Glossary of Terms for Auto Insurance

A
Accident

An unintended and unforeseen event, identifiable in time and place, usually resulting in personal injury or property damage.
Actual Cash Value

The traditional measure of property insurance loss. Usually defined as the cost of replacing the destroyed property with new property, minus an allowance for depreciation resulting from physical wear and tear and/or by changing technology or user preference.
Additional Interest Insured

A person or company, other than the policy owner, who may be liable for an accident involving an insured person or an insured vehicle and who has been named as an Additional Interest Insured under the policy.
Adjuster

An individual who assesses the validity of an insurance claim on behalf of an insurance company. The adjuster authorizes appropriate payment, repairs, or other action.
Application for Insurance

Refers to a questionnaire or form filled out by a customer, which provides pertinent information about the customer to the insurance company. The form is a preliminary step in the application process to obtain insurance.
Assigned Risk Plan

A driver or owner of a vehicle who cannot qualify for insurance in the regular market must obtain insurance through a state-assigned risk plan. Because each state is required to have a risk plan, each company must accept a certain number of high-risk applicants. The cost of insurance under the assigned risk plan is typically higher than market rates, but the plan must accept the high-risk applicant.
Automobile Insurance Policy

There are six different types of automobile insurance coverages. Some are optional and depending on the state you live in, some are required by law. The following list represents the six most common types of automobile insurance coverages:

* Bodily injury liability: for injuries the policyholder causes to someone else.
* Collision: for damage to the policyholder’s car from a collision.
* Comprehensive: for damage to the policyholder’s car not involving a collision with another car (including damage from fire, explosions, earthquakes, floods, and riots), and theft.
* Medical payments or Personal Injury Protection (PIP): for treatment of injuries to the driver and passengers of the policyholder’s car.
* Property damage liability: for damage the policyholder causes to someone else’s property.
* Uninsured motorists coverage: for costs resulting from an accident involving a hit-and-run driver or a driver who does not have insurance.

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BI/PD

BI/PD refers to Bodily Injury Coverage (BI) and Property Damage (PD). For example, 25/50/10 means $25,000 per person per accident for bodily injury/$50,000 total per accident for bodily injury/$10,000 in property damage per accident.
Binder

Formal notification from an agent that the insurance policy has been paid for and is in full force. This Binder protects the policyholder for a specified period of time until the actual insurance policy has been issued.
Bodily Injury Liability

Insurance coverage that protects the insured against financial loss when a person is held liable (legally) for injuring other individuals in an auto accident. Bodily Injury Liability also protects the insured against the cost of legal defense.
Broker

An insurance representative who typically represents the insured, not the insurance company.
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Cancellation

Refers to the termination of an insurance policy before the end of the stated policy period.
Claim

A formal request by the policyholder/insured to be reimbursed for losses covered by the insurance policy.
Collision Insurance

The portion of an auto insurance policy that pays for collision damage to the insured vehicle resulting from another vehicle or object. This may include a collision with a garage door or a tree. Collision Coverage Insurance pays for damage to the insured’s car regardless of who is at-fault in the accident.
Combined Single Limit (CSL)

Amount of liability coverage that combines property damage and bodily injury coverages into one single limit of coverage.
Comprehensive Coverage

Helps cover damages to an automobile resulting from accidents or incidents outside of those outlined under collision coverage. This may include damage resulting from hail, flood, fire, vandalism, or theft.
Consideration

The premium paid by the policyholder for insurance coverage. Consideration typically means "money" in an insurance contract.
Continuously Insured

Insurance coverage was in effect from an insurer or multiple insurers at all times. In order to be continuously insured, there are to be no breaks or lapses in coverage for any reason.
Coverage

The amount and type of protection an insurance policy provides to the insured.
Covered Person

Individuals named in the insurance policy.
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Declarations Page (DEC)

The section of an insurance policy that lists:

* Types of coverage selected by the insured
* Limit for each coverage
* Cost for each coverage
* Vehicles covered by the policy
* Types of coverage for each vehicle covered by the policy
* Other information pertaining to the policy.

