Auto Insurance
Things to know
Accident: the unintentional and unexpected collision of two or more objects, one of which is a vehicle.
Accident Frequency: statistics showing the number of times and frequency accidents occur; used by actuaries to predict future losses and determine insurance premiums.
Accident Points: points assigned by the auto insurance company according to a stated schedule and often times according to the dollar amount paid for an accident; typically only at-fault accidents or collision claims will carry accident points.
Accidental Death Benefit (ADB): a supplementary death benefit amount paid in addition to the face amount death benefit on a life insurance policy, paid if the cause of death is determined to be an accident.
Act of God: an unpreventable event or accident that is a result of natural causes such as lighting, tornadoes or floods.
Actual Cash Value (ACV): the replacement cost of damaged, lost or destroyed property determined by using the cost of “new” minus depreciation. Ex: The actual cash value of an 8 year old car is the new car cost minus 8 years of depreciation.
Actuary: as applied to insurance, a specialist who with the use of gathered data calculates rates, reserves, dividends and other statistics and essentially helps determines the premium to be charged for insurance.
Adjuster: see below, Insurance Adjuster
Additional Insured: an organization such as another individual, a lender or auto leasing company, other than the insured, whose financial interest is protected under the named insured’s policy; also known as Additional Interest.
After Market Parts: vehicle replacement parts and equipment that are not original to the manufacturer of the vehicle, but are designed to perform the same function and uphold the same quality as the original manufactured part or equipment.
Agent: a licensed professional who solicits, sells and services insurance policies.
Amendments: changes made to the Automobile Insurance Policy.
Applicant: this is the person who is actually applying for an Auto Insurance policy.
Application: signed by the policy holder, this is a written statement that provides the details of the policy being applied for.
At-Fault Accident: an accident where you are at fault; often times in an accident situation involving two or more drivers, the person(s) ticketed is considered to be at-fault; if there is only one driver involved in a collision other than animal collision, the driver will usually be named at-fault.
Automobile Insurance: an auto insurance policy that offers at minimum liability coverage for vehicle driven and can provide comprehensive coverage, collision coverage, glass coverage and other available endorsements such as towing and labor, extended transportation, and Auto death Indemnity protection.
Automobile Liability Insurance: automobile insurance that only provides liability protection
Binder: a written statement by the insurance company stating the date coverage is bound by the insurance company.
Broker Agent: an agent that represents more than one auto insurance company.
Cancellation of Policy: an auto insurance policy can be cancelled by the insured or the insurance company for reasons stated within the policy or reasons stated under the law of the residing state; a termination of coverage.
Captive Agent: An Agent who represents only one auto insurance company.
Casualty: an unfortunate and catastrophic incident; a casualty often refers to the death of an individual.
Claim: a request to be indemnified or reimbursed under an auto insurance policy for an incurred loss by a covered peril.
Claimant: the person or group making the accident claim or auto claim.
CLUE Report: CLUE is the registered trademark of Comprehensive Loss Underwriting Exchange which provides claim information in report form of past and present claims; most insurance companies submit claim data to this organization to share relative claim data with other insurance companies.
Collision Insurance: physical damage protection, for additional premium, provided for within an auto policy that shares a loss when the driver of a vehicle collides with another vehicle or object; usually a deductible will apply.
Commission: a percentage of the auto policy premiums paid to the agent.
Comprehensive Insurance: physical damage protection, for additional premium, within the auto policy that covers a loss that is other than collision; comprehensive insurance may cover glass breakage, theft, fire, hail damage, vandalism and animal collision; usually a deductible applies to this coverage.
Continuous Coverage: the length of time you have carried uninterrupted coverage on your vehicle.
Customized Equipment: when non-standard customized equipment is added to an insured vehicle, this coverage can provide a stated dollar amount of coverage for the custom equipment.
Coverage: the limits of protection provided for in an insurance policy; coverage is typically listed in the Declaration Pages and among other details name the individuals insured, dollar limits of coverage, perils covered against and specific properties covered.
Declaration Page: the initial part of your policy pages that list the named insured, drivers, vehicles covered, coverage amounts, coverage type, deductible and the premium cost for the coverage provided within the policy.
Deductible: the amount of self insured risk the auto owner accepts; when filing a claim, this is the portion of the collision or comprehensive loss the insured pays.
