Car Insurance Glossary

Either you offer or want to buy car insurance, the language used by car insurance companies should be known. Some are rather self-explanatory, while others are much better understood when accompanied by a definition.

Only when you understand every word can you help your customers choose the proper insurance for their needs. If you are a buyer, it is important that you comprehend each sentence so that when it comes to filing a claim, you are not taken off guard.

Terms

A

Accident

An unanticipated and accidental incident that causes harm to at least one vehicle. In addition, vehicle occupants may be injured.

Accident-Only Policies

Insurance policies that pay only claims resulting from a car accident or injury.

Actual Cash Value

It’s the reasonable worth of an automobile after an accident, destruction, or theft. When a driver lodges a loss claim, its insurance company sends an adjuster to meticulously examine each vehicle component. They will check the body, tires, interior, and equipment of the car.

Furthermore, you will understand the condition of the car before the robbery accident. On the basis of all of this evidence, the adjuster will determine the real money worth of the vehicle.

Actuary

A risk assessment specialist in vehicle insurance. The actuaries’ insurance projections are based on accident frequency, life expectancy, and loss reserves.

Actuarial Report

The publication aims to empower the national regulatory authorities and the Board of Directors, or similar, formally of professional findings and proposals of the actuary. The report also documents and communicates several methods and methods for ensuring that the recipients of the report are conscious of the relevance of the actuarial findings and views. The analysis for publishing the opinion is also presented in this paper.

Additional Interest Insured

In a policy, a person or company is designated as an extra interest is insured. In the event of an accident involving an insured person or vehicle, this entity may be held responsible. An extra interest insured might be deemed a lienholder.

Adjuster

Professionals who help insurers or claimants resolve loss claims. They study and evaluate each claim carefully, and then recommend payment according to the coverage of the insurance policy.

Administrative Expense Charge

Price deducted from a car coverage in cash, usually once a month.

Advance Premiums

This subscription should be paid before the effective date of the insurance after it has been processed and authorized. These are considered by insurance companies to be liabilities and are not represented in the written premiums or unpaid premium reserves.

Agent

The insurance company representative sells auto insurance policies to customers.

Aggregate

The maximum amount of coverage is payable, either for a single loss or multiple losses in a policy period or on a single project.

Anti-Theft Device

Devices that help prevent automobile theft, either active or passive. A passive device does not need to be activated, automatically arming itself when the car is off, the key is switched off and doors are closed.

An activated device requires the driver, for example, to lock the car or push a lock button. They must be reactivated every time the car is shut off or not working. Vehicles fitted with anti-theft equipment of any kind may be eligible for a coverage reduction.

Application

Customers filled out the form. This form contains information that the insurance company will use to determine whether or not the customer is a good insurance risk.

Appraisal

A documented evaluation of the property’s value. Car repair specialists or insurance adjusters do damage evaluations.

Assigned Risk Plan

Those unable to acquire basic liability coverage due to a bad driving record that has been validated are assigned a special policy type. The State administers these policies. Assigned for some drivers to write premium insurance.

Attach

The insurance company seizes assets or property when a customer has outstanding debts. The customer may also be unable to pay for the debt in cash. They also have assets that cover the value or amount of the debt.

$25/$50/$15

Drivers who acquire liability insurance are given these numbers. They represent the tens of thousands of dollars in liability insurance coverage for bodily injury per person, physical injury for all persons affected in the same occurrence, and property damage liability. Almost every state mandates a certain level of coverage, with insurers offering the option to purchase more.

Automobile Liability Insurance

This kind of coverage protects drivers against the danger of a bodily injury or a loss of property caused by a vehicle accident. If the motorist has been determined to have caused a loss of property or bodily damage to others.

B

Binder

This is a temporary insurance contract that shows the vehicle is covered by a policy until the permanent policy arrives.

Bodily Injury

Injuries are suffered by a person. This can include the person’s death.

Bodily Injury Liability Coverage

A portion of a policy that encompasses the driver, up to policy limitations, in cases when the driver is legally guilty of harm to the pedestrian or other driver. This applies to medical costs, loss of income, and suffering and pain.

C

Cancellation

The insurance policy ends before the policy is renewed. Cancelation of the company or the individual insured.

Claim

A request from the covered driver to cover an insured loss. These are made by phone call, in writing, or online.

Claimant

The person who submits a claim for an insured loss.

