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Car Insurance Glossary
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A
Accident
A sudden fortuitous event.
Often used to refer to a collision or insurance
event.
Accident
An unexpected, unforeseen event
not under the control of an insured and
resulting in a loss.
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.
Accident Frequency
The number of times
an accident occurs. Used by actuaries 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.
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.
If an auto is leased, the leasing company may
want to be listed as an Additional Insured as
well as a lien holder or loss payee. This
protects the leasing company if it's named in a
lawsuit for an accident caused by a
policyholder.
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.
After-Market 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.
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 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.
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. (See Car Insurance)
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
A
discount 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.
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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.
Bodily Injury: An injury sustained by a
person.
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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.
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.
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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.
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E-Bill: An electronic version of your
bill that you can review online. Most utility
services and banks offer these services.
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.
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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.
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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. Read our questions and answers
section for more information.
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.
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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.
Homeowner's 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.
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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.
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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
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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.
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.
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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,
protecting you from ex
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 through some of
CarInsurance.com's motorcycle carriers.
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.
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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-Renewal: When an insurer decides not
to renew a policy at the end of its policy
period.
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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.
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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. See our
coverage definitions page for more information.
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.
Policyholder Service:
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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.
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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.
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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.
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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: Damaged property that may be
retrieved, reconditioned, and sold to reduce an
insured loss.
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.
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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.
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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.
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."
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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.
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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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