Depreciation; the decrease in value of property due to age, wear and tear and mileage.
Effective Date: the actual day your auto coverage is in force; auto policy start date.
Estimate: refers to an adjusters estimated value of damages; can also refer to the estimated cost to repair property that is damaged or lost.
Exclusions: any item, condition, person, property, specified peril or loss not covered by the auto policy.
Expiration Date: the ending date of a policy.
Extended Transportation Expense: in a circumstance of a covered accident, this coverage will provide a specified amount of daily reimbursement for the expense of renting a temporary vehicle.
Full Coverage: this term refers to a policy providing liability and both comprehensive and collision coverage; full deductible is a zero dollar deductible.
Gap Insurance: Insurance often purchased when financing a vehicle; refers to the difference in loan value and the depreciated value of a vehicle; in an accident occurrence, occasionally the actual cash value, the appraised value, of a total loss vehicle is less that the loan amount owed on the vehicle. In this case, gap insurance would provide coverage for the “gap” in the two values.
Grace Period: The time allowed to pay unpaid insurance premiums after the premium due date in which the insurance company still honors the policy as “In Force”. The premium is considered to be paid on time if paid during the grace period.
Indemnity: Restoring an insured person to the same or similar conditions as the insured was prior to an accident or loss, by repair, replacement or payment.
Independent Agent or Producer: usually represents more than one insurer.
Insurable Interest: one must be subject to financial loss under unexpected circumstances, in order to be of insurable interest.
Insurance Adjuster, aka Claims Adjuster: representative of the insurance company whose main objective is to fairly determine the extent of loss for a submitted claim; also known as an Adjuster.
Insurance Attorney: an attorney who specializes in insurance related cases, auto accidents or practice.
Insured: the individual or entity being protected by the auto insurance policy.
Insurer: the auto insurance company.
Lapse of Coverage: a time period when auto insurance premiums have not been paid and auto insurance in no longer in force.
Liability Insurance: see above, Automobile Liability Insurance.
Loss Payee: the individual or lender whom has financed the vehicle; in an occurrence of loss, the loss payee would receive claim funds to pay for the lost collateral.
Malicious Mischief: damage done to a vehicle due to unlawful entry or other vandalism.
Medical Expenses, aka Medical Payments: Payments made for medical needs, bills paid or medical claims of the driver or passengers in a driver’s vehicle, when the driver is at-fault.
Minimum Liability Coverage: this is the minimum allowed liability coverage as set by each individual state.
Motor Vehicle Record (MVR): the state department of motor vehicles comprehensive report including, but not limited to the driver’s license issue and expiration date, specified convicted violations, a record of accidents involving a police officer, license endorsements and descriptive information of the driver.
Multi-Car Discount: many insurance companies will provide an additional discount if more than one vehicle is insured on the same policy.
Mutual Insurance Company: an auto insurance company owned by its policy holders.
NAIC (National Association of insurance Commissioners): Association of state insurance commissioners whose primary purpose is to promote uniform insurance regulation.
Named Insured: the individual or group that is specifically named within the auto insurance policy.
Non-Renewable: the decision of the insurance company not to continue your auto insurance coverage once the initial policy expires.
Not-At-Fault Accident: an accident occurrence which is deemed to be the fault of another; Not-At-Fault accidents are often covered under comprehensive insurance.
Occasional Driver: when adding an inexperienced driver to an auto insurance policy, that driver is assigned as a primary or occasional driver to a specific vehicle listed on the auto policy according to underwriting guidelines.
Occurrence: an event that results in a loss or damage to property or vehicles.
Peril: a circumstance that causes a loss and is covered by the insurance policy.
Personal Injury Protection (P.I.P.): in states with NO-Fault auto insurance, this coverage pays for basic needs, such as medical care expenses for the insured and his or her family if involved in an accident.
Personal Lines: types of insurance that protect individuals and families including personal auto insurance, home owner insurance; other individual insurances are health insurance and life insurance.
Physical Damage: the coverage in an auto policy that provides funds to pay for damages or loss to property caused by an accident; physical damage insurance may pay for damages to vehicle that has been damaged, a telephone pole, or other structure damaged in an accident.
