Car Insurance Definitions

Car Insurance Definitions

What is a Car Accident?

A sudden fortuitous event.

What is an Actual Cash Value (ACV)?

The cost to replace an item of property at the time of loss, less an allowance for depreciation. Often used to determine amount of reimbursement for a loss.

What is a Binder?

An oral or written statement providing immediate insurance protection, valid for a specific period. Designed to provide temporary coverage until a policy can be issued or denied.

What is a Bodily Injury?

Usually defined to include physical harm, sickness, disease, or death resulting from any of these.

What is a Claim

The assertion of a legal right against an insurer, that carries with it a demand for appropriate relief.

What is a Collision?

A type of physical damage insurance, which covers loss due to the insured object striking another object.

What is Comprehensive Coverage?

A broad physical damage coverage which covers all property losses except collision and those perils or property which are specifically excluded.

What are Conditions?

The portion of an insurance contract which sets forth the rights and duties of the insured and insurance company.

What is a Contract?

A legal agreement between two parties promising a certain performance in exchange for a certain consideration.

What are Declarations?

The section of an insurance contract which shows who is insured, what property or risk is covered, when and where coverage is effective and how much coverage applies.

What is a Deductible?

Usually, a dollar amount the insured must pay on each loss to which the deductible applies. The insurance company pays the remainder of each covered loss up to the policy limits.

What is a Driver Improvement Course?

A voluntary refresher course available for drivers age fifty-five (55) and older to enhance their driving skills.

What is an Endorsement?

A document, which is attached to the policy and modifies or changes the original policy in some way.

What is an Exclusion?

Section of the insurance policy, which list property, perils, person, or situations which are not covered under the policy.

What is a Financial Responsibility Law?

State law in some states which requires owners or operators of autos to provide evidence that they have the funds to pay for automobile losses for which they might become liable. Insurance is the usual method for providing this evidence to the state.

What is Fraud?

A false statement intended to deceive the insurer and induce it to part with something of value or surrender a legal right. May void a policy.

What is Garage Location ?

The zip code where your vehicle is parked when not in use and usually corresponds to your primary residence.

What is Indemnity?

A principle of insurance which provides that when a loss occurs, the insured should be restored to the approximate financial condition occupied before the loss occurred, no better, no worse.

What is Insurance?

A contract whereby one undertakes to indemnify another, pay or allow a specified amount or a determinable benefit upon determinable contingencies.

What is Liability Insurance ?

Insures the individual for financial losses which arise out of the person’s responsibilities to others imposed by law or contract.

What are the Limits of Liability ?

The maximum amount of insurance the insurance company will pay for a particular loss, or for a loss during a period of time.

What is Named Insured ?

The first person in whose name the insurance policy is issued.

What is an Occasional Driver?

The person who is not the primary or principal driver of the vehicle.

What is Personal Injury Protection ?

A coverage provided in Auto insurance policies in some states that provides coverage for the insured’s own injuries on a first-party basis, without regard to fault.

What is Physical Damage ?

In auto insurance, damage or loss to the insured’s own autos or autos in the insured’s care, custody or control.

What is a Policy?

An insurance contract

What is a Policy Expiration Date ?

The date when your current insurance policy expires. This date can be found on your current policy, Declaration page, insurance identification card or recent cancellation notice. This date is not to be confused with the date of your next payment or when your renewal payment is due.

What is a Policy Term ?

The length of time that the policy is in force. Most companies offers annual and semi-annual policies.

What is a Premium?

An amount of money paid to an insurance company in return for insurance protection.

What is Primary Use?

What your vehicle is mainly used for: ?

To/From Work: If you use your vehicle to drive to and from your work and/or school. ?
Business: If your vehicle is used for one or all of the following: used to make sales calls, used as vehicle for business trips to bank or post office, picking up supplies, going to different locations owned or leased by a partnership or corporation that have a business listed as and additional interest on the car ?

Farm: If your vehicle is used primarily on a farm, ranch or orchard Artisan If your vehicle is operated by you in a trade or business where the vehicle is: owned or leased by an individual operated solely by the named insured or other resident relatives used to transport tools or other materials where such transport is incidental to the insured’s trade or business at no more than 2 job sites per day.

