Auto Insurance Glossary

A

Accident

An unintentional happening that usually results in loss, damage, or injury.

Accident Threshold

A specific dollar amount that must be paid out on a particular claim type before it can become chargeable.

Accidental Death (AD)

A payment given per the limits of the selected coverage should a person insured on the policy die in motor vehicle accident.

Active Driver’s License

A driver’s licence that is in good standing with the DMV.

Actual Cash Value

The monetary value needed to replace an item at the time of loss, subject to depreciation.

Actuary

The person who calculates premium rates, risks, etc. for the pricing of insurance policies.

Additional Insured

A person or company protected under your insurance policy if they are named during the judicial process due to an accident that was judged the policy holder’s fault.

Aftermarket Parts

Replacement auto parts that were made by a company that is not the vehicle’s manufacturer.

Aggregate

The maximum amount of money an insurance company will pay during a policy agreement.

Agent

A company representative that sells insurance policies.

All-Risk Coverage

An insurance policy that covers property loss from all causes except those listed as specific exclusions.

Anti-Lock Braking System

A computer-controlled braking system that prevents a car’s wheels from locking up and skidding when a driver brakes.

Anti-Theft Device

A device built to deter thieves from stealing automobiles.

Applicant

A person or company applying for an insurance policy.

Appraisal

The process where a property’s value and/or degree of damage is calculated, usually determined by an independent party.

Artisan Risk

The risk vehicles pose when transporting tools and supplies to and from the jobsite and the insured’s home.

Assigned Risk

A risk that requires liability obtained from the state due to it being too high to be accepted by the insurance market.

At-Fault

The party who is legally responsible for the damages, injuries, or losses caused in a car accident.

Automated Binding

A short-term, temporary insurance contract that provides coverage until a permanent policy is given.

Automobile Insurance

B

Binding

Being legally bound to an agreed upon policy.

Bodily Injury

Physical injury caused by an accident.

Bodily Injury Liability

Provides a legal defense during an accident which you are at fault and pays damages for physical injuries or death resulting from it.

Broker

A business representative that represents the insured when negotiating business from an insurance company.

C

Cancellation Notices Before Renewal

A notice that informs the insured that their policy is subject to cancellation unless they renew their policy by a specific date.

Carrier

An insurance provider.

Certificate of Satisfaction

A formed signed by a policyholders when they are satisfied with the appearance, operation, and quality of the repairs done to the insured vehicle by the repairer.

Claim

A request for payment to be granted according to the insured’s signed policy.

Claimant

A person, aside from the insured, that makes a claim for payment due to a loss.

Claims Adjuster

A person that determines the cause of a loss, whether the loss is covered by the insurance policy, the value of the loss, and how much of the loss is payable by the insurance policy.

Collision Coverage

Protection for your vehicle that covers damage caused by a collision with another vehicle or object, regardless of fault.

Collision Damage Waiver

An amendment to collision coverage that waives a deductible in the event that an insured vehicle is damaged by an uninsured vehicle in a collision.

Comparative Negligence

The determination on how the responsibility will be divided between the parties involved in an accident where there is property damage and/or bodily injury.

Competitive Estimate

A term when an insurance provider requests multiple repair estimates for consideration when determining a claim for automobile repair or replacement.

Comprehensive/Other Than Collision Coverage

Payment for repairs or replacement of a vehicle damaged by something other than a collision, usually theft, fire, vandalism, or some other risk.

Conditions

The expectations, rights, and duties of the insured and the insurance company under the policy.

Contract

A legal agreement between two consenting parties.

D

Declaration Page

A summary of your auto insurance coverage, the insurance provider’s information, the start and end dates of the coverage, and the coverages provided within the contract.

Deductible

The payment threshold that the insured is responsible for before any payment is made from the insurance coverage.

Delinquent

A bill or policy that is overdue in payment or renewal.

Depreciation

A decrease in property value due to wear and tear or becoming obsolete.

Draft

A check that requires approval from the insurance company before being cleared at the bank.

Driver Not Rated

A driver status given when the driver is not rated and not insured.

E

Earned Premium

Coverage that is provided throughout the insurance policy period.

Endorsement

An amendment made to an insurance contract in order to alter the original terms.

Excluded Driver

A person that is specifically stated on an insurance policy as unprotected and is not covered should there be an accident caused by that person driving a vehicle insured under the policy.

Exclusion

An event, peril, or circumstance that is not covered in your insurance policy.

F

Field Representative

An employee of the insurance company that contacts insurance agents and brokers within a specific territory.

Flat Cancellation

The cancellation of an insurance policy before the insurer has assumed liability, resulting in the insured getting their premium refunded since they were never covered under the policy.

