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
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
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
17.Benefit: The amount paid by the insurance company to settle a
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
119.Underwriting: The process of selecting covered risks for an
insurance company and deciding what terms the company will accept the
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