What is a Principal Driver?

The person who drives the car most often Private Passenger Autos Ordinary cars, station wagons and jeeps, utility autos (pick-ups, panel trucks and delivery vans of 1,500 lbs. or less, not used commercially) and utility trailers designed to be pulled by a private passenger auto.

What is Property Damage ?

A type of loss covered under many liability contracts. Property damage means physical injury to tangible property, including loss of use.

What is a Salvage?

Damaged property that may be retrieved, reconditioned, and sold to reduce an insured loss.

What is an SR-22?

A form which must be filed by the insurance company stating that auto liability insurance is in effect for a particular individual. Required when insurance is provided to an individual who was in an accident or was convicted of a traffic offense and was unable to show financial responsibility.

What is Subrogation?

The transfer to the insurance company of the insured’s right to collect for damages.

What is Uninsured/Underinsured Motorist ?

Automobile coverage designed to provide protection for the insured should he or she be included in an accident in which the driver at fault has no insurance (or not enough insurance) to cover the loss.

What is a Vehicle Identification Number (VIN) ?

The vehicle identification number (VIN) on your vehicle. This number is usually found on the dashboard of your vehicle on the driver’s side, and is usually listed on the vehicle registration and title. The VIN number is a combination of letters and numbers 17 characters in length that can be used to identify the make, model, and year of your car.

Auto Insurance Glossary – Car Insurance Terms

The following list of auto insurance terms is in alphabetical order.  Scroll down to find the terms you are looking for.  If you cannot find your terms or need additional help, click on the Chat Live link on the right and a customer service rep. will be more than happy to assist you!

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 insurance 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.

Anti-Theft Device

Devices designed either to reduce the chance an auto will be vandalized or stolen, or assist in its recovery. Examples include car alarms, keyless entry, starter disablers, motion detectors, parts of the vehicle etched with the Vehicle Identification Number, and recovery systems.

Assigned Risk

A risk not ordinarily acceptable to insurers which is, according to state law, assigned to insurers participating in a plan in which the insurers agree to accept their share of these risks.

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.

Automobile Insurance Plans

The name for “assigned risk” plans. These are plans set up and monitored by the state to help people who are unable to secure auto insurance through standard insurance carriers. See Assigned Risk.

Basic Auto Policy

Although still used today to insure substandard risks, two-wheel motorized vehicles, and commercial autos, the Basic Auto Policy has been primarily replaced by the Personal Auto Policy, which combines both physical damage coverage and liability insurance for claims arising out of the ownership or use of a vehicle.

Basic Limits of Liability

The least amount of liability coverage that can be purchased, which is generally equivalent to the minimum amount required by state law. In determining rates, a carrier will use the basic limits to develop the base rates. If an insured person wants higher limits, the carrier applies an increased limits factor to the base rate in calculating the new premium for the increased coverage.

Bodily Injury Liability

Legal liability for causing physical injury or death to another.

Collision Insurance

This covers loss to the insured person’s own auto caused by its collision with another vehicle or object.

Combined Single Limit

Bodily Injury and Property Damage coverage expressed as one single amount of coverage.

Commission

That portion of the premium paid to the agent as compensation for the agent’s services.

Comprehensive Coverage

Covers damage to your vehicle caused by an event other than a collision or overturn. Examples include fire, theft, vandalism, and falling objects.

Continuous Coverage or Continuous Liability Insurance

Continuous coverage refers to the length of time you have maintained insurance on your vehicle.

Covered Person

This refers to the named insured, spouse, resident relatives, etc. that are insured under a policy contract.

Customized Equipment/Special Equipment

Items not included in standard insurance options available for cars. These may include extra electronic equipment, special paint or exterior items, or amenities added to the inside of a van or truck.

Deductible

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

Defensive Driver Course

These are classes either offered through or approved by Departments of Motor Vehicles to enhance driving skills. These courses may make drivers eligible for discounts on their premiums. Courses taken for traffic school because of a moving violation are not eligible.