Fraud

A deliberate misrepresentation for gain.

Funeral Expense

The cost for the funeral of the insured should they pass away from the result of an auto accident.

G

Gap Insurance

An optional addition to an insurance policy that could pay the difference in the balance of a lease or loan on a vehicle covered by the policy should it be considered a total loss in a collision.

Grey Market Vehicle

A vehicle that has been imported to the U.S. outside the manufacturer’s distribution channels and could possibly fail to adhere to U.S. safety regulations.

H

Hazard

An act, item, or occurrence that increases the chance of a loss.

I

Incomplete Chassis

A vehicle that has all the necessary running parts, but no established passenger areas.

Indemnify

The act of restoring a party’s loss to the same financial position as it was before the loss occurred.

Index MVR

A state-assigned license number for drivers that don’t have a U.S. driver’s license, typically assigned for accidents, violations, and/or tracking purposes.

Installment Fee

A fee charged when making monthly installment payments of an insurance premium rather than paying the full term up front.

Installment Premium

One or more payments made by the insured until the entire insurance premium is fully paid.

Insurance

Coverage by contract wherein one party agrees to replace or reimburse another for loss under the terms of the agreement.

Insured Driver

A driver covered under an auto insurance policy.

Insurer

The company that provides the insurance policy and coverage.

Insuring Agreement

The portion of an insurance policy that spells out what perils or hazards are covered by the insurance company.

International License

A driver’s license issued by a country other than the United States.

L

Lapse in Coverage

A period of time when an insurance policy’s coverage was not in effect.

Leased Vehicle

An automobile that is rented under a long-term contract. The leasing company is the owner of the leased vehicle and must be listed in your insurance policy as an insured party.

Lemon Law Vehicle

A vehicle that has been deemed defective and cannot be repaired after a number of attempts.

Lessor

The leasing company that owns the driver’s vehicle.

Lessor Liability Endorsement

A policyholder’s additional coverage that allows them to lower their liability limits for personal protection while the insurance company extends higher limits to the lessor.

Liability Insurance

Coverage the protects the insured from financial loss from liability claims by transferring the financial burden to the insurance company.

Liability Investigation

The collection of information to determine the cause of an accident.

Lien Holder

The company that provided the loan and holds the title of the insured driver’s vehicle.

Loss Ratio

The method that insurance companies use to succeed in covering current losses out of a current premium.

M

Manual Rating

The manner used determine the cost of an insurance policy using predetermined rates, usually from a manual.

Material Damage

All property damage related losses that are covered in your insurance policy.

Medical Payments Coverage

Insurance coverage that reimburses medical and funeral costs accrued from the result of an accident.

Misrepresentation

Written or verbal misstatement of a material fact within a contract.

Motor Vehicle Report (MVR)

A report that lists accidents, citations, and violations that appear on your driving record.

N

NAIC Number

A number issued by the National Association of Insurance Commissioners (NAIC) for each individual underwriting company.

Named Non-Owner Policy

A policy issued to a person or persons that do not own or regularly operate an automobile.

National Insurance Crime Bureau (NICB)

A renowned U.S. non-profit organization dedicated to fight insurance fraud and other insurance-related crimes.

Negligence

Failure to take reasonable care to protect others from potential harm.

No-Fault Insurance

An insurance policy that covers medical expenses, funeral expenses, loss of income, and other coverage regardless of who is at fault in an accident. This policy is only available in certain states.

Non-renewal

A notification that states that insurance coverage will no longer continue after the agreement’s expiration date.

O

Occurrence

A loss that happens during a specific place and time or over a period of time.

Original Equipment Manufacturer (OEM) Parts

A replacement car part that is made by the manufacturer of the original part.

P

Passive Restraint System

Safety devices that automatically activates upon impact during a collision to protect passengers in a vehicle Examples include special safety belts and air-bags.

Pending License

A temporary license issued to a driver that is waiting to obtain an official state license.

Peril

The cause of a loss such as a collision, fire, or natural disaster.

Personal Injury Protection

A part of a policy that could cover the medical, funeral, and other costs as the result of an accident for the insured and pedestrians struck by the insured, regardless of fault.

Policy

The insurance agreement and the expected coverage.

Policy Limit

The maximum amount an insurance company will pay for a loss covered by the insurance policy.

Policy Rewrite

Placing an insurance policy back into active status after a lapse in coverage.

Premium

The amount of money charged by an insurance company to provide coverage.

Premium Notice

A bill that provides the price and date due to continue insurance coverage.

Primary

The insurance policy that will respond first in the event that a loss is covered by more than one policy.

