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Auto Insurance Terms:


1.Absolute Liability: Liability for damages even in cases where negligence or fault cannot be proven.

2.Accident: An unforeseen or unintended event or occurrence

3.Accidental Death Coverage: Sometimes part of an insurance policy's Personal Injury Protection or First Party Benefits plan, this coverage provides a payment to the insureds designated beneficiary in the event that the insured dies from accident-related injuries.

4.Actual Cash Value: This is the amount that is reimbursable to the insured. The Actual cash value of a vehicle is calculated by determining the original cash value of the vehicle minus the amount it has depreciated over time.

5.Additional Uninsured: An additional insured party specifically named in the policy.

6.Adjuster: The person who investigates claims and settles losses for the insurance company.

7.Adjusting: The process of investigating claims and settling losses with an insurance company.

8.Adverse Selection: The tendency of high-risk drivers to seek a greater amount of insurance coverage than drivers who present average risk.

10.Age Limits: Stated minimum and maximum ages beyond which an insurance company may deny coverage.

11.All-Risks Policy: Coverage in which the insurance company agrees to cover all losses except those specifically excluded in the policy.

12.Amendment: A document which lists formal changes to an insurance policy. This document must be signed by an insurance agent and the policyholder or the policyholder's authorized representative before the policy changes take effect.

13.Amortization: Making payments on an interest-bearing liability instead of one lump-sum payment.

14.Anti-Theft Recovery System: An electronic device installed in a concealed area on a vehicle that can be used to locate it if the vehicle is stolen. Many insurance companies offer discounts for vehicles with anti-theft recovery systems.

15.Automobile Liability Insurance: Coverage that protects the insured against financial loss as the result of legal liability for vehicle-related injuries or property damage.

16.Automobile Physical Damage Insurance: Coverage for loss of or damage to an insured vehicle as a result of collision, theft, fire or other hazards.

17.Benefit: The amount paid by the insurance company to settle a claim.

18.Binder: A temporary written or verbal contract that makes the insurance policy effective in certain situations where it is not possible to issue or endorse a policy immediately. Binders are subject to all of the terms and premiums of the policy to be issued.

19.Binding Receipt: A receipt given for a premium payment made on the issuance of a binder. The binding receipt makes an approved insurance policy effective from the date of the receipt.

20.Bodily Injury Liability Coverage: This coverage protects the insured from financial loss in the event the insured is responsible for injuring someone else in an accident. This type of coverage pays the injured party's medical expenses and lost wages up to the maximum amount stated in your policy. It may also help pay for the insureds legal expenses in any related lawsuits.

21.Broadform Collision Coverage: This is a type of collision coverage only available in the state of Michigan. It 

22.Broker: A broker is a marketing representative for insurance organizations. Brokers work with companies and their agents to arrange the insurance coverage for the customer.

23.Business/Commercial Use: This classification is given to vehicles used primarily for business purposes and work-related driving such as sales or delivery calls and business errands. This classification does not include commuting to and from work.

24.Cancellation: The termination of an insurance policy before its expiration date. An insurance policy may be canceled for due to non-payment of premiums, replacement by another policy or other reasons stipulated in the policy.

25.Certificate of Insurance: A statement of insurance coverage that outlines the insureds benefits and policy provisions.

26.Choice No-Fault: This type of policy allows the insured the choice of remaining under the tort system or choosing no-fault coverage for a reduced premium.

27.Claim: A request for payment of a loss which is covered under the terms of the insurance policy.

28.Collision Insurance: This coverage protects the insured against loss resulting from collision with another vehicle or object regardless of whether or not the insured was at fault.

29.Collision Deductible Waiver: This coverage pays the deductible for collision coverage if the insured is involved in an accident in which an uninsured driver is at fault. This coverage is not available in all states, and must be purchased with collision coverage where it is available.

30.Commission: This is the part of the insurance premium paid to the broker or agent for procuring and servicing the insurance policy.

31.Commuting: This term refers to vehicles used primarily for transportation to and from work or school.

32.Comprehensive Coverage: This type of coverage protects the insured from loss due to damage by fire, falling objects, certain natural disasters, theft and vandalism. The maximum amount paid under this coverage is the car's actual cash value minus the insureds deductible.

33.Continuously Insured: The length of time a person has been covered without a lapse in auto insurance.

34.Declination: The refusal of an insurance company to provide insurance to an individual after careful evaluation of the application and the applicant's information.

35.Deductible: The amount of out-of-pocket expense the insured agrees to pay if filing a claim. Although choosing a higher deductible results in a lower premium, the insured must cover this amount before the insurance policy will settle the claim.

36.Declarations: The Declarations page summarizes the information contained in the insurance policy. This summarization includes the insureds name and address, information on the insured vehicles, the premium amount, policy coverages, policy limits and deductibles.