Collision Coverage

This is optional coverage for damage caused by a clash with a fixed object, for example, a wall. It also includes damages caused by rollover incidents. Severe pothole damage can also be covered. It applies only to the automobile covered by the policy — it will not pay for damages to anything damaged by the car. The responsibility for property damage encompasses this.

Combined Single Limit

This kind of insurance provides a single sum for both bodily injury liability payout limitations and property damage. It varies from a split limit policy with distinct limitations for (per person) body injury, body injury per crash, and property damage per accident.

Comprehensive Coverage (for physical damage other than collision)

This compensates for damages or losses caused by damage other than an accident in your car. These include hail, tornadoes, floods, fire, vandalism, theft, and falling items.

Continuously Insured

A consumer is covered, either by an insurer or by a second insurance provider. There is no coverage break.

Contract

The policy. Contracts between clients and insurance firms are insurance policies.

D

Declarations Page

This page, known as the “dec page,” provides the name, location, and description of the insured object, its names, and addresses, the term for the policy being implemented, premiums payable, and coverage.

Deductible

How much must the insured individual pay after a loss before the insurance company pays?

Dollar Threshold

This level prevents persons from claiming pain and suffering in jurisdictions with no fault of car coverage. In order to qualify for the right to sue, medical expenditure must increase beyond a certain amount of the dollar, known as the “threshold.”

Driver Education Credit

Auto insurance discount for younger drivers. These drivers are eligible for this discount once they finish their driving training. This is available exclusively in select countries.

Driver Improvement Course

Conductors over the age of 55 can take optional training to enhance their driving abilities. This course can help drivers qualify for a policy discount if certain qualifying conditions are fulfilled.

Driver Status

Other drivers can be added to policies. Each status describes the driving privileges for each person.

Rated: may actively drive a vehicle listed on the policy

Excluded: Person is not allowed to drive any vehicles on the policy. Not covered under the policy

Limited: Residents of a household who don’t drive the vehicles on the policy. This may include roommates.

E

Effective Date

The date the policy takes effect.

Endorsement

Written policy agreement included. This agreement adds or removes coverage. This agreement. Once approval is provided, it is first examined under the original policy terms.

Exclusions

Actions not covered by an insurance policy. These include regular wear and tear, deliberate acts, and drag races.

Extended Coverage

This is an additional endorsement of a policy. In the insurance, it may be a clause that adds extra coverage for risks other than those covered by standard policy terms.

F

Fair Market Value

The price of a car between prospective buyers and sellers will vary. Both parties must be aware of the relevant facts. Buyers and sellers are not obligated to sell their automobiles.

Financial Responsibility Law

Each driver must have vehicle insurance under this law. Some states enable a monetary deposit to demonstrate the owner’s capacity to pay for fault causing losses to others. The losses are caused throughout the vehicle’s operation. This is legal in 47 countries and the Columbia district. In no state is it allowed to operate a car without evidence of insurance first.

Free Look Period

The time frame for an insurer to terminate a vehicle insurance coverage during this period for any reason. It’s generally the first 30 days of the insurance, however, that varies according to state.

Full Coverage

This phrase relates to how much a motorist is covered by insurance. Although no full coverage is provided, this word normally indicates a person has complete coverage and coverage of responsibility.

G

Gap Insurance

An insurance cover paying for the difference between the vehicle’s real cash worth and the amount remaining on the loan.

Garaging Location

If a vehicle is not in use, parked. This is generally the residence of the car owner.

Grace Period

The term from the date of the insurance until the time it expires. It’s usually 31 days. The insurance remains in force when the premium payment is due, but not paid.

I

Indemnity

This is the basis for every car insurance coverage. The aim of ‘insurance’ is to assist the insured individual in returning to the same financial situation after the loss that was caused prior to the loss (the concept to ‘make you whole).

Independent Agent

An insurance agent representing a number of insurance firms. This representative is not an employee of any of these firms. They get commissions from insurance sold by each firm, though.

L

Lapse

The expiry of a policy when a party fails to fulfill its responsibilities in time. If an auto policy lapses, the driver may pay higher premiums under a new policy because insurance companies have decided that drivers who allow their policies to lapse are at higher risks than those who don’t allow their policies to lapse.

Liability Coverage

The other driver’s injuries are covered. It also covers damages made by another driver to the other driver’s car in an accident. This also includes individuals who drive the vehicle with the consent of the insured driver.

Liability limits

This is the maximum amount insurance pays. For each harmed party, it must pay at least $25,000. The total allowable coverage is $50,000. A simple policy has coverage of “$25/$50/$25” and specifies the thousands of dollars payable each.

