Auto Insurance Glossary
The following are some general terms that may be helpful to you in reading and understanding your automobile insurance policy. Because insurance laws vary throughout the United States and Canada or coverages may not be available in some jurisdictions, the information below may not apply to all situations. These terms and definitions in your actual policy will govern any claims or questions of interpretation. Please take this opportunity to read these terms. If you have any questions, please give us a call.
Insurance that supplements an already existing policy. It is uncommon that the company or its duly authorized agent allows additional insurance.
An individual or organization covered by an insurance policy other than the named insured in the policy declarations. In an automobile policy, anyone who drives the car with the owner’s consent is an additional insured; although, in most cases, the additional insured must be named in the policy.
A person who fills out and signs a written application for insurance.
A written statement by a prospective policyholder that gives the information the company relies upon when evaluating the applicant and issuing the policy.
A survey by a Claims Representative or Claims Appraiser estimating the amount of damage to a vehicle and the cost to repair or the determination of a complete loss.
Auto Loan/Lease Coverage (Gap Coverage)
Provides coverage, in case of a total loss, for the ‘gap’ between the amount due under the terms of the vehicle’s loan/lease and the actual cash value of the vehicle at the time of the loss. Please note that there are vehicle eligibility requirements and the coverage may not be available in your state. Please contact your Agent for more information.
The lowest coverage amount, as prescribed by law or the company, for which an insurance policy can be written. Basic Limits primarily prescribe limits of liability.
Injury to the body of a person. In insurance, people often refer to Bodily Injury as the coverage afforded for financial protection against injury of a person resulting from an accident.
Termination of an insurance contract before its expiration date, by either the insurance company or the policyholder.
A demand for payment under an insurance contract for the estimated or actual amount of loss.
Collision insurance laws may vary by state, but generally, this insurance covers a loss to the insured’s vehicle caused by its impact with another vehicle or object.
Comprehensive insurance laws may vary by state, but generally, this insurance protects against any loss or damage to an automobile except those caused by collision or by upset; for example, glass replacement, towing and labor coverage, or coverage against fire or theft.
Compulsory Auto Injury Laws
Laws which make it illegal to operate a vehicle without first having proof of the ability to pay for a judgement that may result from an accident.
Provisions that set forth the rights, duties, and responsibilities of the parties to an insurance contract. Conditions may be found anywhere in the contract.
Those insured under the policy.
Any vehicle shown in the declarations, or in some cases, a substitute vehicle used temporarily because of breakdown or repair of the insured’s own covered vehicle.
A sum of money that a party is legally obligated to pay to another as compensation for injury.
The part of the policy that provides detailed information about the insured, the insurer, and the coverages.
The amount of a claim that the policyholder has agreed to pay. This amount is deducted from a claims payment.
A decrease in an automobile’s value over time.
Drive-In Claims Services
Automobile insurer’s facility to which an insured may bring a damaged vehicle to facilitate the adjusting of claims and the settlement of damages.
The date the coverage begins on an insurance contract (policy).
Electronic Equipment Endorsement
Provides coverage for your covered autos’ permanently installed electronic equipment or electronic equipment designed to be permanently installed but can be removed as an anti-theft measure. This endorsement also covers direct and accidental loss to any accessories used with such equipment. Radar detectors are specifically excluded. Please contact your Agent for more information, as there are eligibility requirements and this coverage may vary in your state.
An amendment to your policy written especially to cover unique items just for you. An endorsement is also a change to your policy that is made during the policy’s term. An endorsement is attached to your policy to modify the terms of the insurance contract.
Part of an insurance contract that excludes coverage of certain perils, persons, property, or locations.
The termination date of an insurance contract (policy).
Financial Responsibility Clause
Financial Responsibility ensures that a policy conforms to the financial responsibility laws of any state or Canadian province in which the insured’s vehicle operates.
Coverage for accidental or malicious breakage to glass.
A state’s department that has responsibility for the enforcement of the state’s insurance code. It is charged with the supervision and licensing of insurance companies and agents and the general administration of insurance laws of the state.
A person who is protected by the policy.