37.Defensive Driver and Driver Improvement Courses: Courses that are available to provide individuals with defensive driving education and driver training. In some stares, the insured may qualify for auto insurance discounts for completing these courses.

38.Depreciation: This term refers to a decrease in the value of an automobile over time due to age and wear-and-tear. Depreciation is used to calculate the actual cash value of a vehicle at the time of loss.

39.Driver Education Credit: Student discount or premium reduction given available to young drivers upon completion of a driver education course.

40.Economic Loss: The estimated total of insured and uninsured costs resulting from an accident. This includes losses from property damage, funeral expenses, wage loss and insurance administration costs as well as medical, hospital and legal costs.

41.Effective Date: The effective date is the date the auto insurance coverage starts.

42.Emergency Roadside Service: This optional coverage is also referred to as towing coverage and pays a fixed amount toward expenses incurred for towing, tire changes, battery or lockout services and delivery of fuel, water or oil.

43.Endorsements: Also referred to as riders, endorsements are changes to the original insurance policy. These changes can include the increase or decrease of the deductible amount, the addition of a new vehicle to the policy or changes in insured drivers.

44.Exclusions: This term refers to specific situations not covered under the policy. Specific exclusions are listed in the policy contract documentation.

45.Extraordinary Medical: This type of coverage is sometimes included as part of Personal Injury Protection or First Party Benefits coverage. It protects the insured against financial loss in the event of accident-related injuries requiring extensive or long-term medical care. These benefits go into effect after the insured has exhausted the policy limit on standard medical benefits.

46.First Party Benefits: This is a type of optional insurance coverage available only in Pennsylvania. It covers the insured and any relatives residing in the same household for medical expenses, lost income, accidental death and/or funeral costs associated resulting from injury in an accident. Coverage limit amounts are selected at the time of policy purchase.

47.Funeral Benefits: This type of coverage is sometimes included in a policy's Personal Injury Protection or First Party Benefits plan. This insurance pays for a specified portion of accident-related funeral expenses in the event a covered individual dies as a result of injuries sustained in the accident regardless of who is at fault.

48.Garaging Location: This term refers to the location where the insured vehicle is parked most of the time. It is generally determined by the zip code in which the individual resided.

49.General Damages: Commonly referred to as compensation for “pain and suffering,” general damages are payments awarded to an injured person for intangible losses that cannot be measured directly as a dollar amount.

50.Good Student Discount: A discount given to young drivers who are at least sixteen years of age and maintain rankings in the upper 20% of their class, a 3.0 or higher GPA or earns placement on the Dean's list or honor roll.

51.Grace Period: The specified time after a payment is due in which the insured must submit the payment to continue insurance coverage.

52.High-Risk Automobile Insurer: An insurance company that specializes in insuring drivers with poor driving records or who have otherwise been refused insurance.

53.Homeowners Insurance: Personal items that are stolen from a vehicle are typically covered under a homeowners insurance policy, not under automobile coverage.

54.Income Loss Coverage: This type of coverage is sometimes part of a policy's Personal Injury Protection or First Party Benefits plan. It protects the insured against financial loss resulting from lost wages due to accident-related injury.

55.Indemnification: This refers to the compensation given to the victim of a loss, either in whole or in part through payment, repair or replacement.

56.Indemnity: A legal principle that specifies that in the event of a loss, an insured should be compensated for the actual cash value of the loss and should not be able to collect more than that amount.

57.Independent Agent: An independent business person who can represent more than one insurance company and is paid on commission.

58.Insolvent: Having insufficient financial resources to meet obligations or liabilities.

59.Insurance: A contractual guarantee of protection against financial loss resulting from specified risks under specified conditions.

60.Insurance Claim Report: This is a consumer report that provides the insurance company with information about an applicant's past insurance claims.

61.Insurance Score: A ranking based on analytical models which measure the likelihood of an individual's future insurance losses based on the individual's credit history. This score and analysis is provided to insurance companies by various independent consumer reporting agencies.

62.Insured: This term refers to an individual or organization covered by an insurance policy. This includes the “named insured” and any other party for whom protection is specified in the policy.

63.Insurer: The party in an insurance contract that is responsible for paying any covered losses or benefits.

64.Joint Underwriting Association: A type of “shared market” designed to make insurance available to people who cannot obtain insurance in the regular market.

65.Judgment: A final decision given by a court of law regarding the outcome of a lawsuit.

66.Judgment Rating: A rate-determining method used by insurance underwriters in which the underwriter evaluates each exposure individually to determine a policy's rates.

67.Lapse: The discontinuation or termination of insurance coverage due to non-payment of the policy premium.

68.Larceny-Theft: The unlawful taking of another person's property.

