Auto insurance terms

Accumulated Depreciation – The reduction in value of a vehicle to reflect the loss of value due to wear, tear, and usage.

Actual Cash Value (ACV) – What it will cost to replace an item at the time of loss after subtracting depreciation

Additional Insured or Additional Interest – A person or entity, other than the named insured or covered person, who is protected under the named insured’s auto 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.

Adhesion Contract – An insurance policy is a contract where the insurance company has the power in composing and drafting the contract.

Adjuster – A person who evaluates the damage caused by an accident or other covered loss and determines the amount to be paid.

Agent – A person authorized, by and on behalf of an insurer, to sell and service insurance policies.

Agreed Value – An amount guaranteed to you in writing that you will receive under a collector car insurance policy is stolen or totaled during the policy period. Usually you will receive the agreed amount or the cost to repair the covered auto, not to exceed the agreed amount.

Anti-Theft Device – Devices intended to prevent theft or vandalism, or to assist in the recovery of a stolen vehicle. Some examples include etched VIN numbers, car alarms, the “Club” and other such devices, etc.

Assigned Risk – A poor risk that an insurance company is compelled to cover under state laws.

Automobile Death Benefits – Pays a dollar amount to the beneficiary upon death of the insured from an auto accident, including being struck by a motor vehicle as a pedestrian.

Basic Liability Limits – The lowest amounts of liability coverage that you can legally buy in your state.

Binder – A temporary or preliminary agreement which provides coverage until a policy can be issued/delivered.

Bodily Injury Liability – Your risk if you cause physical harm to another in an accident.

Broker – A person who for a fee (paid by you) procures insurance on your behalf.

Brokerage – An agency or group employing brokers, who for a fee (paid by you) procures insurance on your behalf.

Capping – The (usually illegal) referral of clients by an auto body or repair facility to medical or legal offices for a fee.

Claim – A notice to an insurer of a loss that under the terms and conditions of a policy may be covered.

Comparative Negligence – The percentage of fault in an auto accident determined by comparing two drivers carelessness to each others. I.E. If you were 25% at fault and the other person was 75% at fault, the other person (or his insurance company) must pay 75% of the fair compensation for your injuries. A formula for holding each party accountable for the amount of damages that they caused.

Contributory Negligence – Can prevent a person from collecting any monies to compensate for injuries suffered, even if that person’s carelessness was minor. Alabama, North Carolina, South Carolina, Tennessee, Virginia, Maryland and the District of Columbia, have statutes that bar you from compensation if your own carelessness substantially contributed to the accident.

Commission – That portion of the premium paid to the agent as compensation for his or her services.

Commissioner of Insurance – The title of the head of most state insurance departments. In some states, called the Director or Superintendent of Insurance.

Classic (aka Vintage) Car Insurance – Coverage applied to collector cars over 20 year of age. Many companies will assign a very low book value to a car this old without insuring it’s real street value.

Collision – Only covers damage to your own vehicle (excluding fire, theft, animals, etc.) in a collision. The collision could be with another car, a light post, parking curb, garage wall, etc.

Combined Single Limit – Bodily Injury and Property Damage coverage combined into one single amount of coverage.

Comprehensive Coverage – Pay for losses due to fire, theft, animals or other losses that are not the result of a collision as stated in the insured’s policy.

Continuous Coverage or Continuous Liability Insurance – The length of time you have had your vehicle insured without a break in coverage (some insurers require at least six months.)

Covered Person – People residing in the residence that are covered under the policy.

Declarations Page – The front page of your policy which contains the exact name of your insurance company, policy number, coverages, premiums, deductibles, vehicles insured, VIN numbers, and the classifications for rating purposes.

Diminished value – Compensation that gives you the loss of market value your car incurs as a result of an accident.

Deductible – The dollar amount you will have to pay before your covered for your loss. You can save substantially by increasing your deductible

Defensive Driver Course – Courses offered by your own state’s DMV or by an approved entity that promote safe driving. Upon completion of such a course, you may become eligible for lower insurance rates. A good deal if you can get it.

