Auto Insurance Definitions

Accident
An unforeseen, unintended event; something unexpected; fortuitous.
Accident Frequency
The number of times an accident occurs. Used in predicting losses upon which premiums are based.


Actual Cash Value
An amount equivalent to the replacement cost of a stolen or damaged property at the time of the loss, less depreciation. For vehicles, this amount would be determined by a local area private party sales and dealer quotations. Kelly Blue Book would only be used as a guide and not the final word.

Actuarial
Statistical calculations used to determine insurance rates and premiums, based on projections of utilization and costs for a defined risk.
Actuary
A professional trained in the mathematics of insurance and risk management. Known as a mathematician in most countries outside the United States.
Act of God
Natural occurrence beyond human control or influence. Such acts of nature include hurricanes, earthquakes, and floods.
Additional Insured (Additional Interest)
An organization or individual that is protected under someone else's auto insurance policy, such as a leasing company; exists for liability purposes.
Additional Interest (Additional Insured)
An organization or individual that is protected under someone else's auto insurance policy, such as a leasing company; exists for liability purposes.
Adjuster
A person who investigates and settles insurance claims.
Administrative Costs
Costs related to utilization review, insurance marketing, medical underwriting, agents' commissions, premium collection, claims processing, insurer profit, quality assurance programs and risk management.
Admitted Company
An insurance company authorized to do business in a given state.
Age Limits
The ages below or above which the insurance company will not issue a given policy or renew a policy in force.
Agent
A person who sells insurance products of the insurance company; the person responsible for your insurance coverage needs.
Alien Insurance Company
An insurance company incorporated under the laws of a foreign country .
Anti-Theft Device
A device designed to minimize the chance that an automobile will be vandalized or stolen, or to hasten it's recovery. Alarm systems, keyless entry, and motion detectors are a few examples that could affect insurance premiums.
Assigned Risk
A risk assigned to insurers by law, which they may not otherwise accept.
Automobile Insurance
Coverage on the risks associated with driving or owning an automobile. It can include collision, liability, comprehensive, medical, and uninsured motorist coverages.
Automobile Insurance Plans (2)
Assigned risk plans, set up by the state to assist those who cannot obtain standard insurance. See Assigned Risk.
Auto Insurance Premium Discount
A discount offered to drivers for such safeguards as air bags, seat belts, good driving record, anti-theft devices, multiple vehicles, etc.
Basic Auto Policy
Still covers substandard risks, two-wheel motorized vehicles, and commercial vehicles; has been largely replaced by the Basic Auto Policy, which covers both physical damage and liability insurance.
Basic Limits of Liability
The lowest level of liability coverage that can be purchased, as determined by law. Increased coverage, with increased premiums, is available.
Binder
A temporary or preliminary agreement which provides coverage until a policy can be written or delivered.
Blue Book (Red Book)
A publication used for the determination of values for used automobiles and trucks.
Bodily Injury Liability
Legal liability for causing injury or death.
Cancellation
The termination of insurance coverage during the policy period.
Claim
A formal request for payment of a loss under an insurance contract.
Claimant
The first or third party. That is any person who asserts right of recovery.
Clause
A section or paragraph in an insurance policy that explains, defines or clarifies the conditions of coverage.
Collision Coverage
Insurance coverage which pays for damage to the policyholder's car caused by collision.
Combined Single Limit
Bodily Injury and Property Damage coverage, combined as a single amount.
Commission
Paid to the insurance agent as compensation.
Composite Rate
A uniform premium applicable to all those eligible in a subscriber group, regardless of the number of claimed dependents. This is common among plans purchased by large employer groups.
Comprehensive Coverage
Coverage in automobile insurance providing protection in the event of physical damage (other than collision) or theft of the insured car.
Continuous Coverage (Continuous Liability Insurance)
The length of time in which insurance has been maintained on a particular vehicle.
Continuous Liability Insurance (Continuous Coverage)
The length of time in which insurance has been maintained on a particular vehicle.
Customized Equipment (Special Equipment)
Items not covered under standard auto insurance plans, such as electronic equipment, aftermarket exterior pieces, or additional interior amenities.
Decline
An insurance company refuses to accept the request for insurance coverage.
Deductible
The amount of the loss which the insured is responsible to pay before benefits from the insurance company are payable. You may choose a higher deductible to lower your premium.
Defensive Driving Course
A driver improvement course, offered privately or through the Department of Motor Vehicles, which may reduce premiums for some drivers.
Depreciation
A decrease in value due to age, wear and tear, etc.
Driver Improvement Courses
Optional coverage that covers any vehicle operated by the insured person.
Driver Education
A course covering at least 30 hours of professional classroom instruction.