69.Liability: This term refers to legal responsibility. The liable party is the party determined to be at fault for an accident.

70.Liability Insurance: This coverage protects the insured from financial loss from the insureds liability for damages resulting from an accident.

71.Limits: The maximum amount an insurance policy will pay for a covered loss. Many states require drivers to carry minimum coverage limits, even though limits can be chosen by the applicant.

72.Loss: Damages or occurrences for which the insurance company pays.

73.Loss Expense – Allocated: Handling expenses which are paid by an insurance company when settling a claim, such as legal expenses or adjuster fees, that can definitely be charged to that claim.

74.Loss Expense – Unallocated: Expenses such as salaries and other expenses which the insurance company incurs for the operation of a claims department that cannot be charged to any individual claim.

75.Medical Benefits: This coverage pays any medical expenses that are a direct result of an accident-related injury, and is sometimes part of a policy's Personal Injury Protection or First Party Benefits plan. Covered expense limits are capped at the amount the insured chooses when purchasing the insurance policy.

76.Medical Payments Coverage: This type of insurance coverage pays medical bills and/or funeral expenses for the covered driver and/or any passengers are injured or killed in an insured vehicle, regardless of which party is at fault. This insurance may also cover policyholders and their family member in other vehicles or if injured or killed as pedestrians.

77.Motor Vehicle Report: This is a consumer report obtained by the insurance agency which provides information on an individual's driving record from states in which the individual is or has been licensed to drive.

78.National Credit File: Also known as a credit report, this consumer report provides the insurance company with information regarding the financial history of an individual, and can be used as a factor in determining an individual's policy rate in states where this is applicable by law.

79.No-Fault Insurance: A type of insurance available in many states in which losses incurred as a result of an automobile accident are paid by the insureds company regardless of which party was at fault. The right to sue an individual for additional damages is limited in some states where this coverage is available. 

80.No-Fault States: States in which insurance the law requires insurance companies to pay a policyholder's covered losses regardless of who was at fault in the accident. In states without these laws, the insurance company covering the party liable for the accident must pay for any covered losses.

81.Non-Passive Alarm: This is a type of manual alarm that can be installed on a vehicle and must be activated upon leaving the vehicle. If someone attempts to force entry into a vehicle with this equipment, an alarm sounds and the vehicles starter, ignition and/or fuel circuit is disabled. Vehicles equipped with these devices may be eligible for an insurance discount.

82.Passive Alarm: This is an automatic alarm system that emits warning sounds if someone attempts to force entry into the vehicle. Once the alarm system has been triggered, the vehicle's starter, ignition and/or fuel circuit are disabled. Many insurance companies offer discounts for vehicles with this type of equipment.

83.Personal Injury Protection (PIP): This type of policy provides expanded coverage for accident-related medical costs. This coverage is only available in certain states, and is usually mandatory in states where it is available. Specific protections and limits available under this type of insurance policy can vary widely from state to state.

84.Physical Damage: The loss of or damage to an automobile as a result of collision, theft, fire or other risks.

85.Pleasure Use: This term refers to vehicles used primarily for recreational uses and not for regular business or commuter purposes.

86.Policy Expiration Date: The date when an insureds coverage ends if the policy is not renewed.

87.Policy Term: The length of time an insurance policy is valid. The two most common terms for most auto insurance policies are 6 months and 12 months.

88.Premium: The amount paid by an individual to an insurance company to keep a policy in force.

89.Primary Driver: This is the person who uses the vehicle the most.

90.Primary Policyholder: This is the person who is designated as the main contact person for the policy, and is usually also the person billed for the premium payments.

91.Primary Use: This refers to how the car is used most often. The three main primary use categories assigned to vehicles are commuting, business/commercial or pleasure use.

92.Proof of Loss: Documentation required by the insurance company to support a claim so that the company can determine whether or not the loss is covered under the policy.

93.Property Damage Liability Coverage: This coverage protects the insured against financial loss resulting from the insureds liability regarding damage to another person's property. This type of auto insurance coverage also helps cover the insureds legal expenses in an accident-related lawsuit, and the coverage limits are capped at an amount the policyholder chooses when the insurance is purchased.

94.Rate: The pricing factors upon which the policyholder's premium amount is based.

95.Rated Policy: Also called an “extra-risk” policy, this type of insurance is issued at a higher premium rate to cover the company's potential additional risks when insuring an individual with a DUI or other applicable traffic violation.

96.Rebating: This is the practice of giving all or part of an agent's commission back to the insured or applicant as an inducement to purchase or renew an insurance policy. This practice is prohibited by law.

97.Reimbursement: Payment by the insurance company of expenses actually incurred as a result of an accident. This amount cannot exceed the limits specified in the policy.