Drive-Other-Car Endorsement

Optional coverage that broadens the definition of a covered auto to include non-owned vehicles the insured person operates.

Driver Education

State accredited educational course that consist of at least 30 hours of professional classroom instruction.

Driver Training

State accredited training course that consists of at least six hours of behind-the-wheel professional instruction.

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.

Extended Non-Owner Liability

An endorsement that provides broader liability coverage for specifically named people operating any non-owned automobile or trailer. It covers non-owned autos, use of autos to carry people or property for a fee, and individuals driving employer-furnished cars who do not own vehicles themselves.

Family Automobile Policy

Now replaced by the Personal Auto Policy, the Family Auto Policy was a package policy in which both liability and physical damage protection to an insured’s vehicle was offered under one policy.

Financial Ratings

Financial ratings reflect a rating organization’s opinion on the financial strength and ability to meet ongoing obligations to policyholders. The ratings organizations most commonly identified with the insurance industry are AM Best, Standard & Poor’s and Moody’s.

Financial Responsibility Laws

Financial responsibility laws require owners and operators of autos to maintain enough money to compensate those they injure. Liability insurance is the most common way to satisfy these requirements.

First Party Benefits

This pays policyholders and others covered by the policy in the event of injury, no matter who caused the accident. The benefits can include medical expenses, loss of income, funeral and death benefits. This may also be called Personal Injury Protection.

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. This optional coverage pays the difference.

Good Student Discount

A premium discount for students with high scholastic grades. Some statistical research has shown a relationship between good grades and safe driving.

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.

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.

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.

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.

Medical Payments

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

Multi-car discount

A discount offered by some insurance companies for those with more than one vehicle insured on the same policy. In some cases, if you drive a company car insured by your company, your own insurance company may give you the multi-car discount.

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

Any person, firm or corporation designated by name as the insured person(s) in a policy. Others may be protected by policy definition even though their names aren’t on the policy, such as other drivers operating (with consent) the named insured’s covered auto.

Named Non-Owner Policy

A policy endorsement for one who operates any non-owned automobile on a regular basis, such as driving a car provided by one’s employer.

No-Fault Insurance

Many states have enacted auto accident compensation laws permitting auto accident victims to collect directly from their own insurance companies for medical and hospital expenses regardless of who was at fault in the accident. Although there are many legal variations of no-fault insurance, most states still allow people to sue the negligent party if the amount of damages exceeds a certain state-determined threshold.

Non-Owned Auto

Any vehicle that is not owned, borrowed, or leased by the insured, and which is used primarily for a business purpose.

Per Occurrence Limit

This refers to the cap amount an insurance company will pay for all claims arising from a single incident. In an automobile accident, it comprises bodily injuries sustained by all parties. When Bodily Injury coverage is purchased in split limits, the second limit is the “per occurrence” limit: e.g. $100,000(per person)/$300,000(per occurrence)

Per Person Limit

This refers to the cap amount an insurance company will pay for any one person’s injuries arising from a single incident. In an automobile accident, it comprises bodily injuries sustained by each person. When Bodily Injury is purchased in split limits, the first limit is the “per person” limit: e.g. $100,000(per person)/$300,000(per occurrence)

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.

Personal Injury Protection

The name usually given to no-fault benefits in states that have enacted mandatory or optional no-fault auto insurance laws. Personal Injury Protection (PIP) usually includes benefits for medical expenses, loss of income from work, essential services, accidental death, funeral expenses, and survivor benefits.

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

The period of time in which a policy is in effect. For example, six months or one year, are standard policy periods.

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.

Preferred Risk

Any risk considered to be better than the standard risk on which the premium rate was calculated.

Premium

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

Private Passenger Automobile

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

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.

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.

Renewal

The process of keeping an active policy in force through the issuance of a renewal policy.

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.

Safe Driver Plan

A rating system that assigns points for traffic convictions and certain accidents. Similar to a merit-rating plan, each point increases the surcharge percentage to the baseline rates.

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.

