information about your insurance policy and serves as evidence of coverage when requested by law enforcement.

Insurance Score

A number created by insurance companies based on your credit score and claim history to estimate the likelihood that a policyholder will file a future claim.

Insurer

An organization that provides insurance.

Leased Vehicle

A vehicle rented under a long-term contract, typically two or three years. The leasing company keeps ownership of the vehicle and must be included on your insurance policy as an insured party.

Legal Liability

Liability enforced by law, versus liability resulting from a contract or agreement.

Liability

The legal obligation to pay a monetary award for injury or damage caused by one’s negligent or statutorily prohibited action.

Liability Examiner

Examiners review settled insurance claims to determine that payments and settlements have been made in accordance with company practices and procedures.

Liability Insurance Coverage

Insurance that provides protection from claims arising from injuries or damage to other people or property.

Liability Investigation

The process of collecting information to identify the cause of an accident.

Lien

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

Lienholder

An organization or individual holding a financial interest in property (limited to the amount of money borrowed or still owed on the property).

Limit

The maximum compensation an insurance company agrees to pay in the case of loss.

Limits of Liability

The amount stated in your policy up to which the insurance carrier will cover you.

Loss

The amount an insurance company pays for damages under the terms of a policy.

Loss of Use

Reimbursement to a third-party claimant for the damage a person suffers from the inconvenience of not having their car after it has been in an accident.

Malicious Mischief

Intentional destroying or damaging of the personal property of another, from actual ill will or resentment towards its owner or possessor.

Material Damage

Includes all policy covered property-related damage losses. This includes the following: collision damage, property damage, comprehensive damage, rental reimbursement, uninsured motorist property damage, or Fire/Theft Combined Additional Coverage.

Mechanical Breakdown Insurance

Covers repairs to your vehicle’s critical mechanical parts, protecting you from costly repair bills.

Medical Claim Examiner

Depending upon the coverage on your policy and the state where you live, review of 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, is handled by the medical claim examiner.

Medical Payments Coverage

This coverage, which is optional, pays for medical expenses for bodily injury caused by an auto accident, regardless of fault. Coverage for persons other than the named insured and his or her family members is typically restricted to circumstances when they are occupants of the insured auto.

Misrepresentation

A false or misleading statement, either directly or indirectly that, if intentional and material, can allow the insurer to void the insurance contract.

Motor Vehicle Report (MVR)

Generated from the agency that issues your driver’s license, this report lists accidents and violations that appear on your driving record. This report is used to confirm information provided by policyholders and insurance applicants.

Multi-Car Discount

Policyholders who insure more than one vehicle at the same location may be able to save with multi-car discounts.

Named Insured

The individual defined as the insured in the policy contract.

National Insurance Crime Bureau (NICB)

The National Insurance Crime Bureau (NICB) is the nation’s premier not-for-profit organization dedicated exclusively to fighting insurance fraud and crime, and is the only organization in the United States that convenes the collective resources needed to prevent, detect and deter these crimes.

Negligence

The failure to exercise reasonable consideration, resulting in loss or damage to oneself or others.

No-fault Insurance

No-fault insurance is available in certain states and pays medical expenses, and in some cases, loss of income, essential services, accidental death, funeral expenses, and survivor benefits, regardless of who is at fault in an accident.

Non-Renewal

When your auto insurance company notifies you of a non-renewal, it means that your current coverage will continue until the end of the policy period, and thereafter cease to exist.

Original Equipment Manufacturer (OEM) Parts

OEM designates a replacement part made by the manufacturer of the original part. OEMs cost more than after-market parts.

Passive Restraint System

A safety device, such as an air-bag or special seat belt that is activated automatically to protect an automobile passenger at the moment of impact when a collision occurs.

Personal Injury Protection

An automobile insurance coverage mandated by law in some states. The statutes typically require insurers to provide or offer to provide first-party benefits for medical expenses, loss of income, funeral expenses and similar expenses without regard to fault.

Personal Property

All tangible property not classified as real property such as contents.

Policyholder

The person or entity entitled to covered benefits in case of an accident or loss.