Driver Training
A course covering at least six hours of behind-the-wheel instruction.
Earned Premium
That part of the premium applicable to the expired part of the policy period, including the short-rate charge on cancellation.
Effective Date (Inception Date)
The date on which an insurance policy coverage starts.
Endorsement (Rider)
Amendment to the policy used to add or delete coverage.
Exclusion
Certain causes and conditions, listed in the policy, which are not covered.
Experience
The record of claims made or paid within a specified period.
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 on which the policy ends.
Extended Non-Owner Liability
Policy providing broader liability coverage for certain people (such as family members) who operated a trailer or automobile that does not belong to them; this covers carrying people or property for a fee, or using vehicles provided by employers to employees who do not own vehicles themselves.
Family Automobile Policy
A package for both liability and physical damaged to the vehicle(s) of the insured; has been replaced by the Personal Auto Policy.
Flat Cancellation
the cancellation of a policy as of it's effective date, without any premium charge.
Financial Ratings
Reflects the financial strength of insurance companies, and their ability to meet their obligations to their policyholders. Major rating organizations include Standard & Poor's, Moody's, and AM Best.
Financial Responsibility Laws
Laws requiring motorists to have enough money to compensate those whom they injure; this is done through liability insurance requirements, set out by law.
First Party Benefits (PIP)
Coverage present in no-fault states which pays medical, loss of income, death and/or disability, and loss of services incurred as a result of an automobile accident.
Gap Insurance
Optional coverage making up for the difference between the market value of a vehicle and it's outstanding payments.
Good Student Discount
A discount for students who achieve high academic standing.
Hit-and-Run
Describes an accident from which the perpetrator flees, without providing information or assistance.
ID Card
Provides evidence of liability insurance; this is required in most states.
Inception Date (Effective Date)
The date on which an insurance policy coverage starts.
Lapse in Coverage (Policy Lapse)
A period during which a policy has been canceled or terminated by the insurance company for a variety of causes.
Mathematician
A professional trained in the mathematics of insurance and risk management. Known as an actuary in the United States.
Medical Payments
Covers medical and funeral expenses, as well as passenger injuries, resulting from an auto accident, regardless of who is at fault. It also covers other people's vehicles that you are driving with permission, and injuries sustained as pedestrians.
Misquote
An incorrect estimate of the insurance premium.
Multi-Car Discounts
A discount offered to those who have two or more vehicles listed on the same policy. Some companies may grant multi-car discounts to those who drive company vehicles.
Motor Vehicle Record (MVR)
A record containing information gathered from a driver's application and abstracts of convictions and accidents. Also known as a DL printout.
MVR (Motor Vehicle Record)
A record containing information gathered from a driver's application and abstracts of convictions and accidents. Also known as a DL printout.
Named Insured
A corporation or individual designated on a policy. Others, such as those operating the vehicle with consent of the insured, may also be protected.
Named Non-Owner Policy
A policy endorsement for those who operate a vehicle that they do not own, such as someone who drives a company vehicle regularly.
No Fault Insurance
A system in which each driver's auto insurance coverage pays for injuries and damage, no matter who caused the accident (used in some states and provinces). Most jurisdictions still allow one to sue the party responsible for the accident, up to a given threshold.
PAP (Personal Auto Policy)
The most common auto insurance policy being sold, written in simple language, providing coverage for liability, medical payments, uninsured motorist coverage, and physical damage.
Per Occurrence Limit
The cap amount for which an insurance company will pay claims resulting from a single incident. It generally covers bodily injuries of everyone involved; determined for each occurrence.
Per Person Limit
The cap amount for which an insurance company will pay claims resulting from a single incident. It generally covers bodily injuries of everyone involved; determined for each person.
Personal Auto Policy (PAP)
The most common auto insurance policy being sold, written in simple language, providing coverage for liability, medical payments, uninsured motorist coverage, and physical damage.
Personal Injury Protection (PIP)
Coverage present in no-fault states which pays medical, loss of income, death and/or disability, and loss of services incurred as a result of an automobile accident.
Physical Damage
Any damage to an insured vehicle resulting from a collision, fire, vandalism, or theft.
PIP (Personal Injury Protection)
Coverage present in no-fault states which pays medical, loss of income, death and/or disability, and loss of services incurred as a result of an automobile accident.
Rider (Endorsement)
Amendment to the policy used to add or delete coverage.
Physical Damage Insurance
Property damage coverage for a vehicle under the 'collision insurance' and 'comprehensive insurance' sections of the policy.
Policy
A written insurance contract; can include forms, riders, endorsements, and attachments.