The company that issues a policy to a policyholder; the party in the insurance contract that promises to pay losses and render services.
Part of an insurance policy that states the coverage of the contract.
Liability insurance pays on behalf of the insured for certain types of injury to others.
Limit of Liability
The maximum amount that an insurer agrees to pay in the case of loss under policy contract.
A value reduction in an insured’s automobile caused by an insured peril, the amount sought in a claim, or the amount paid on behalf of an insured under an insurance contract.
Loss Payable Clause
A policy condition that enables an insured to direct the company to pay any loss that may be due to a third party.
Loss of Use Insurance
Compensation when the policyholder has lost the use of his or her vehicle; for example, an automobile rented to replace one that is stolen.
Medical Payments Insurance
In certain states, Medical Payments insurance is a coverage under which an insurer agrees to pay, up to a specified limit, medical, surgical, hospital, and funeral expenses, regardless of the liability of the insured.
Mutual Insurance Company
A company with no capital stock that is owned and controlled by policyholders.
The individual or organization with whom an insurance contract is made and who is specifically named as a Named Insured in the policy declarations. Additional individuals or organizations can also be added as named insureds.
In certain states, No-Fault insurance permits automobile accident victims to be directly reimbursed for medical and hospital expenses and loss of income by their own insurance company regardless of who is at fault.
A policy that the insurer does not continue after its expiration date.
An accident or loss, including continuous or repeated exposure to substantially the same general harmful conditions, that result in bodily injury or property damage.
A loss that does not completely destroy the insured automobile that is covered by an insurance policy.
The policyholder authorizes his or her employer to deduct amounts from the employee’s earnings to cover the premium.
The cause of a possible accident, loss, or claim.
Personal Injury Protection (PIP), No-Fault Insurance
May also be referred to as No-Fault insurance. In certain states, this provides insurance that can cover for medical costs, loss of earnings, additional living expenses, and funeral costs for occupants of the insured automobile and pedestrians, other than those insured under other policies.
A formal written contract of insurance.
Date on which an insurance policy must be reinstated to remain in force.
The party to whom a policy is issued who agrees to pay a premium to an insurer in consideration of the latter’s promise to provide insurance protection.
The amount that a policyholder agrees to pay to the insurance company for an insurance policy.
Damage to tangible property. In insurance, people often refer to Property Damage as the coverage afforded for financial protection against damage to another’s property resulting from an accident.
Coverage afforded by an insurance contract.
The statements in an insurance policy that explain the benefits, conditions, and other features of the insurance contract.
The cost of insurance per unit; used as a base for the determination of premiums.
A state supervised organization that classifies and computes rates, gathers data, and measures individual risk hazards. This information is made available to all insurance companies who are members of such a bureau.
Money or other valuables that the insurance company obtains through subrogation, salvage, or reinsurance.
Returning a lapsed policy to its full value after its termination as if it was never terminated.
A policy issued to replace one that has expired.
Rental reimbursement coverage is optional. If you must rent a car because your own car was out of service due to a covered loss, rental coverage pays you back for money you spent on your rental car (up to a specific limit you select). Be sure to review your policy for any restrictions which may apply such as maximum dollar amount allowed per claim or specific time limitations, among other items.
Safe Driver Plan
A system for adjusting standard rates up or down according to good or bad driving records of the insureds.
When your insurance company pays for a loss caused by another driver, your company may have the right by law or policy provision to recover an amount of the loss from the other person or their insurer.
Towing is an optional coverage. It pays the cost of having your car towed and on-site road repairs (up to a specific limit you select) each time your car breaks down (whether or not there is an accident involved). You are covered for the on-site labor costs at the breakdown site (not any parts) needed to get your car running again. Be sure to review your policy for any restrictions which may apply such as maximum dollar amount allowed per claim or specific time limitations, among other items.
A process that evaluates an applicant and their automobile(s) against pre-established criteria for insurability to determine whether the applicant will be rejected or accepted for coverage and whether at standard or modified rates.
Uninsured or Underinsured Motorists Insurance
Uninsured or Underinsured Motorists insurance provides protection in the event that damage is caused by a motorist who has no insurance or not enough insurance to cover the loss.