Auto Insurance Glossary

 

A


Accident: An unexpected event outside of the control of the insured, resulting in damage or loss.

Accident Forgiveness: A program that assures the insured that his/her carrier won’t add on any charges to premiums after the next at-fault accident; Customers who have not had an at-fault accident in the past five years qualify for this in most states.

Accident Frequency: The number of times accidents have occurred, used by actuaries to forecast losses and determine premiums.

Accidental Death Benefit (ADB): An additional life insurance policy provision that provides an additional death benefit payment in the event of the insured’s accidental death, usually equal to the face amount of the insurance.

Act of God: A natural occurrence out of human control, including hurricanes, floods and earthquakes.

B


Basic Auto Policy: Mostly replaced by the Personal Auto Policy; Still used to insure substandard risks, motorized two-wheel vehicles and commercial automobiles.

Binder: When a policy cannot be issued or approved right away, this temporary agreement states that the policy is valid and in effect.

Blue Book: A book that’s used to determine the values of used automobiles and vehicles.

Bodily Injury: Any physical injury a person experiences.

C


Cancellation: The early termination of an insurance contract before the actual end of the policy period by either the insurer or the insured.

Car Insurance: A type of insurance that protects against losses resulting from owning or operating a car; It covers car-related losses the insured is liable for, as well as losses to the insured’s property.

Carrier: The insured’s insurance company or insurer.

Catastrophe: A large, unexpected disaster that affects a particular geographic region, usually causing injury or death; These can oftentimes be natural disasters or acts of God.

Certificate of Financial Responsibility: A document confirming that specific coverage has been purchased to meet a given state’s financial responsibility laws; This will vary by state; Includes SR-22, FR-44, SR-50 forms.

D


Damage: Harm or loss sustained by a person or property.

Declaration Page: The page in an insurance policy that lists the insurer along with pertinent information, including the name and address of the insured, start and end dates of the policy and the specific types of coverage contained in the terms of the contract.

Deductible: The amount the insured is required to pay on each applicable loss; The carrier will pay for the rest of each covered loss up to the limit set by the policy.

Defensive Driver Course: These are driving courses offered by the local Department of Motor Vehicles or by approved organizations to improve driving proficiency and can allow drivers who successfully complete the course to become qualified for discounts on their premiums.

Defensive Driver Discount: A discount on car insurance premiums offered to drivers (typically over the age of 50) who have chosen to take and successfully complete a defensive driving course; This discount is not offered to drivers who were required to take a driving class as a result of a moving violation.

E


E-Bill: An electronic copy of your auto insurance bill that can be seen online, offered by most insurance companies.

E-Commerce: This includes the sale of auto insurance products over the Internet, or any other related online transaction.

Earned Premiums: The portions of premiums that pertain to the expired time of a stated policy period; Premiums are paid in advance but aren’t fully earned until the policy period ends.

Economic Loss: The total loss of earnings, medical or funeral expenses, cost of fixing or replacing damaged property and legal expenses; The financial losses resulting from the death or disability of a wage earner, or from damage to property; This does not include noneconomic losses (physical pain).

Effective Date: The specified date when the auto insurance policy is formally set to begin.

F


Family Automobile Policy: Used to be a policy package that covered both liability and physical damage protection to the insured’s vehicle, now replaced by the Personal Auto Policy.

Field Adjuster: An insurance adjuster who meets with claimants and conducts scene investigations and damage inspections in-person.

Financed Car: An automobile financed by a loan, with the claim on the vehicle retained by the lender until the loan has been fully paid back.

Financial Ratings: These ratings, which are given by a variety of companies, attempt to convey an estimation of an organization’s financial strength and capacity to meet their financial obligations to its policyholders.

Financial Responsibility Law: These require auto owners and operators to retain enough money to pay compensation for those they injure; Most commonly satisfied by liability insurance.

G


Gap Insurance: The difference between the market value of an insured’s vehicle and the amount still owed on it when making lease or loan payments is covered by this optional insurance coverage, which pays for this gap.

Garage Location: The zip code where your vehicle is parked when it’s not being used, which usually indicates your primary residence.

Good Student Discount: This may be offered by certain carriers to full-time students who maintain a specified minimum grade point average.

Guarantee Funds: These funds kick in and bail out policyholders when an insurance company becomes insolvent.

H


Hazard: Something that increases the chance of an accident or puts people at risk of damage or injury.

Hit-and-Run: An accident caused by a driver who does not stop, help or provide information.

Homeowner’s Insurance: This form of insurance protects the insured from losses on their house, personal property and particular kinds of damage or injury to others that the homeowner can be held responsible for.

I


I.D. Card: A card or small piece of paper detailing basic personal and policy information, issued to the insured by the carrier.

Inception Date: The date on which the insurance coverage officially begins.

Indemnification: The provision of compensation for a loss to return an individual or entity to its financial condition before the related loss.

Indemnity: The notion that when the insured sustains a loss, he/she should be restored to their approximate financial standing before the loss in question.

Independent Adjuster: An insurance adjuster who isn’t employed by the insurance company, but assesses and estimates losses on behalf of the carrier.

J


Joint Underwriting Association (JUA): A group of insurers who unite to provide coverage for a certain type of risk or exposure; These groups shares the profits and losses that result from this kind of coverage.

L


Lapse in Coverage: The span of time during which the car insurance policy has either been cancelled, paused or ended for failure to pay premiums, or when the policy is voided on other grounds.

Leased Vehicle: A vehicle that is rented by way of a long-term lease and is owned by the leasing company unless the balance is eventually fully paid; The leasing company must be noted as insured on the insurance policy.

Legal Liability: Legal responsibility enforced by law, which is different from responsibilities stemming from contracts.