Stacking of Limits

The application of more than one policy limit to the same loss or occurrence. In some jurisdictions, courts have required stacking of limits when multiple policies, or multiple policy periods, cover an occurrence. For example, Uninsured motorist bodily injury limits of $100,000/300,000 on two policies owned by the same person may be added together to pay a loss. In this event, the total amount of coverage available for an accident would be $200,000/600,000.

Term

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

Threshold Level

Under some no-fault insurance laws, the threshold level represents the degree of injury a claimant must establish before being allowed to sue the negligent party. The threshold may be verbal (regarding the severity of the injuries) or a dollar amount ($10,000), or both. For example, with a threshold of $5,000, an injured person may sue if his/her injuries and other economic damages (rehabilitation expenses, loss of income, etc.) exceed $5,000.

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.

Tort Feasor

One who commits a tort.

Towing and Labor Costs

This endorsement, which is added to the physical damage coverage, provides reimbursement up to a specified limit to tow your vehicle or pay for on-site labor costs.

Transportation Expenses

Subject to a daily and maximum dollar limit, this coverage (under the physical damage portion of an automobile policy) pays for transportation expenses incurred by the named insured only in the event of theft of an entire covered auto. Coverage generally begins after a stated minimum waiting period.

Uninsured Motorists Bodily Injury

Uninsured motorists bodily injury coverage (which must be offered in most states) pays for a covered person’s bodily injuries of which an uninsured or hit-and-run motorist is legally liable, but unable to pay. How to Determine Your Auto Insurance Coverage Needs

Underinsured Motorists Bodily Injury

Underinsured motorists bodily injury coverage (which must be offered in most states) pays for a covered person’s bodily injuries of which a person with not enough insurance is legally liable. How to Determine Your Auto Insurance Coverage

Uninsured Motorists Property Damage

Uninsured Motorist Property Damage Liability coverage pays for property damages caused by uninsured drivers. How to Determine Your Auto Insurance Coverage

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.

Unsatisfied Judgment Fund

Some states have established laws to reimburse those injured in auto accidents that have been unable to collect from the responsible party.

Usage

This refers to the primary function or purpose in which you intend to operate your vehicle. For example, if you primarily drive your car to and from work, the usage is considered “commute; “if you’re self-employed and you primarily drive to see customers, the usage is considered “business;” if you’re retired, your usage is considered “pleasure.”

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).

Waiver of Collision Deductible

This option pays your collision deductible when you carry collision coverage on a vehicle that is damaged by an uninsured or hit-and-run motorist who is at fault. Coverage applies only when there is actual physical contact and when you can identify the uninsured driver or vehicle.

Whole Dollar Premium

Generally, insurance premiums are rounded to the nearest dollar; an amount of 51 cents or more being rounded up to the next dollar, and any amount less than that being dropped.

Auto Insurance Glossary – Car Insurance Terms

The following list of auto insurance terms is in alphabetical order. Scroll down to find the terms you are looking for. If you cannot find your terms or need additional help, click on the Chat Live link on the right and a customer service rep. will be more than happy to assist you!

  • 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.

  • Automobile Insurance Plans

    The name for “assigned risk” plans. These are plans set up and monitored by the state to help people who are unable to secure auto insurance through standard insurance carriers. See Assigned Risk.

  • Basic Auto Policy

    Although still used today to insure substandard risks, two-wheel motorized vehicles, and commercial autos, the Basic Auto Policy has been primarily replaced by the Personal Auto Policy, which combines both physical damage coverage and liability insurance for claims arising out of the ownership or use of a vehicle.

  • Basic Limits of Liability

    The least amount of liability coverage that can be purchased, which is generally equivalent to the minimum amount required by state law. In determining rates, a carrier will use the basic limits to develop the base rates. If an insured person wants higher limits, the carrier applies an increased limits factor to the base rate in calculating the new premium for the increased coverage.

  • Bodily Injury Liability

    Legal liability for causing physical injury or death to another.

  • Collision Insurance

    This covers loss to the insured person’s own auto caused by its collision with another vehicle or object.

  • Combined Single Limit

    Bodily Injury and Property Damage coverage expressed as one single amount of coverage.