Deductible

An agreed upon amount that must be paid by an insured person making a claim against an insurance policy before an insurer will pay any compensation for losses. (i.e., a $500 deductible)
Direct Writer

An insurance company that sells its insurance policies to the public directly through salaried or commissioned employees rather than through independent brokers or agents.
Driver Education

Program or educational course intended to teach individuals the rules of the road, legal aspects associated with driving, and the mechanics of driving. Driver education programs and courses are accredited by the state.
Driver Status

Provides information detailing whether or not the driver has been rated or listed on the policy.
Driver Training

Program or course, accredited by the state, involving a predetermined number of hours behind the wheel of a vehicle with a professional driving instructor.
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Earned Premium

Refers to that portion of the premium representing coverage already provided. A day of earned premium consists of each day an insurance policy is in full force.
Effective Date

The starting date of an insurance policy—the date actual insurance protection begins.
Endorsement

An amendment added to an insurance contract, in writing, and made part of the contract in order to change the original terms. An endorsement may be used to expand or restrict coverage.
Exclusions

A section of the insurance policy listing the types of losses not protected by the policy.
Expiration Date

The exact date and time that a policyholder’s insurance coverage ends.
Extended Non-Owner Liability

Endorsement to a personal auto policy that provides broader liability coverage only for specifically named individuals. The endorsement provides protection for non-owned vehicles provided for the regular use of an insured, use of vehicles to carry property or passengers for a fee, and broader coverage for autos used for business purposes.
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Financial Responsibility

Refers to the ability of individuals to reimburse others for damage caused by the individual.
Financial Responsibility Filing (SR22)

Each state requires individuals to provide proof of future financial responsibility. This if commonly called SR22. The SR22 shows that an individual is financially able to pay any judgment against the insured individual if the individual is found to have caused injury to another individual.
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Gap Insurance

Covers what traditional auto insurance will not. In a nutshell, this type of insurance, popular among individuals who prefer to lease a vehicle, closes the gap between what the insurance company pays if a vehicle is stolen or totaled and what is owed to the finance company.
Garaging Location

Zip code where a vehicle is parked or garaged when not in use, typically the vehicle owner’s primary residence.
Good Driver

A licensed driver who has only one DMV point (minor traffic violation) during the last 3 years, has only one at-fault accident during the last 3 years (property damage only) and has never been convicted of specific vehicle-related crimes during the last 7 years.
Good Student Discount

Discount on automobile insurance granted to students with high scholastic ratings.
Grace Period

A period of time following the date the premium is due, during which a policy remains in force even though the premium has not been paid.
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Hit & Run

A "hit and run" occurs when a person driving a motor vehicle is involved in an accident and flees the scene.
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ID Card

ID Cards are provided by insurance companies to show evidence of insurance in case of an accident, traffic stop, etc. ID Cards are required by law in most states across the U.S.
Independent Agent

An individual who is licensed to sell insurance and represents several different insurance agencies.
Insurance

Financial protection against loss or harm. An agreement by which a company provides customers with financial protection against loss or harm in return for payment or premium.
Insured

Individual or object covered by insurance, also referred to as "policyholder."
Insurer

A company, organization, or individual providing insurance. Also referred to as "insurance carrier."
ISO

Abbreviation for Insurance Services Office. An ISO is an organization of the Property and Liability Insurance business created to compile statistics, effect rates, and create policy forms.
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Lapse in Coverage

When a policyholder neglects to pay his/her premium, this results in a break in continuous insurance coverage. During the time of nonpayment the vehicle is not covered. This time period is called a lapse in coverage.
Liability

Under the law, liability is the legal responsibility for someone’s negligent acts that have resulted in costs and damages.
Liability Coverage

Refers to coverage for bodily injury and property damage.
Limits

The maximum amount the insurance carrier will pay for a specific insurance coverage. The limit amount is usually stated on the declarations page.
Loan Lease Payoff

This type of coverage is only available on current model year vehicles. Coverage requires collision and comprehensive coverage as well as a loss payee.
Loss Assessment

Covers the policyholder from a charge when calculating loss due to a covered risk. In many cases, insurance companies automatically provide coverage up to $1,000.
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Medical Payments Coverage

A coverage provided in the auto policy that pays certain medical and funeral expenses, resulting from an automobile accident, regardless of fault. This coverage protects all passengers in the insured vehicle. This coverage also protects the policyholder and relatives residing in the household while in other vehicles or if struck as a pedestrian. For individuals residing in states that require personal injury protection benefits, this coverage may not be available.
Motor Vehicle Record (MVR)

Record of a driver’s accidents, convictions, and/or traffic violations.
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Named Insured

The person designated by name in the insurance policy as the individual who is protected. This may also include the spouse of the named insured.
Named Non-Owner Policy

If an individual does not own a vehicle, but rather drives borrowed vehicles or rented automobiles, he/she may obtain a named non-owner automobile insurance policy.
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Occasional Driver

An individual who is not the primary or principal driver of the vehicle.
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PAP

Abbreviation for "personal auto policy."
PD

Abbreviation for "property damage."
Per Occurrence Limit

Maximum amount an insurance carrier will pay for claims resulting from a single accident.
Per Person Limit

Maximum amount an insurance carrier will pay for one individual’s injuries resulting from a single accident.