Pre-accident Condition

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

Premium

The amount of money an insurance company charges to provide coverage in a policy.

Proof of Loss

A formal statement made by the insured to the insurer regarding a claim, so that the insurer may determine its liability under the policy.

Property Damage Liability Coverage

Helps pay for the damage that you cause to another vehicle, or other types of property resulting from an accident for which you are at fault. In addition, in most cases, it provides you with legal representation if you are sued.

Proximate Cause

An act from which an injury results as a natural, direct, uninterrupted consequence and without which
the injury would not have occurred.

Quote

Based on detailed information provided by the individual requesting the premium amount, the quote is a statement of the premium that will be charged for requested insurance coverages.

Rate

Often confused with premium, but actually refers to the base rating units that are used to calculate the final premium.

Rating Plan

The guidelines that are used to calculate the cost of your insurance premium. Based on your personal characteristics, these guidelines adjust the base rates by applying discounts and surcharges.

Reinspection

An adjuster’s review of an estimate or appraisal during or after repairs to a vehicle. The purpose of the review is to guarantee that the required work is being completed by the body shop.

Release

A legally binding contract signed by an insured or a third party claimant dismissing the insurance carrier of any further liability (or any liability at all) regarding a specific claim.

Renewal Date

The date that your current insurance policy term expires and the date that your renewed policy starts.

Rental Reimbursement

Optional coverage that helps pay expenses towards a rental vehicle while your insured vehicle is being repaired as the result of a covered accident or loss.

Renters Insurance

Personal property and liability insurance providing coverage to an individual living in an apartment, condominium or single family home owned by another party.

Replacement Parts

Different types of parts may be used to repair your vehicle: new parts, both after-market and original equipment manufacturer (OEM).

Rider

A rider is an amendment, attachment, or schedule that is added to a document in order to modify it.

Salvage

Damaged property that may be retrieved, reconditioned, and sold by the insurance company after payment of a claim.

Self-Insured Retention

In umbrella insurance, self-insured retention works much like a deductible does with collision coverage. The self-insured retention is the specified amount of damages for which the insured is liable before the umbrella coverage kicks in to cover a loss.

SR-22, Certificate of Financial Responsibility (CFR)

An SR-22 is not an insurance policy; it’s simply a financial responsibility form that proves an individual has the minimum liability insurance as required by law.

Subrogation

If your car is damaged because of another driver’s negligence and you request your insurance carrier to settle the claim for damage to your car, they will attempt payment recovery (including your deductible) from the other party. This method of payment recovery is called subrogation.

Supplement/Supplemental Estimate

Used to cover damage not accounted for in the original estimate.

Theft

The unlawful acquiring of another person’s property with the goal of permanently denying the owner of its use or possession.

Third Party

Person or entity not party to a contract or transaction but has an involvement in it.

Third Party Claim

Claims for injury or property damage of a third party asserted to have been due to actions by the insured.

Tort

A private wrong or harm (other than a contract breach) carried out against another, resulting in legal liability.

Total Loss

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

Towing and Labor Coverage

Optional coverage, provides reimbursement up to a specified limit to tow your vehicle or provide roadside assistance.

Umbrella Insurance

A policy designed to provide additional protection against catastrophic losses covered under liability policies, it provides excess limits when the limits of the existing liability policies are exhausted by claim payments.

Underwriting

The evaluation steps an insurer goes through to decide whether or not it will provide coverage requested for an applicant.

Uninsured Motorist Coverage

An addition to a standard automobile insurance policy that provides coverage in the event the other driver is not insured and is found liable for the accident. Uninsured motorist coverage is required in some states, and optional in most others.

Vandalism

Action involving deliberate destruction of or damage to public or private property.

Vehicle Identification Number (VIN)

Used for identification purposes, the VIN is a 17-digit number assigned to every vehicle manufactured in the United States after 1980. This number is visible on the dashboard when viewed from the outside of the vehicle.

Warranty

A written assurance of the reliability of a product and of the manufacturer’s accountability for the repair or replacement of defective parts.