  • Commission

    That portion of the premium paid to the agent as compensation for the agent’s services.

  • Comprehensive Coverage

    Covers damage to your vehicle caused by an event other than a collision or overturn. Examples include fire, theft, vandalism, and falling objects.

  • Continuous Coverage or Continuous Liability Insurance

    Continuous coverage refers to the length of time you have maintained insurance on your vehicle.

  • Covered Person

    This refers to the named insured, spouse, resident relatives, etc. that are insured under a policy contract.

  • Customized Equipment/Special Equipment

    Items not included in standard insurance options available for cars. These may include extra electronic equipment, special paint or exterior items, or amenities added to the inside of a van or truck.

  • Deductible

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

  • Defensive Driver Course

    These are classes either offered through or approved by Departments of Motor Vehicles to enhance driving skills. These courses may make drivers eligible for discounts on their premiums. Courses taken for traffic school because of a moving violation are not eligible.

  • Drive-Other-Car Endorsement

    Optional coverage that broadens the definition of a covered auto to include non-owned vehicles the insured person operates.

  • Driver Education

    State accredited educational course that consist of at least 30 hours of professional classroom instruction.

  • Driver Training

    State accredited training course that consists of at least six hours of behind-the-wheel professional instruction.

  • 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.

  • Extended Non-Owner Liability

    An endorsement that provides broader liability coverage for specifically named people operating any non-owned automobile or trailer. It covers non-owned autos, use of autos to carry people or property for a fee, and individuals driving employer-furnished cars who do not own vehicles themselves.

  • Family Automobile Policy

    Now replaced by the Personal Auto Policy, the Family Auto Policy was a package policy in which both liability and physical damage protection to an insured’s vehicle was offered under one policy.

  • Financial Ratings

    Financial ratings reflect a rating organization’s opinion on the financial strength and ability to meet ongoing obligations to policyholders. The ratings organizations most commonly identified with the insurance industry are AM Best, Standard & Poor’s and Moody’s.

  • Financial Responsibility Laws

    Financial responsibility laws require owners and operators of autos to maintain enough money to compensate those they injure. Liability insurance is the most common way to satisfy these requirements.

  • First Party Benefits

    This pays policyholders and others covered by the policy in the event of injury, no matter who caused the accident. The benefits can include medical expenses, loss of income, funeral and death benefits. This may also be called Personal Injury Protection.

  • 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. This optional coverage pays the difference.

  • Good Student Discount

    A premium discount for students with high scholastic grades. Some statistical research has shown a relationship between good grades and safe driving.

  • 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.

  • 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.

  • 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.

  • 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.

  • Medical Payments

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

  • Multi-car discount

    A discount offered by some insurance companies for those with more than one vehicle insured on the same policy. In some cases, if you drive a company car insured by your company, your own insurance company may give you the multi-car discount.

  • 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

    Any person, firm or corporation designated by name as the insured person(s) in a policy. Others may be protected by policy definition even though their names aren’t on the policy, such as other drivers operating (with consent) the named insured’s covered auto.

  • Named Non-Owner Policy

    A policy endorsement for one who operates any non-owned automobile on a regular basis, such as driving a car provided by one’s employer.

  • No-Fault Insurance

    Many states have enacted auto accident compensation laws permitting auto accident victims to collect directly from their own insurance companies for medical and hospital expenses regardless of who was at fault in the accident. Although there are many legal variations of no-fault insurance, most states still allow people to sue the negligent party if the amount of damages exceeds a certain state-determined threshold.

  • Non-Owned Auto

    Any vehicle that is not owned, borrowed, or leased by the insured, and which is used primarily for a business purpose.

  • Per Occurrence Limit

    This refers to the cap amount an insurance company will pay for all claims arising from a single incident. In an automobile accident, it comprises bodily injuries sustained by all parties. When Bodily Injury coverage is purchased in split limits, the second limit is the “per occurrence” limit: e.g. $100,000(per person)/$300,000(per occurrence)

  • Per Person Limit

    This refers to the cap amount an insurance company will pay for any one person’s injuries arising from a single incident. In an automobile accident, it comprises bodily injuries sustained by each person. When Bodily Injury is purchased in split limits, the first limit is the “per person” limit: e.g. $100,000(per person)/$300,000(per occurrence)

  • 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.

