Car Insurance Glossary

Accidental Death Coverage: This type of coverage provides the beneficiary of the individual insured with a death benefit in the case of the insured individual’s loss of life due to injuries sustained in an auto accident. This type of coverage is usually found under the 1st Party Benefits or under the Personal Injury section of your policy.

Actual Cash Value: This value is determined by taking the original value of your vehicle and subtracting the amount that it has depreciated since its original purchase date. Many insurance companies will only reimburse individuals for the actual cash value of a vehicle in the event that the vehicle is totaled out in an accident.

Adjuster: Should you file a claim against your auto insurance policy, this individual will be the one who investigates that claim and, ultimately, settles it.

Agent: Although it may seem as if there are three types of agents, independent, captive and exclusive; there are truly only two. The captive or exclusive agent is one in the same and this type of agent represents one single insurance company. The captive or exclusive agent can receive commissions or a salary. The insurance company that this type of agent would work for is called a direct writer. The independent agents, on the other hand, tend to represent many separate insurance companies and are usually paid on commission only.

Agent/Broker: Much like the agent, a broker can also sell policies as well as manage them, but the broker represents those individuals who find themselves searching for insurance, while the agent is a representative of the insurance company itself.

Alternative Dispute Resolution: This is, basically, a way to settle any disagreement but it is done outside the courtroom. An independent, unbiased third party is the ultimate decision maker and both parties agree to allow this individual to sort out their matter. The third party discusses the matter with both parties involved in an attempt to settle the matter on both sides. Arbitration and mediation are both involved.

Anti-Theft Recovery System: This is an electronic system that is hidden within an inconspicuous area of your vehicle. Should the vehicle be stolen, this device will provide a signal that will help the authorities to locate the vehicle. To purchase the most effective of these devices for your specific area, you should first check with local law enforcement.

Application: This is the form that the insurance company will be using in order to choose whether or not to issue a policy to you as well as the price of that policy. It contains information, filled out by you, that will help to determine these factors.

Apportionment: This is, basically, when a loss is divided by more than one individual. If a vehicle is totaled and two individuals have insurance on that vehicle, the loss is divided between the two insured.

Appraisal: The appraisal helps to determine the insured value, loss and worth of an item. The item is surveyed to reach the amount.

Auto Insurance Premium: The price of auto insurance coverage. This price is based on the number and frequency of theft, vandalism and accidents; amongst other things.

Benefit: When an insurance claim is filed, this will be the amount provided to you or to the individual designated as your beneficiary.

Binder: A binder is, basically, the temporary proof that you have purchased insurance. It will be helpful to carry until the permanent policy arrives.

Bodily Injury Liability Coverage: This portion of the auto policy will cover any injuries that a policyholder may cause to another individual in the event of an accident.

Broadform Collision Coverage: Although this type of is available in Michigan only, it will cover the expenses for damages caused to your vehicle regardless of fault. Policy holders are responsible for the deductible selected if they are found faulted at higher than 50% of responsibility. Otherwise, no deductible will be due.

Broker: Ultimately, this is the middle-man between the insurance company and the client or customer. These individuals scour the market to find the most suitable coverage for the customer and generally work only on commission.

Business/Commercial Use: Vehicles fitting into this classification are those that are used mainly for business or work-related duties, aside from the usual commute.

Captive Agent: This individual is the representative of one specific insurance company and is able to sell and manage insurance policies for such.

Card ID Number: A card ID number is an extra security code that is printed on the back of all major credit and debit cards in order to validate that the person using the card actually has the card in his or her possession. A person buying insurance with a debit or credit card will have to provide this number from the back of their card where it will be printed following the rest of the account number. These numbers are typically a three digit number, although American Express cards have ID numbers that are four characters long.

Claim: Any situation where a person with insurance is requesting funds to cover the costs of anything that is covered under the terms of their policy.

Claimant: This is an individual who chooses to file a claim against their auto insurance.

Collision Coverage: This type of coverage will cover damage resulting from an accident to the policyholder’s vehicle. Amounts of coverage can vary and are selected by the policyholder.

Collision Deductible Waiver: In certain states, you will have an option to add an additional clause to your auto insurance policy that is called a Collision Deductible Waiver. This waiver applies in a situation where you are in a collision and the driver who is responsible is uninsured. In this situation, the insurance carrier will pay the cost of your deductible.

Commission: This type of coverage will cover any damage to a policyholder’s vehicle in the case that fire, vandalism, theft, deer, earthquakes, explosions or riots, etc. happen to damage the vehicle. It is an additional type of coverage that does not cover collisions with other vehicles.