98.Reinstatement: This term refers to the resumption of insurance coverage under a policy which has lapsed.

99.Renewal: The continuance of a policy beyond the original expiration date by the insurer's acceptance of a premium payment for a new policy term.

100.Rental Car Reimbursement: An optional type of coverage which helps pay for the expense of a rental car in the event that an insured car is stolen or damaged in an accident.

101.SR-22: This is an official document that can be requested from an insurance company and is used to show proof of financial responsibility. This document is required by the motor vehicle departments in certain states for people convicted of certain traffic violations.

102.Salvage: This term refers to the recovery of an insurance company's payment of a claim by the sale of property that was taken over by the insurance company as part of the loss settlement.

103.Secondary Driver: Also known as an occasional driver, this is an additional person who is covered under a policy to drive an insured vehicle.

104.Stacking: This is an option available to individuals purchasing uninsured/underinsured motorist bodily injury coverage. Although definitions for stacking differ in some states, this term typically refers to limit increases which are determined by the number of vehicles the individual is insuring.

105.Standard Risk: This term is used to refer to a person who is entitled to purchase an insurance policy without special restrictions or extra rating based on the company's underwriting standards.

106.Steering Restraint: This is an anti-theft device designed to make it more difficult for thieves to bypass a vehicle's ignition system. Many insurance companies offer discounts for vehicles equipped with these devices.

107.Substandard Risk: This term refers to a risk that does not meet the normal requirements of the auto insurance policy. This classification is usually given to individuals that present a higher risk due to poor driving habits, and is contingent upon acceptance of a waiver, special policy form or higher premium charge.

108.Supplemental Family Member Liability Coverage: This is an optional type of insurance coverage available in the state of Maryland. This coverage protects the insured if the insured is found to be at fault in an accident resulting in the injury or death of a family member. The amount of coverage is usually equal to the Bodily Injury limits stated in the policy, but must at least equal the state's minimum coverage requirements of 20/40.

109.Supplemental Spousal Liability: This is an optional type of auto insurance coverage available only in the state of New York. This coverage protects the insured if the insured is found to be at fault in an accident resulting in the death or injury of the insureds spouse. Coverage is capped at limits set when the auto insurance policy is purchased.

110.Third Party: This term refers to the person making a claim under a liability policy. This is a person other than the insured or the insurer, usually the person whose damages the insured is found to be liable for.

111.Third Party Claim: A claim made by an individual against a policyholder of another company, specifically against any payments that will be maid by the compamy.

112.Tort: A legal term used to describe situations when the someone can be deemed legally responsible for injuries to another person or damages to the person's property.

113.Towing Coverage: This optional type of insurance coverage pays a set amount toward the towing expenses incurred if the insureds car is disabled in an accident or breaks down.

114.Underinsured Motorist Bodily Injury Coverage: This coverage pays for the medical expenses, lost wages and other damages incurred by the driver or passengers of an insured vehicle in the event they are injured in an accident caused by a driver with insufficient insurance. This type of insurance usually pays the difference between the insureds coverage limits and the other driver's bodily injury limits, and is typically mandatory in states where it is available.

115.Underinsured Motorist Property Damage Coverage: This type of auto insurance coverage protects the insured from damages to property caused by an accident in which the other driver has insufficient insurance coverage. It pays the difference between the insureds coverage limits and the other driver's property damage coverage limits. This type of insurance is not available in all states, and is often mandatory in states where it is available.

116.Uninsured Motorist Bodily Injury Coverage: This coverage pays for the medical expenses, lost wages and other damages incurred by the driver or passengers of an insured vehicle in the event they are injured in an accident caused by a driver without insurance. This type of insurance also covers injuries sustained as a result of a hit-and-run accident, and is typically mandatory in states where it is available.

117.Uninsured Motorist Property Damage Coverage: This type of auto insurance coverage protects the insured from damages to property caused by an accident in which the other driver has no insurance coverage. This type of insurance is not available in all states, and is often mandatory in states where it is available.

118.Underwriter: This term refers to the company that receives the premium payment and provides for the fulfillment of the policy contract. It may also be used to refer to a company employee assigned the task of determining whether or not the company should insure a particular individual.

119.Underwriting: The process of selecting covered risks for an insurance company and deciding what terms the company will accept the risks under.

120.VIN: short for Vehicle Identification Number, this unique 17-digit number used to identify a specific vehicle. This number is found on the vehicle registration and in several places on the vehicle itself.

121.Verbal Threshold: This is a stipulation found in some states with no-fault insurance laws in which victims of an accident are only allowed to sue in tort if their injuries or losses meet certain verbal descriptions for recovery of “pain and suffering.”

122.Waiver: An attachment to an insurance policy which exempts from coverage certain injuries or disabilities that would otherwise be covered.

 
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