Policyholder
Literally, the person who has possession of the policy; can refer to the policy owner and those covered under the policy. Thus the term is non-functional as commonly used.
Policy Lapse (Lapse in Coverage)
A period during which a policy has been canceled or terminated by the insurance company for a variety of causes.
Policy Limit
The maximum amount a policy will pay, either overall or under a particular coverage.
Policy Period
The time in which a policy is in effect.
Preferred Risk
A risk considered better than that on which a premium was calculated.
Premium
The amount of money an insurance company charges for insurance coverage.
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.
Property Damage Liability Insurance
Protection from liabaility to someone else's property, including loss of use. Bodily Injury and Property Damage Liability are usually included as part of the same policy.
Private Passenger Automobile
A vehicle that requires registration for personal use.
Quote
An estimate of the cost of insurance, based on information supplied to the insurance company by the applican't.
Rebate
A reduction of a premium.
Red Book (Blue Book)
A publication used for the determination of values for used automobiles and trucks.
Reinsurance
A form of insurance that insurance companies buy for their own protection.
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. If you have personal property replacement cost coverage, your insurance will pay the full cost to repair an item or buy a new one once the repairs or purchases have been made.
Replacement Value
The full cost to repair or replace the damaged property with no deduction for depreciation, subject to policy limits and contract provisions.
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.
Renewal
The process by which someone can keep an existing policy in effect.
Rental Reimbursement
Optional coverage that will reimburse the costs of a rental car while your vehicle is in repair.
Risk
A term used to designate an insured or a peril insured against.
Safe Driver Plan
A rating system to determine premium costs based on a driver's record of accidents and traffic convictions.
Short-Rate Cancellation
When the policy is terminated prior to the expiration date at the policyholder's request. Earned premium charged would be more than the pro-rata earned premium. Generally, the return premium would be approximately 90 percent of the pro-rata return premium. However, the company may also establish it's own short-rate schedule.
Special Equipment (Customized Equipment)
Items not covered under standard auto insurance plans, such as electronic equipment, aftermarket exterior pieces, or additional interior amenities.
Split Limit
An insurance policy with limits for different types of insurance (such as bodily injury or property damage).
Surcharge
An extra charge applied by the insurer. For automobile insurance, a surcharge is usually for accidents or moving violations.
Term
The period in which a policy is in effect.
Tort
An act of wrongdoing committed negligently or willfully, but not as a breach of contract, which results in legal liability; auto insurance plans cover unintentional torts.
Tort Feasor
Someone who commit's a tort.
Towing and Labor Costs
An endorsement that covers the cost of towing or on-site labor; it can be added to physical damage coverage.
Transportation Expenses
Part of physical damage coverage; covers transportation expenses in the event of vehicle theft, up to a maximum daily limit.
Umbrella Liability Insurance
A liability policy that covers in excess of primary limits of the basic liability policy.
Underwriting
The process of selecting applicants for insurance and classifying them according to their degrees of insurability so that the appropriate premium rates may be charged. The process includes rejection of unacceptable risks.
Unearned Premium
The part of a premium left on a given policy term.
Uninsured Motorist Bodily Injury
Bodily injury coverage for uninsured motorists (required in most jurisdictions), which will cover injuries sustained due to a hit-and-run for which an uninsured motorist is responsible but cannot pay.
Uninsured Motorist Coverage
Endorsement to a personal automobile policy that covers an insured's claims for bodily injury involved in a collision with a driver who does not have liability insurance.
Uninsured Motorist Property Damage
Covers property damages caused by uninsured motorists.
Unsatisfied Judgment Fund
A fund, set up by some states, to reimburse people who have been injured in an auto accident but have been unable to collect from the person who caused the accident.
Usage
The primary purpose for which you intend to drive. Commuters' rates, therefore, will be different from business rates or pleasure rates.
Vehicle Identification Number (VIN)
An identification number that is unique to each vehicle, which provides it's serial number, make, model, options, etc.
VIN (Vehicle Identification Number)
An identification number that is unique to each vehicle, which provides it's serial number, make, model, options, etc. This number must appear on all auto insurance policies.
Waiver
(a) A rider waiving (excluding) liability for a stated cause of accident or (especially) sickness. (b) Provision or rider agreeing to waive (forego) premium payment during a period of disability. (c) The giving up or surrender of a right or privilege that is known to exist. It may be effected by the agent, adjuster, or insurance company employee or official orally or in writing.
Waiver of Collision Deductible
Covers your collision deductible on a vehicle that is damaged by an at fault, uninsured or hit-and-run driver; applies only to physical contact.
Whole Dollar Premium
Premiums rounded up to the nearest dollar (any amount of 51 cents or more); lesser amounts are typically eliminated entirely.