Commuting: As a classification for insurance purposes, commuting indicates that the car is used mainly for your transport between work and your home and/or school and your home.

Comprehensive Coverage: This form of coverage works like collision coverage insofar as you will still have to pay a deductible based on what you’ve chosen when you sign up for your initial policy. Unlike collision coverage, comprehensive coverage covers expenses up to the total value of your car when damage is resultant from weather, some natural disasters, and criminal acts such as vandalism or theft.

Compulsory Auto Insurance: Every state has a minimum requirement for the amount of liability auto insurance. This type of insurance meets the minimum state requirements.

Continuously Insured: The period that you can state yourself as having insurance continuously is how long you’ve had auto coverage. This means that you’ve never been without coverage in that period. The coverage may have been issued from more than one insurance carrier, but must have been continuous.

Coverage: This refers to the amount of protection provided by an auto insurance contract.

Declarations: The part of your policy where the majority of the facts and figures of the policy are laid out. The facts will include the name that the insurance policy is under and their legal address, as well as any information regarding the vehicles that are covered under the policy. The figures will cover all financial outlines of the policy. This includes the deductible amount, how much the car is covered for, and what premium will be paid on the insurance.

Declarations Page: This is a page that is provided within an auto policy. It provides your vehicle’s description, the price and amounts of your vehicle’s coverage, the total amount of your insurance premium, the beginning and end dates of your policy and the name and location of the company or insurer.

Deductible: The premium that is charged to the insured is affected by the deductible. The deductible is, basically, the amount paid by the insured in the case of a claim. The deductible is decided by the insured at the time of policy purchase and can be a set amount, such as $250, $500, or $750; or it can be a specific percentage paid of the amount of the claim. Some insurance companies even state that a certain period of time must pass prior to any benefits being paid.

Defensive Driver and Driver Improvement Courses: These courses are offered on a state by state basis. Some states have decided to promote safer driving by offering discounts on insurance for people who are in the targeted age range, usually younger and more mature drivers, if they have completed one of these courses which are designed to either teach safe and defensive driving skills to the young, or to reinforce good driving habits among older drivers.

Depreciation: The lowering of a vehicle’s value due mostly to regular use and wear.

Earned Premium: This is the amount of a policy that has actually been “earned” by an insurance company.

Effective Date: Whatever the effective date on your policy, this is the date that your coverage will actually be active. Driving before this date is tantamount to driving uninsured, even if you have already registered your policy, you are not protected by it until the effective date.

Emergency Road Service: Some insurance carriers have this as an additional option on their policies. This option will entitle you to payment by the insurance company for a number of roadside assist services such as towing. This type of coverage may also include opening locked cars, flat repairs, assistance in the case of a car running out of fuel, and battery boosting.

Endorsement: Also referred to as a Rider, the endorsement is, basically, an amendment to the coverage that is provided in the auto insurance policy.

Exclusions: Any specific situation that will not be covered under the terms of your policy would be deemed an exclusion. Any instances of possible exclusions will be listed in the terms of your policy.

Exclusive Agent: This type of agent is one who only represents one specific insurance company. These types of agents cannot provide business to any company other than the one that it represents unless a policy is turned away by the company that the agent represents.

Extraordinary Medical: This is a type of medical coverage that applies to situations where injuries are sustained in an accident that results in long term or permanent effects. Situations where long term assistance is needed or where the medical treatment required is above what your standard medical car insurance would cover can fall under extraordinary medical coverage. First Party Benefits or Personal Injury Protection plans are the types of plans that would typically contain this type of coverage.

Financial Responsibility Law: Each state requires drivers to carry a certain amount of insurance coverage. The minimum amount must be proven in the event of an accident.

First Party Benefits: Also referred to as FPB, this coverage includes many costs that can include you and the relatives that you reside with. This coverage occurs in the event that injuries have been sustained as the result of an accident. When you sign up for FPB you will have to determine the amounts that you are going to be covered up to, and you will be able to be covered for those amounts for costs relating to death or funeral costs, medical expenses, or lost income. FPB is an option in the state of Pennsylvania.

Full Coverage Auto Insurance: A term that the Auto Insurance Industry aims to avoid, because nothing that could truthfully be deemed “full” coverage exists. However, the term is used to occasionally refer to policies that contain coverage beyond simple liability.