  • Personal Injury Protection

    The name usually given to no-fault benefits in states that have enacted mandatory or optional no-fault auto insurance laws. Personal Injury Protection (PIP) usually includes benefits for medical expenses, loss of income from work, essential services, accidental death, funeral expenses, and survivor benefits.

  • 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

    The period of time in which a policy is in effect. For example, six months or one year, are standard policy periods.

  • 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.

  • Preferred Risk

    Any risk considered to be better than the standard risk on which the premium rate was calculated.

  • Premium

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

  • Private Passenger Automobile

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

  • 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.

  • 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.

  • Renewal

    The process of keeping an active policy in force through the issuance of a renewal policy.

  • 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.

  • Safe Driver Plan

    A rating system that assigns points for traffic convictions and certain accidents. Similar to a merit-rating plan, each point increases the surcharge percentage to the baseline rates.

  • 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.

  • Stacking of Limits

    The application of more than one policy limit to the same loss or occurrence. In some jurisdictions, courts have required stacking of limits when multiple policies, or multiple policy periods, cover an occurrence. For example, Uninsured motorist bodily injury limits of $100,000/300,000 on two policies owned by the same person may be added together to pay a loss. In this event, the total amount of coverage available for an accident would be $200,000/600,000.

  • Term

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

  • Threshold Level

    Under some no-fault insurance laws, the threshold level represents the degree of injury a claimant must establish before being allowed to sue the negligent party. The threshold may be verbal (regarding the severity of the injuries) or a dollar amount ($10,000), or both. For example, with a threshold of $5,000, an injured person may sue if his/her injuries and other economic damages (rehabilitation expenses, loss of income, etc.) exceed $5,000.

  • 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.

  • Tort Feasor

    One who commits a tort.

  • Towing and Labor Costs

    This endorsement, which is added to the physical damage coverage, provides reimbursement up to a specified limit to tow your vehicle or pay for on-site labor costs.

  • Transportation Expenses

    Subject to a daily and maximum dollar limit, this coverage (under the physical damage portion of an automobile policy) pays for transportation expenses incurred by the named insured only in the event of theft of an entire covered auto. Coverage generally begins after a stated minimum waiting period.

  • Uninsured Motorists Bodily Injury

    Uninsured motorists bodily injury coverage (which must be offered in most states) pays for a covered person’s bodily injuries of which an uninsured or hit-and-run motorist is legally liable, but unable to pay. How to Determine Your Auto Insurance Coverage Needs

  • Underinsured Motorists Bodily Injury

    Underinsured motorists bodily injury coverage (which must be offered in most states) pays for a covered person’s bodily injuries of which a person with not enough insurance is legally liable. How to Determine Your Auto Insurance Coverage

  • Uninsured Motorists Property Damage

    Uninsured Motorist Property Damage Liability coverage pays for property damages caused by uninsured drivers. How to Determine Your Auto Insurance Coverage

  • 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.

  • Unsatisfied Judgment Fund

    Some states have established laws to reimburse those injured in auto accidents that have been unable to collect from the responsible party.

  • Usage

    This refers to the primary function or purpose in which you intend to operate your vehicle. For example, if you primarily drive your car to and from work, the usage is considered “commute; “if you’re self-employed and you primarily drive to see customers, the usage is considered “business;” if you’re retired, your usage is considered “pleasure.”

  • 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).

  • Waiver of Collision Deductible

    This option pays your collision deductible when you carry collision coverage on a vehicle that is damaged by an uninsured or hit-and-run motorist who is at fault. Coverage applies only when there is actual physical contact and when you can identify the uninsured driver or vehicle.

  • Whole Dollar Premium

    Generally, insurance premiums are rounded to the nearest dollar; an amount of 51 cents or more being rounded up to the next dollar, and any amount less than that being dropped.

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