Glossary of Insurance Terminology

Accident - A sudden, unexpected, and unintended occurrence.

Actual Cash Value - The amount it would cost to replace the stolen or damaged property with property of like kind and quality. In the event replacement property of like kind and quality is unavailable, allowances can be made for the difference in value between the replacement and the damaged property

Additional Insured or Additional Interest - A person or an organization, other than the named insured or covered person, who is protected under the named insured's auto policy. If an auto is leased, the leasing company may want to be listed as an Additional Insured as well as a lien holder or loss payee. This protects the leasing company if it's named in a lawsuit for an accident caused by a policyholder.

Adjuster - A claim representative of the insurer who seeks to determine the extent of the insurer's liability for loss when a claim is submitted.

Application - The application contains all the personal and vital information concerning the insured, any drivers, members of the household, accident and violations history for drivers, coverages being purchased, lien holder information, and additional underwriting questions. The applications should be reviewed by the agent and the named insured and signed by both to verify the truth and the accuracy of the information contained therein.

Appraisal - A written monetary estimate of physical damage sustained to a motor vehicle when the making of the estimate is assigned in order to allow the return of the vehicle to its predamaged condition completed by a professional. The term includes estimates made by the insurer, its employees, its agents or related entities or individuals or entities assigned to make the estimate.

Automobile Insurance - A form of insurance that protects against losses involving autos. Different types are available depending on the needs and wants of those buying policies. Examples of coverage types include: bodily injury liability, property damage liability, medical payments, and collision and comprehensive coverage for physical damage to the insured's vehicle.

Bodily injury - Bodily harm, sickness or disease, including death, that results there from. “Bodily injury” does not include harm, sickness, disease or death arising out of a medically defined communicable disease contracted by any person or the exposure of such a disease by any person to any other person.

Bodily Injury Liability - Legal liability for causing physical injury or death to another.

Collision - The upset of “your covered auto” or its impact with another vehicle or object.

Collision Coverage -This covers loss to the insured person's own auto caused by its collision with another vehicle or object. If you cause an accident, collision coverage will pay to repair your vehicle, and is normally the most expensive part of an auto insurance policy. You must choose a deductible, which is the amount you, the insured, must pay before the insurance company pays the remainder of each covered loss. The higher the deductible, the lower the premium costs. However, keep in mind that this is the amount you must pay (generally to the repair shop) if your vehicle is damaged, so deciding on your deductible, which directly affects your premium, can be a bit of a balancing act.

Comprehensive Coverage - This covers damage to your vehicle caused by an event other than a collision or overturn. Examples include fire, theft, vandalism, and falling objects. This also comes with a deductible you select, which is how much you will pay before the insurance company pays the remainder.

Deductible - The amount an insured person must pay before the insurance company pays the remainder of each covered loss, up to the policy limits.

Depreciation - Decline of value due to wear and tear or obsolescence.

Diminution in Value - The actual or perceived reduction, if any, in the fair market value of tangible property by reason of the fact that it has been damaged and repaired.

Earned Premium - The portion of a premium that has been "used up" during a policy term. With a one-year policy, half of the total premium has been earned after six months.

Effective Date / Inception Date - The date that coverage begins on an insurance policy.

Expiration Date - The date your coverage ends. There is usually a time of day associated with this date, for example, an expiration date of 5/1/2002 at 12:01am. This means your coverage ends one minute after midnight on the date listed.

Family member - A person related to “you” by blood, marriage or adoption that is a resident of “your” household. This includes a ward or foster child, or stepchild.

Gap Insurance - If you are making lease or loan payments and you experience a total loss, there may be a difference (gap) between the market value of your vehicle and what you still owe on it that was taken out when you purchased your vehicle from the automobile dealership. This optional coverage pays the difference.

Garaging Location - The ZIP code where your vehicle is parked or garaged when not in use. This is usually your primary residence.

Hit and Run - An accident caused by someone who does not stop to assist or provide information.

ID Card - An identification card issued by your insurance company that provides evidence of liability insurance. Such evidence is required in most states.

Installment Fee - A fee paid with your bill payment if your policy is not paid in full.

Insurer - Companies, associations and exchanges engaged in the insurance business of insurance companies and self-insurers.

Lapse in Coverage / Policy Lapse - A point in time when a policy has been canceled or terminated for failure to pay the premium, or when the policy contract is void for other reasons.

Loss - Sudden, direct, and accidental destruction or damage. “Loss” does not include “diminution in value”.

Loss Payee/Lien holder - A person or entity with a legally secured insurable interest in another's property, usually a financial institution that loaned money to buy a car. The car is the loan collateral. If the auto is damaged in an accident, loss payments will be made to you and to the loss payee on your policy.

Lender/Lessor - Your lender is the institution to which you make car payments. Your lessor is the institution to which you make your lease payments.

Liability - That portion of the insurance contract which pays and renders service on behalf of an insured for a covered loss arising out of the insured's responsibility to others imposed by law or assumed by contract. In simpler terms, if you are at fault in an accident, liability insurance will pay to cover injuries and property damage costs caused to others in the accident (including your legal defense costs, if applicable). Bodily injury coverage pays for things like medical costs and lost salary to others; while property damage pays for repairs to other people's property you damaged in the accident (other than your own car). Liability coverage is the basic building block of any auto policy, and minimum liability limits vary from state to state.

Limits - The maximum amount paid for a specific insurance coverage. You may choose the limit which meets your needs. Most states have laws that specify the minimum limits you must purchase.