Funeral Benefits: Another type of insurance where you must choose the amount you wish to be covered for at the time of the policy signing. Funeral benefits offer the amount of that coverage to be paid to help offset funeral costs in the event of a death in an accident. The payment of these benefits does not hinge on who was at fault in an accident. Funeral benefits are often found as a part of First Party Benefits or Personal Injury Protection.

Gap Insurance: This type of coverage provides the difference of a vehicle’s actual value and the amount that is owed to the company that is financing or leasing the vehicle in the event of an auto accident or in the event that the vehicle is stolen.

Garaging Location: This is one of the many factors that influence the quote you will be offered by your auto insurance company. The garaging location is simply the place where your car is parked most often when it is not being driven. Usually this will be your residence, but it could be different for people who keep cars in locations other than that of their primary residence.

HEV: abbreviation for Hybrid Electric Vehicle. A newer class of vehicle that runs off of both gasoline and an electric battery. HEVs get more miles to the gallon and emit fewer emissions due to their dual fuel source than regular vehicles.

Homeowners Insurance: Homeowners Insurance is typically the insurance company that would cover the theft of property from inside your vehicle, although the incident will also have to be discussed with your auto insurance carrier.

Income Loss: As a result of certain accidents, people are sometimes injured to a point where they are no longer able to adequately perform their job, or they must take time off from work in order to receive medical care. Income loss insurance will help cover the income they are missing out on by not working during that time. This is a part of First Party Benefits or Personal Injury Protection plans.

Indemnity: A financial provision that compensates losses.

Independent Agent: This agent may represent a number of insurance companies. Further, this agent is paid solely on commissions.

Insurance Claim Report: These reports are completed by independent agencies, such as the C.L.U.E – which stands for the Comprehensive Loss Underwriting Exchange, and are not completed by the insurance companies themselves. As these reports hold a detailed analysis of claims that have been filed with insurance companies, the information contained in them might be drawn from multiple insurance carriers in order to create an accurate report, which is part of why they are completed by independent groups.

Insurance Fraud: This is the intentional hiding of facts, lying and fraud of a policyholder in an attempt to gain the payment of a false claim.

Insurance Score: Insurance scores are like credit scores insofar as they are created by independent agencies rather than the insurance companies themselves. These are an objective model that is created based on certain formulas that determine how likely future insurance losses are in your specific case.

Insured: To be insured is to be a person that has an active auto insurance policy.

Judgment: In the realm of auto insurance, a judgment is the final decision by a court as to who is at fault in any given situation. After an accident, if it is contested as to who is fault, the case will go to court and the decision that is reached by that court in regards to fault is known as the judgment.

Lapse: The term, lapse, indicates that a payment has not been made on time on a policy, potentially rendering the holder uninsured. Although, in certain states, a grace period may be issued in the case of a first time lapse to renew the policy.

Liability: You are liable for damages when you are deemed to be at fault for whatever has caused said damages. Liability essentially translates as legal responsibility for an issue.

Liability Coverage: If you are deemed liable for an accident, it means that, after investigation of the incident, the primary fault in the particular situation has been found to belong to you. In these cases, if you have liability coverage, you will not be required to pay for those damages out of your own pocket and, instead, the damages you caused will be compensated for from your insurance. In auto insurance terms, both bodily and property damage are types of liability coverage.

Liability Insurance: The part of your policy that protects you from having to pay out of pocket for damages caused in the event of an accident where the responsibility is found to belong to you.

Limits: When you apply for auto insurance, you will have some flexibility to choose the amount that your insurance company will pay as a maximum for your various types of coverage. These cap amounts are your limits. Choosing your limits can affect your premiums, but many states have minimums that must be met in order to be issued a legal insurance policy.

Loss: Loss is the amount of a claim that a policy holder makes.

Medical Benefits: Medical benefits are one of the many possible inclusions in Personal Injury Protection or First Party Benefits plans. If you are injured in an accident, the chances are that you will have medical bills as a result of that injury. The costs of those doctor’s appointments, treatments, and procedures can be covered up to the limits that you set on your policy.

Medical Payment Insurance: A type of coverage that will cover you in a number of different situations, including potentially covering you and family members if you are hurt by a vehicle while walking, or if you are injured while in another vehicle, and of course while you are driving your own vehicle. This coverage will assist in the payment of medical or funeral expenses for the covered parties up to the amounts of the limits that were set on the initial policy.

Medical Payments Coverage: This type of policy is designed to pay for medical expenses that are encountered as the result of any kind of auto accident. This includes being hit by a vehicle while walking, riding in other people’s cars, and being in an accident in your own car regardless of who is at fault in a given incident.