Loan/Lease Payoff Coverage

This is frequently known as a “gap” since the insurance company covers the difference between what is owned by the insured on their car and what is paid for by the insurance company if the vehicle is stolen or declared wrecked. The sum made is minus the deductible for any collisions.

Loss

One claim is paid by an insurance company.

Loss History

The total number of claims submitted by a policyholder. Insurance firms evaluate loss histories when deciding whether to sign a new policy or to renew an existing policy. This is also utilized as insurance firms are concerned that a policyholder is likely to submit a claim in the future.

M

McCarran-Ferguson

This law, enacted in 1945, gives authority to states to tax and regulate the insurance profession.

Medical Payments Coverage

This one is part of car insurance coverage. It covers medical and burial expenses incurred by the driver and his passengers in an accident. This coverage is made irrespective of who is responsible.

Medical Payments and Personal Injury Protection (PIP)

This is a limitation on medical and burial costs if the driver, family member, or passenger is wounded or murdered in a crash. PIP also includes income loss compensation.

N

Named Driver Exclusion

Approval to exclude accidents involving a person excluded from the insurance policy.

Named Driver Policy

This insurance does not cover someone who lives in a listed insured person’s dwelling. This includes a car insurance policy endorsed to cover just those drivers listed in the policy.

Named Insured

The first individual to do the policy on whose behalf the policy was issued.

No-Fault Insurance

Auto Insurance regulations oblige insurance firms in certain countries to reimburse such damages irrespective of who caused the collision. Personal injury protection is the most basic coverage of medical, hospital, and funeral costs for the driver. Foot and passenger expenditures are also covered. Lost wages and other accident-related expenses might also be compensated.

Non-Economic Benefits

These are advantages paid for intangible losses such as emotional stress, pain, and suffering, annoyance, quality of life degradation, and loss of the consortium.

Non-Owners Policy

Covers that the person who does not own the car gives responsibility, medical payments, and uninsured motorists.

Non-Renewal

The insurance firm decides not to renew the coverage of the consumer.

O

Occasional Driver

Someone who is not the insured primary driver.

P

Payee

The insured person or beneficiary who receives the insurance company’s loss payout. The loss payer is the financial institution for an insurance policy that financed the vehicle’s loan or rental. The insurance company pays the loss payable first if the car is a complete loss.

Personal Injury Protection (PIP)

First-party benefits package providing medical compensation for your loss of salaries, health expenditures, and loss of the insurance holder’s basic services. This also covers funeral expenses and is linked to insurance without default.

Policy Period

Also known as the “political phrase.” This is the time your policy is active.

Premium

The insurance is paid by the insured individual to their insurance company for maintaining or obtaining car insurance coverage.

Primary Residence

The location in which the policyholder resides most of the time his insurance is in force.

Primary Use

The principal usage of the vehicle of the policyholder: personal, fun, from and to work, or farming.

Principal Driver

The individual who most regularly utilizes the car is known as the main driver.

Property Damage Liability Coverage

This is the portion of a basic car insurance plan covering up to and including the policyholder for losses resulting from damages or destruction of personal property by someone else. In most countries, this coverage is obligatory.

Proximate Cause

Restoration or replacement of items lost or destroyed. Depreciation or current market value is not taken into consideration. A guaranteed cost for new vehicles is provided by certain vehicle insurance providers if the vehicle loss takes place during the first 12 months or 12,000 miles placed on the vehicle.

R

Rate

Cost of one insurance unit. This sum is worth around $1,000. The insurance coverage is based on customer experience in the loss for similar risks. Based on prior experience with the firm, an insurance company charges its clients. The client should be grouped according to variables such as age, sex, driving history, marital status, and the vehicle’s brand and model.

Refund

The cost is determined back to a client after the insurance premium has been overpaid.

Reinstatement

While car insurance coverage is reinstated when the premium is not paid.

Renewal

Maintaining a policy in force after its expiry. The consumer is notified that the policy is due to expire within x weeks so that they can continue to make a payment.

Rental Reimbursement Coverage

Part of an insurance vehicle that pays so much for a rental automobile per day so that the policy owner can repair his vehicle after an accident.

Replacement Cost

Another element of the policy is that the dollar is needed to substitute destroyed personal items. This does not deduct the depreciation costs. However, the maximum cash amount of the policy is restricted.

Rescission

An insurance policy is canceled by the insurance firm when a substantial misrepresentation (lying) is disclosed.

Rider

A formal attachment to a policy that either extends or restricts the advantages to which the policy applies. This is also known as support.