Lender: The establishment that receives the payments made on your car and retains ownership of the vehicle until the loan is completely paid for.

Lessor: The institution that receives your car lease payments.

M


Malicious Mischief: Damage to personal property that is intentional and reflects planned malevolence.

Material Damage: All losses from damage to property covered by the insurance policy; Includes property damage (PD), comprehensive damage (COMP) and collision damage (COLL), among others.

Material Misrepresentation: Any piece of false information or statement made by the policyholder or applicant on an insurance policy application.

Mechanical Breakdown Insurance: Protects the insured from costs associated with major mechanical failures for the covered vehicle.

Medical Adjuster: An adjuster who evaluates medical bills, replacement services and any lost wages that were submitted to the insurer for injuries sustained by the insured or passengers in the vehicle in question.

N


Named Insured: The person or company listed, by name, as the insured party in an insurance policy. Some policies may protect individuals who aren’t listed in the policy.

Named Non-Owner Policy: Support for someone who operates a non-owned vehicle on a regular basis, delineated in the policy.

National Insurance Crime Bureau (NICB): A not-for-profit group that works with more than 1,000 insurance companies and law enforcement agencies to identify, locate and take legal action on insurance offenders.

Negligence: Failure to use the caution and care that would be expected from a rational individual in comparable circumstances.

No-Fault Insurance: Coverage that may pay for lost wages, medical treatment or other expenses as a result of an accident, regardless of who is at fault for the accident in question.

O


Occasional Driver: An individual who is not the primary or most frequent driver of a particular vehicle.

Occurrence: An event or a recurring circumstance that causes damage or injury during the insurance policy period.

Original Equipment Manufacturer Parts: Automobile parts that are acquired from the original maker of the vehicle or supplier of the original part in question.

P


Passive Restraint System: A safety system that triggers automatically in an accident (e.g. an air bag).

Payment Plans: Installment payment arrangements for the insured to pay their auto insurance premiums, with a service fee added.

Payment Recovery: The process by which an insurance company seeks recovery of the insured’s deductible and payments from a driver whose negligence causes damage to the insured’s car, also called subrogation.

Per Occurrence Limit: The maximum amount an insurance company will pay for all claims related to a single event, covering physical injuries sustained by all parties involved.

Per Person Limit: The maximum amount an insurance company will pay for a person’s injuries from a single event, covering physical injuries sustained by all people involved.

Q


Quote: A stated premium that will be charged for car insurance coverage and is based on various pieces of information, such as the driving records of all drivers listed as potential names on the policy.

R


Rate: The base rating units used to establish the final premium; Incorrectly used as a synonym for “premium.”

Rating Plan: The stipulations used to determine the final cost of the insured’s premium by applying surcharges or discounts to the base rate, depending on the insured’s personal attributes.

Rebate: A decrease of a premium.

Red Book: A publication that helps to determine the values of used vehicles.

Reinspection: A review of an appraisal or estimate determined by an adjuster during or after a vehicle’s repairs, to ensure accurateness and to make sure that all necessary repairs are being completed by the shop.

S


Safe Driver Plan: A system that gives points for each traffic conviction and specific accidents, with each point raising the surcharges added to base rates.

Salvage: To recover, repair and sell damaged property to diminish losses.

Select Repair Shop: Body shops selected and authorized by the insurance company to carry out the repair of an insured vehicle; Inspections by an adjuster are unnecessary in these situations.

Self-Insured Retention: A provision in umbrella insurance plans that is similar to deductibles and sets the amount of damages for which the policyholder is responsible for before the umbrella coverage kicks in to cover a loss.

Short Rate Cancellation: This occurs when an insurance policy is prematurely terminated and the refunded premium isn’t proportional to the time remaining in the policy period, because of fixed expenses for the insurance company.

T


Term: The set length of time that a policy is in effect.

Theft: The illegal seizure of someone else’s property without intent to return it to the original owner.

Third Party: A person or entity that is not directly included in an agreement but has an interest in it.

Third-Party Claim: A claim made by a third party for damage to property or injury caused by the insured.

Threshold Level: The set degree of injury a claimant has to prove before being permitted to file a suit against the negligent party; The threshold may be verbal and is set under some no-fault insurance laws.

U


Umbrella Insurance: This offers limits of supplementary liability coverage higher than the limits set in a homeowner’s or auto insurance policy, and may provide coverage not included by other liability policies.

Underinsured: This is the circumstance when a policyholder fails to purchase a sufficient amount of insurance coverage, resulting in the policyholder recovering only a portion of the total cost of repairing or replacing damaged items covered by the policy.

Underwriting: The process an insurance company complete to conclude whether or not it will cover an applicant.

Unearned Premium: This is the amount of a premium remaining in a policy term, since an insurance company does not earn future months’ premiums.

Unsatisfied Judgment Fund: These funds compensate people injured in automobile accidents and who are unable to be reimbursed by the party responsible for the damage or injury; They are established by some states.

V


Vandalism: The ruin or defacement of a property.

Vehicle Identification Number (VIN): Every vehicle manufactured in the U.S. after 1980 has a 17-digit identification number that indicates its year, make, model and other traits, and is made visible on the dashboard and is used for finding cars.

Void: This describes a policy contract that has been made legally null because a condition in the contact has been breached.

W


Waiver of Collision Deductible: This pays an insured’s collision deductible when he/she holds collision coverage on a vehicle that is damaged by an at-fault uninsured or hit-and-run driver; It is only applicable to events that result in physical contact and when the uninsured driver or vehicle is recognized.

Whole Dollar Premium: Insurance premiums that are rounded to the nearest dollar.

 

 

 

 

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