Personal Injury Protection (PIP)

Unique form of insurance that pays for loss of income and medical expenses resulting from an automobile accident. PIP may also cover accidental death and funeral expenses. This coverage may vary greatly from state to state.
Physical damage

Refers to damage from risks such as collision, comprehensive, fire, theft, or any damage to the vehicle itself.
Plan

In general, an insurance company may have several different insurance plans in place. Two of the most common are "standard" and "preferred." Preferred plans are mostly available to drivers with good driving records. Rates for preferred insurance plans are lower and there are more types of included coverages.
Policy Term

Length of time a policy is in effect.
Premium

The amount of money paid to an insurance company for automobile insurance protection.
Property Damage Liability (PD-Liability)

A type of insurance coverage that pays for the policyholder’s monetary loss if they are found liable for damages to a third party.
Proposal

A document containing a list of coverages with prices the customer would have to pay for those particular coverages on his/her property. Also called a "quote."
Protection

Refers to the financial protection an insured individual has when purchasing an insurance policy.
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Rate

The cost of a given unit of insurance.
Rental Reimbursement

Pays expenses to rent a car in case of an accident or loss covered under either comprehensive coverage or collision coverage.
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Second Named Insured

A second designated driver listed on the policy who will have the same coverage under the policy as the named insured.
Statutory Limits

Minimum limit of liability required by law to be carried.
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Threshold Level

The point at which the insured individual may bring wrongful action under a modified No-Fault Automobile Insurance plan.
Tort

A wrongful act for which damages can be sought by the injured party. There are two types Tort Thresholds: Limited and Full. "Limited tort" gives the insured individual the option to choose a form of insurance that limits their rights as well as the rights of members of their household to seek monetary compensation for injuries or damage caused by other drivers. "Full tort" gives the insured individual the option to choose a form of insurance that gives the insured and members of the household unrestricted rights to seek monetary compensation for injuries or damage caused by other drivers.
Total Loss

Damages that are so severe, restoration is not possible, such as a totaled car.
Towing Costs

Optional auto coverage that pays the emergency towing costs of a disabled vehicle. Insurance companies will pay up to a fixed amount.
Transportation Expenses

In the event of theft, transportation expenses may be covered by the insurance company up to a daily limit and maximum dollar amount limit, if the insured has physical damage coverage for theft. Coverage typically begins after a brief waiting period.
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Underinsured Motorist Bodily Injury Coverage (UIM)

A form of auto insurance that protects the insured if hit by a legally liable individual who does not carry enough insurance to cover damages.

Uninsured Motorist Coverage (UM)

A form of auto insurance that protects the insured if hit by a legally liable individual who is uninsured.
Underwriter

A person employed by an insurance company who assesses risks, fixes premiums, and accepts or rejects applications for insurance.
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Vehicle Identification Number (VIN)

A unique combination of letters and numbers used to identify the make, model, and year of a vehicle. The VIN is usually located on the dashboard of the vehicle on the driver’s side and is listed on the title and vehicle registration.
Vehicle Use

Refers to what the insured vehicle will be used for. Choices include: business (other than driving to and from primary place of employment), pleasure or occasional use, work or driving to work daily, farm (vehicle is not used for anything other than farming or ranching), and artisan (skilled craftsman uses his/her vehicle to transport tools for work). Vehicle use is also referred to as "usage" or "primary use."
Violation

Refers to a traffic moving violation, involving an illegal operation of a motor vehicle. Some violations include:

* Driving under the influence of alcohol
* Driving without lights
* Evading police
* Failure to obey a safety zone
* Failure to stop at a stop sign or light
* Following too closely
* Illegal lane change
* Improper turning
* Leaving the scene of an accident
* Obstructing traffic
* Speeding.

W
Waiver

An official form stating the relinquishment of right or privilege signed by an individual, voluntarily.
Whole Dollar Premium

Rather than carrying premiums out to the nearest cent, most insurance contracts today typically round premiums to the nearest dollar. In general, an amount of 51 cents or more is rounded up to the next dollar amount. Cents amounts less than 51 are usually dropped.
Window ID System

With a Window ID System, the VIN number is permanently marked on at least two windows of the motor vehicle.