Motor Vehicle Report: When you apply for insurance, your policy carrier will obtain your Motor Vehicle Report, or MVR, from any states that you have held a valid driver’s license in. This report will contain any and all information regarding any tickets, accidents, or other vehicular violations you have received.

Named Driver Exclusion: This term indicates a person that will be specifically not covered under the terms of an insurance policy. This is a clause placed usually when a known problem driver may be likely to drive a vehicle.

Named Driver Policy: A named driver policy is a policy that has specific drivers that are listed as being covered by the insurance policy so that they are covered by the insurance in the case of an incident.

National Credit File: A report compiled by an independent association that will report on the financial history of an individual. This report will impact insurance scores.

No-Fault: A type of insurance that means responsibility does not have to be determined before settlement.

No-Fault Insurance: A specific type of insurance that requires processing of claims in a method that does not require an assignment of responsibility in the case of an accident before those claims are paid out.

No-Fault States: States that have no fault insurance. This means that, in the event of an accident, insurance companies pay the claim amounts regardless of fault in the case of the accident.

Non-Owners Policy: Insurance for someone who may occasionally drive a car that does not belong to them. You must not own a car or live with someone who owns a car to be eligible.

Non-Passive Alarm: Having an alarm system will sometimes enable you to get a discount on your insurance. A non-passive alarm must be armed before it becomes active. After activation, the alarm will sound if someone tries to gain access to the car, in addition to cutting the power to the ignition, the starter, or the fuel supply.

Passive Alarm: Many insurance carriers will reward a discount for cars equipped with such an alarm. Passive alarms are always armed once you leave your car. If someone triggers the alarm, warnings will sound and the car will not start until the alarm has been properly disabled.

Personal Injury Protection: This type of insurance varies greatly from state to state. In certain states where it is available, it is also mandatory. This type of policy will cover medical expenses or wages lost as the result of an injury in an accident. However, the terms and types of PIP are extremely different from state to state.

Personal Injury Protection Coverage (PIP): Insurance that is available and mandatory in certain states. It covers the insured’s medical expenses and, sometimes, will also cover events such as income lost as the result of an injury.

Pleasure Use: Using a car for fun more than work means defines pleasure use. A pleasure use vehicle wouldn’t be used in the operations of a business or for commuting.

Policy: The specific articles outlying your insurance coverage.

Policy Expiration Date: After the policy expiration date you will no longer be insured unless you have renewed the policy.

Policy Period: The length of time that your vehicle is covered by your insurance policy. This can also be defined as the amount of time between the start date and expiration date of your policy.

Policy Term: Policy terms are the amount of time you and your vehicle are covered by your insurance policy. A usual policy term would be twelve months, although six would not be uncommon either.

Premium: The amount of money that you must pay in order to be covered by your insurance policy.

Primary Driver: The driver that is most often using the automobile covered under an insurance policy.

Primary Policyholder: The person in whose name the policy is registered, and who is usually the primary driver of the car.

Primary Use: Insurance is impacted by the activity the car is used for on a regular basis more than any other. Primary use categories include commuting, business, and pleasure.

Proof of Loss: A physical documentation that proves that a loss has occurred. This will also prove both that loss occurred and that the amount of loss claimed is accurate.

Property Damage: When physical property is damaged.

Property Damage Liability Coverage: Coverage that protects you in the event that you are found to be at fault for an accident that causes damage to another person’s property. Property can include but is not limited to items such as cars, houses, fences, and other physical items. Property damage liability coverage will also cover court costs relating to such property damage.

Property-Casualty Insurance: The same thing, in essence, as property damage liability coverage. This covers the policy holder in the event of damage to another person’s property.

Rate: The rate can be set by either state regulatory bodies or by insurance companies. This amount is decided upon by the history of loss on similar policies, and will help to determine the premium.

Rate Regulation: The rates set by insurance companies are monitored by the state, and this is called rate regulation.

Rental Car Reimbursement: If you need a vehicle at all times, this type of added item to your insurance will cover you for the amount of a rental in order to assure that you have a vehicle if yours becomes unavailable due to theft or damage.

Rental Reimbursement Coverage: This coverage will pay out a certain amount to cover the cost of a rental car if your car has to be repaired after an accident.

Rider: A rider is also known as an endorsement. This is a specifically written article that will either expand upon or reduce the regular benefits of a policy.