Policy: a written insurance contract, including all endorsements, clauses, exclusions and areas of coverage for the policy.
Policy Holder: the main applicant and typically the named insured of the policy.
Policy Period: actual and effective period the auto policy provides insurance protection.
Preferred Auto: refers to an auto applicant that has a clean driving record without accidents or tickets; a preferred driver is an acceptable risk for an insurance company and is often rewarded with lower premiums.
Premium: the amount one pays for an auto policy.
Principal Driver, Primary Driver: the driver assigned to a vehicle that is the primary driver of that vehicle; see above, Occasional Driver.
Quote: an estimate of insurance cost provided to an applicant by an auto insurance agent; a quote is not a guaranteed price.
Reinstatement: following a lapse of coverage, once the premium is paid for an auto policy to put the policy back in force, the policy may be reinstated.
Reinsurance: an insurance for insurance companies that enables an Insurance Company to share the risk of loss; in circumstance such as insuring a class of high risk drivers, the risk of large loss can be absorbed by more than one company which reduces the burden of a large loss on a single company.
Repair or Replacement Coverage: when referring to an auto policy, this coverage may be placed on a new vehicle at the time of purchase; underwriting requirements may include that the endorsement must take place within the first 100 odometer miles or 30 days of ownership. In the event of an accident, this coverage provides for the repair or replacement of the vehicle without regard to the actual cash value of the vehicle.
Renewal: most auto insurance policies will renew automatically unless cancelled by the insured or the insurer; a renewal is the continuation of an auto policy.
Rental Reimbursement: see above, Extended Transportation.
Salvage: damaged vehicle or other property that is sold or reconditioned to reduce the amount of loss.
Short Rate Cancellation: Termination of an auto policy within the policy period, in which the amount of premium returned is reduce by fixed expenses incurred by the insurance company; in a short rate cancellation, the premium returned is not proportional to amount of days remaining on the policy.
Split Limits: when establishing liability limits in an auto policy, limits can be one lump sum, Combined Limits, to cover all bodily injury and property damage or have Split Limits. Example: 25/50/100 split limits would indicate bodily injury protection of $25,000 for one person up to $50,000 bodily injury for the whole accident and $100,000 for property damage.
Standard Auto Insurance: an auto policy that is rated with standard rates and charged a standard premium, for a typical driver who has incurred a minor traffic ticket or minor accident.
Stock Company: an auto insurance company owned by its stock holders.
Subrogation: a stated right of the insurer to attempt to recoup losses paid by pursuing remedies for damages against a third party
Surcharge: an additional premium charge by an insurance company that is higher than standard rates.
Theft: theft coverage in an auto policy will provide protection in the event a vehicle is stolen; minimal coverage, if any, is provided in an auto policy for personal items stolen from a vehicle.
Total Loss: in relation to an auto claim, a high percentage of damage is considered a complete loss of property use.
Towing and Labor Costs: a reimbursement insurance that pays customary expenses for towing, locksmith or other labor needed, up to the limits in the policy.
Transportation Expenses: see above, Extended Transportation Expense.
Umbrella Policy: a policy that provides additional limits of coverage for all underlying policies such as an underlying auto or home policy.
Underwriter: an individual who works for the insurer, who is trained in evaluating driver risks and determining coverage allowed within the insurer’s underwriting guidelines.
Underwriting: the process of reviewing an automobile insurance application to qualify the application under the insurer’s underwriting guidelines and to ensure that all discounts and necessary charges are applied to the policy.
Underinsured Motorist Coverage: bodily injury and property damage protection within an insured’s own policy that provides protection in the event of the insured’s loss by a driver who carries auto liability insurance, but does not have enough insurance to cover the damages incurred; this coverage is only up to the limits specified in the auto policy.
Uninsured Motorist Coverage: bodily injury and property damage protection within an insured’s own policy that provides protection in the event of the insured’s loss by a driver who does not carry any auto liability insurance, and is not able to pay for damages incurred: this coverage is only up to the limits specified in the auto policy.
Vehicle Identification Number (VIN): this is the unique identification code given to a specific vehicle; the VIN is comprised of a series of letters and numbers and is noted of the title of the vehicle and is stamped to the vehicle on the driver’s side lower windshield and is often on the inside of the driver’s door.