Roadside Assistance Coverage

This includes services such as pneumatic changes, towing, battery jumping, and locksmith services. Customers are available for an extra premium if this is not currently part of their policy.

Rule of 78

This calculates the rest of the premium, bearing in mind that higher insurance coverage is necessary at the beginning of a loan. As the repayment of the loan is larger, the premium is higher also. When the loan is paid off, less cover is required for the car. The proportion of refunds will decrease.

Rule of Anticipation

This is related to the Rule of 78. A newer car demands more insurance since the overall payout is greater. The quantity of coverage needed will be reduced when the loan has been paid off, indicating that the percentage of refund will also be reduced.

S

Salvage Titles

Everything depends on the state. In certain countries, rescue titles are dependent on the damage caused by a vehicle. Other states demand a total loss for the car. Those names indicate whether the vehicle may be reconstructed or whether just components can be utilized.

In some countries, the title is changed whenever the damage estimate reaches a proportion of the retail value of the vehicle (75 percent is one estimate in New York). Even if the car is not a total loss and may be reconstructed, this legislation still applies.

Second Named Insured

The insurance adjuster may demand a car policy to designate another individual who is named the “second named insured” in a vehicle policy. Its coverage is the same as the specified insured driver.

Split Limit

These plans have three distinct liability limit levels. One sum is per person for bodily injury; the second is for accident bodily injury, and the third is for accident property damage. In this sequence, the policy will state these limitations. It can be shown as $100/$300/$100 (for thousands of dollars).

SR-22

A court may need this record to demonstrate the financial responsibility of people convicted of certain kinds of traffic offenses.

Surcharge

An extra fee will be charged to a subscriber premium. This usually happens if the insured has a record of incidents at fault.

T

Third Party

A third party is someone other than the holder of a policy or members of the family covered directly by a vehicle insurance policy. The insurance company is regarded as the second party.

Threshold

The moment where an injured individual can bring a recovery case for physical harm, agony, and discomfort. The individual being sued is the one responsible for the automobile accident.

Tort

An act that causes injury to a person or property harm. This is typically the basis of civil action (lawsuit). Does not cover contract infringement.

Towing and Labor Coverage

This coverage states that a car is not drivable for towing expenses. This also includes personnel costs for operations such as fixing a flat when the vehicle has collapsed.

U

Underwriter

The person who looks at insurance applications and assesses if the applicant is an appropriate risk. You also set the premium that the consumer pays.

Underwriting

The process of deciding whether a coverage application is approved or dismissed.

Uninsured and Underinsured Motorist Coverage

One element of insurance coverage for vehicles. This covers damage to the customer and anyone involved in an accident involving an uninsured motorist or one who does not have sufficient coverage. UM/UIM is not compulsory in all 50 States, however, holding this coverage is a great concept.

Uninsured Motorist Coverage (UM)

Element of coverage covering the driver, family members, and passengers involved in an uninsured driving accident. UM coverage for injuries, including death, can be used by customers and passengers. Exclusions may apply. This may apply.

Underinsured Motorist Coverage (UIM)

If a motorist with insurance coverage insufficient for a UIM accident has an accident, it allows the customer with this insurance coverage to be reimbursed for his injuries, even death. It also applies to travelers and relatives of residents. Customers can pick their desired coverage limitations. Exclusions may apply so that they read their rules carefully.

Uninsured/Underinsured Motorist Property Damage Coverage

More like relative for body injury, this portion of insurance covers property losses caused by a motorist who is not insured or is covered too little. It also applies to anyone wounded by an unidentifiable motorist. This sort of coverage is necessary for several states. Exclusions may again apply.

V

Vehicle Identification Number (VIN)

This number is uniquely connected to the vehicle. Can be situated on the driver side of the dashboard, the driver side door, the registration of a car, or the title. It comprises 17 letters and digits identifying the vehicle’s fabric, model, and year.

Verbal (or Descriptive) Threshold

This outlines the sort of significant injury someone must incur before a lawsuit may be filed against the motorist causing the accident.

To know more about car insurance, you may check out our insurance company reviews of Columbia Car Insurance Review.

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Levi Jorgensen
Levi Jorgensen is the co-founder of CarInsuranceGrades.com & LifeInsuranceGrades.com. He is an avid lover of creating amazing content to educate people about life insurance. He is a life-long explorer. When he's not writing about life insurance, he builds websites, and manages local marketing campaigns for insurance agents. He's based in Columbus, Ohio with his wife and 2 children.
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