Secondary Driver: If a person other than the primary driver is going to drive a car and be covered by the insurance policy, they must become listed on that policy as a secondary driver. This individual can also be known as an occasional driver.

Self-Insurance: If a person decided to assume responsibility for the financial repercussions of any incident, this would be an example of self insurance. All claims are somewhat self insurance, to the degree that the claimant must pay the deductible; which is from their own income.

SR-22: Sometimes an SR-22 will be required in order to gain insurance for people who have previously been convicted of certain violations. The form proves financial responsibility.

Stacking – Uninsured/Underinsured Motorist Bodily Injury Coverage: This is insurance that is designed to cover your medical expenses if you are hurt in an accident where another driver is at fault, and that driver either has no insurance, or has insurance that is insufficient to cover the total cost of medical expense. The remainder of those expenses can be covered by your policy up to whatever limit you set on the policy when you initially signed it.

Steering Restraint: This is a theft deterrent measure. It is a shield or barrier that, when fastened onto the steering column of a vehicle, it makes it harder for someone to hotwire the car in order to steal it. As with an alarm, this sort of theft deterrent measure can entitle you to an insurance discount.

Structured Settlement: A legal term that covers more than car insurance. When an amount is agreed upon to be paid out, it is sometimes paid all at once in a lump sum and sometimes in a number of predetermined payment amounts. The second model is called a structured settlement.

Supplemental Family Member Liability Coverage: This is a type of coverage specific to Maryland. It offers protection to a driver if a family member is harmed in any way as a result of the driver’s actions.

Supplemental Spousal Liability: A type of coverage only available in New York. This coverage provides protection if the policy holder is responsible for an accident that causes harm to their spouse.

Surcharge: Added fees can be assessed for various reasons and added onto the cost of a policy. Most often, these surcharges are added because you have been previously found responsible in an accident.

Tort: The opposite of no fault insurance. Tort refers to a case where in any incident involving two parties, one party will be deemed to be at fault or responsible for the damages.

Total Loss: When a vehicle is damaged and the damage is going to cost more to fix than the total value of the vehicle, the vehicle is assessed as a total loss.

Towing & Labor Coverage: If you have a mechanical problem and your car needs to be towed, or if you get a flat tire that needs to be changed, this coverage will cover the towing and/or labor fees associated with the repairs or assistance.

Umbrella Policy: A policy that provides extra coverage for amounts to be applied after the basic level of protection afforded in the basic policy.

Underinsured: If someone is at fault and their insurance is not set with high enough coverage to pay in full for all of the assessed costs, they would be deemed to be underinsured.

Underinsured Motorist Bodily Injury Coverage: This isn’t available in every state but, in many of the states where it is available, it is also mandatory. This covers you or your passenger’s medical expenses in the event that you are injured in an accident where the at-fault driver has insurance that is not sufficient to cover the full cost of your expenses. You will set the limit on this type of coverage when you acquire your policy.

Underinsured Motorist Property Damage Coverage: This coverage protects your car if it is damaged by a driver with a low amount of insurance. If your car is damaged in an accident where the at fault party has insurance that is not equal to the amount of repairs necessary to your car, this coverage will pay the difference up to the limits you select when you get your coverage.

Underwriter: When you apply for insurance, the underwriter is the person who will approve your application and decide what premium you will be assessed.

Uninsured Motorist Bodily Injury Coverage: If you live in a state where this type of coverage is available, it may be mandatory. If you are injured by a vehicle where the driver has no insurance, or you are injured in a hit and run, this insurance coverage may pay for medical expenses up to the amount of your predetermined limits.

Uninsured Motorist Coverage: A type of insurance designed to protect you if you are in an accident where another party is at fault but has no insurance.

Uninsured Motorist Property Damage Coverage: This coverage may be mandatory if you live in a state where it is offered. You will preselect a limit that you will be covered up to, and if your car is damaged by a person without insurance, the damages will be covered up to the limits you have selected.

Uninsured/Underinsured Motorist Bodily Injury Coverage: This is a combination of the types of insurance that protect you against paying medical expenses in the case of an injury where the at-fault party has no insurance or where their insurance coverage is not adequate to meet your expenses. In either case, your expenses would be protected by this coverage up to the amount of your predetermined limits.

VIN: Unique number given to every vehicle for tracking purposes.VIN stands for Vehicle Identification Number, and is seventeen characters long. A vehicle’s make, model, year, and serial number can be determined from the VIN. It is printed on the registration and the vehicle’s documentation, and engraved in several places on the vehicle itself, like the driver-side door. This number is needed to register car insurance.