Medical Payments - This pays you and your passengers for medical and funeral expenses incurred in an auto accident, regardless of fault. It will also cover injuries sustained by you while you're operating someone else's car (with their permission), in addition to injuries you or your family members incur when you are pedestrians.

Motor vehicle — A motorized device, including a trailer attached thereto, in, upon or by which a person or property is or may be transported or drawn upon a public highway.

Multi-car discount - A discount offered by some insurance companies for those with more than one vehicle insured on the same policy.

MVR - Motor Vehicle Record - A motor vehicle record, also referred to as DL printout, or MVR, contains information obtained from an individual's driver license application, abstracts of convictions and accidents.

Named Insured - The “named insured” as shown in the Declarations; and the spouse if a resident of the same household.

Other Than Collision - “Loss” caused by the following is considered “Other than Collision”: missiles or falling objects, fire, theft or larceny, explosion or earthquake, windstorm, hail, water or flood, malicious mischief or vandalism, riot or civil commotion, contact with bird or animal, or breakage of glass, except as a result of “collision”.

Personal Auto Policy - The most common auto insurance policy sold today. Often referred to as "PAP," this policy is written in simple wording and provides coverage for liability, medical payments, uninsured/underinsured motorist coverage, and physical damage protection.

Physical Damage - Damage to your covered vehicle from perils including (but not limited to) collision or upset with another vehicle object, fire, vandalism and theft.

Policy - The written documents of a contract for insurance between the insurance company and the insured. Such documents include forms, endorsements, riders and attachments.

Policy Period or Policy Term - The period of time in which a policy is in effect. (For example, six months or one year).

Policyholder - One who maintains ownership in an insurance policy. This may refer to the policy owner or those covered under the policy. See also Named Insured.

Premium - The price of insurance an insured person pays for a specified risk for a specified period of time.

Primary Residence - The place where you will reside for the majority of your policy term. If you are a homeowner who does not reside in the home you own, please choose the "rent" or "other" option.

Private Passenger Automobile - A four-wheeled motor vehicle that is subject to motor vehicle registration and used for private personal use.

Property damage - Physical injury to, destruction of, or loss of use to tangible property.

Property Damage Liability Insurance - Protection against liability for damage to another's tangible property, including loss of use. Although this coverage is different than liability for bodily injury to another person, Bodily Injury and Property Damage Liability protection are generally written together.

Pro Rata Cancellation - Termination of an insurance contract before the policy expiration date on which the premium returned to the insured person is adjusted in proportion to the amount of time the policy was in effect.

Renewal - The automatic re-establishment of in-force status affected by the payment of another premium.

Rental Reimbursement - This optional coverage will reimburse you for a rental car if your vehicle is disabled due to a covered loss. This coverage will pay all or part of your rental car costs, depending on the limits set forth in the policy. This coverage usually has a maximum $ limit per rental day, as well as a maximum $ limit per loss occurrence and maximum amount of days of coverage.

Short Rate Cancellation - A policy termination in which the refunded premium is not proportional to the amount of time remaining in the policy period due to the fixed expenses incurred by the company. The insured will generally pay more for each day of coverage than if the policy had remained in force throughout the entire policy period.

Split Limit - Any insurance coverage with separately stated limits for different types of coverage. Example: an automobile liability policy of 100/300/50 provides a maximum of $100,000 bodily injury coverage per person, $300,000 bodily injury coverage per accident, and a property damage limit of $50,000 per accident.

SR-22 - A document required as proof of financial responsibility by the court or under state law for persons convicted of certain traffic violations.

Term - The length of time for which a policy or bond is in force.

Tort - A private wrong or harm (other than a breach of contract) committed against another, resulting in legal liability. A tort is either intentional or accidental (negligent). Automobile liability insurance is purchased to protect one from suits arising from unintentional torts.

Tortfeasor - One who commits a tort.

Total Loss - A loss of sufficient size that it can be said no value is left. The complete destruction of the property. The term also is used to mean a loss requiring the maximum amount a policy will pay.

Towing - Towing Coverage is simply that. Your insurance company will reimburse you (or accept direct billing) for the cost of towing the insured vehicle from a place of breakdown to the nearest appropriate service facility. Most insurance companies have a maximum limit they will pay out on Towing Claims but some companies have virtually no maximum limit, so check this out when you buy your policy. Most insurance companies will only offer Towing and Rental Reimbursement Coverage if the insured vehicle already has Collision and Comprehensive Coverage with that same company.

Underinsured Motorists Bodily Injury - coverage (which must be offered in most states for all sums (up to your policy limits) if an accident occurs with an uninsured or hit-and-run motorist who is determined to be legally at fault.

Underinsured Motorists Bodily Injury - Underinsured Motorist Bodily Injury covers you for all sums (up to your policy limits) if an accident occurs with a motorist who is underinsured (i.e., they carry bodily injury limits less than your UMBI limits and less than the amount of the injuries).

Unearned Premium - The portion of your premium remaining on your policy term. For example, with a six-month premium, at the end of the first month of the premium period, five-sixths of the premium is unearned by the insurance company.

Uninsured Motorists Property Damage - Liability coverage pays for property damages caused by uninsured drivers.

Uninsured Motorists Property Damage - Uninsured Motorist Property Damage (UMPD) Liability coverage pays for property damages (up to your policy limits) caused by uninsured drivers.

VIN Vehicle Identification Number - A Vehicle Identification Number is a 17-digit alpha-numeric code that provides valuable information concerning the vehicle's serial number, make, model, options, and year in official records (like a Social Security number for your car).