Private Passenger

A four-wheeled automobile used for private and personal use to transport insured and passengers, usually sedans, station wagons, etc. but could include small trucks when not used for commercial purposes.

Pro Rate Cancellation

Cancelling a policy before its expiration and returning an amount of the premium to the policyholder proportional to the uncovered days of the policy.

Property Damage Coverage

Coverage that pays for the property damage caused by the insured and any legal defense costs if the insured is sued.

Proximate Cause

The event that kickstarted the the unintended events that lead up to the loss.

Q

Quote

The statement of an offer of an insurance premium that will be charged for the requested coverage.

R

Rate

The basic rating units used by insurers to calculate your final premium.

Rated Driver

An active driver who is covered while driving an insured vehicle.

Rating

The determination of the cost of a premium based on risk characteristics and calculation of the chance of a loss.

Reciprocal

The information that is transferred from one state to another.

Reinstate

When a policy is back in force without lapse after a cancellation or expiration.

Release

A legally binding contract signed by a claimant or third party that dismisses the insurer of any liability or further liability of a specific claim.

Renewal

An offer to continue insurance coverage beyond the policy’s expiration date.

Renewal With Lapse

When a policy is renewed past the expiration date, after a period without coverage.

Rental Reimbursement

Optional coverage that helps reimburse the cost of a rental vehicle while the insured vehicle has been incapacitated as a result of a covered accident or loss.

Return Premium

A partial or full refund of a paid premium due to cancellation, rate reduction, or similar reasons.

Risk

The chance of loss to the insured that’s related to the insurance policy.

Roadside Assistance

Coverage and services that assist motorists when their vehicle is inoperable and they are left stranded.

S

Salvage

Damaged property that an insurance company can be reconditioned or sold for materials or parts after a payment of a claim.

Self-Insured Retention

The specific amount of damages the insured is liable to cover before umbrellas insurance is activated to cover a loss.

Special Glass Coverage

Coverage that pays for glass and windshield repair on a vehicle without a deductible, usually only available through comprehensive coverage insurance plans.

SR-22

A vehicle liability insurance document required by most DMV offices for high-risk insurance policies, usually required for drivers with multiple traffic violations, getting into car accidents while uninsured, or getting a DUI.

SR-22 Safety Responsibility Law

A statute requiring drivers to provide evidence of the ability to pay damages should they get involved in an automobile accident.

Stacked Liability

Liability limits from one vehicle in a multi-car policy that are applied to another vehicle in the same policy. This service is provided in a limited number of states.

Step Down Endorsement

A policy provision that allows the insurer to automatically reduce the amount of coverage to the minimum levels allowed when the insured vehicle is being driven by someone that’s not listed on the policy. This provision and its availability varies from state to state.

Subrogation

A term used when the insurance company takes over the insured’s right to collect damages from any other person responsible for the loss after the insurance company makes a payment to the insured.

Surcharge

An additional charge to a premium used to offset an increase of exposure that usually isn’t factored within normal rates.

T

Term

The period of time wherein the insurance policy is issued and active.

Territory

The geographic location(s) used to determine insurance ratings.

Tier Determination

Calculating a driver’s level based on the insured’s driving record and insurance coverage history.

Towing and Labor

A provision that pays in part the cost of towing a disabled vehicle and any labor done at the site of the vehicle’s disablement. Usually only available through comprehensive car insurance plans.

U

Umbrella Insurance

An insurance policy designed to provide additional coverage against major losses covered under the original policy if existing liability claim payments are exhausted past their limits.

Underinsured Motorist

A driver that has less coverage than what is necessary to fully reimburse damages resulting from an accident or a driver that has less liability coverage than required by state law.

Underwrite

Investigating whether a risk meets company guidelines within a policy.

Uninsured Motorist

Insurance coverage that compensates the insured for bodily injuries up to preset limits when involved in a collision with an uninsured motorist.

Unstacked Liability

When liability limits of one insured vehicle cannot be transferred to another vehicle that is under the same policy. This is the case in most states.

V

Voided/Rescinded

A policy that has been canceled and cannot be reinstated.

W

Waiver of Mandatory Arbitration

A possible provision in an insurance policy that allows the policyholder to take action against the car insurance company in civil court without requiring the usual mandatory arbitration in the event of a dispute.

Warranty

Written assurance of a product’s reliability and the manufacturer’s accountability to replace or repair defective parts.

Written No-Loss Statement

A signed statement by the insured that claims no losses, no accidents, and no damage was done to the insured vehicle during the duration of the vehicle’s insurance policy.

Written Premium

The amount of premium charged for a policy that has already become effective