Depreciation – The amount of money your car has devalued over time.

Drive-Other-Car Endorsement – A part of your policy that extends coverage to any other car you might be driving, i.e. a rental car.

Driver Education – A course that could be required by the State DMV for new drivers

Earned Premium – The part of your premium used up by time / use.

Effective Date/Inception Date – The actually date on which your policy begins to cover you against losses (not necessarily the day you pay, or sign, etc.)

Endorsements – A term for all the other optional policies, like daily rental reimbursement, roadside assistance, etc.

Exclusions – Situations that are not covered by a given insurance policy; specific exclusions are listed on your insurance policy.

Expiration Date – The date your coverage ends. There is also usually a time involved, for example Midnight of such and such day.

Family Purpose – Doctrine in California, Pennsylvania, Indiana, Arizona, Tennessee, West Virginia, New Mexico, Texas, Georgia, North Carolina, North Dakota, Washington, Ohio, Nebraska and South Carolina that the head of the household is held liable for damages caused by any member of the family using the car (Possibly with or without the owner’s permission). The owner is presumed to be better able to satisfy property damage and injury claims.

Financial Ratings – Ratings, similar to credit ratings, of insurance providers meant to accurately represent a carrier’s ability to meet claims. Often mentioned ratings are by agencies such as Standard and Poor’s and AM Best.

Financial Responsibility Filing (SR22) – A requirement by a state regulatory entity (usually the state Motor Vehicle Department) for an insurance company to certify on a driver’s behalf that the driver has the ability to pay future claims up to the state required limit. The certification is done by means of a form called an SR-22.

Financial Responsibility Laws – State laws requiring drivers to maintain enough insurance to cover accidental losses to others. Law and limits vary state-by-state.

First Party Benefits – Personal Injury Protection (PIP) or Medical Coverage, this policy pays for physical injuries sustained by the occupants of your car in the event of anyaccident, regardless of who was at fault. This is generally not a good deal, as a good health insurance policy would cover these injuries anyway.

Flat Cancellation – When the full premium is returned to the insured

Full Coverage – Usually means you have both comprehensive and collision coverage.

Gap Insurance – A gap car insurance policy makes up the difference between what you owe on your car and what your insurance company would pay you for if there was a total loss. You usually have to decide at the time of purchase if you are going to buy gap insurance. Usually available from the finance company, dealership, or car manufacturer

Garaged Address – Where you physically keep your car.

Good Driver Discount – Better insurance companies offer discounts to customers with good driving records.

Good Student Discount – A discount which sometimes applies to juveniles when the driver has a higher grade point average at school.

ID (Identification) Card – A document identifying you as having liability coverage for the vehicle that you are driving. Liability insurance is required in most states.

Income Loss Coverage – Sometimes a part of Personal Injury Protection, income loss coverage takes care of you if you’re unable to work due to accident-related injuries.

Indemnity – A predetermined sum paid for a covered loss.

Installment Fee – A fee charged if you finance your insurance payments.

Insured Person – The person(s) insured under a policy contract. (Same as a covered person.)

Insurer – The insurance company providing the coverage.

Lapse in Coverage – Also known as policy lapse. The point in time when a policy is canceled for any reason, including failure to pay, change of provider, etc.

Lender – The lender is the entity (usually a bank) which lends you the money to purchase a car. They are usually the loss payees, until you pay off the balance of the loan.

Lessor – Similar to the lender, the lessor is the entity which leases your vehicle to you. This is quite often the financial arm of the car company itself.

Liability Insurance – Covers negligence or fault resulting in bodily injury or property damage.

Loss Payee/Lien holder – The lender or lessor who gets paid by you or the carrier

Liability Coverage – Insurance that provides compensation for a harm or wrong to a third party for which an insured is legally obligated to pay.

Limits – The maximum amount of benefits the insurance company agrees to pay in the event of a loss.

Loyal customer or longevity discount – Discount for customers who have been with the company several years or more without a claim.

Medical Payments Coverage – Medical payments coverage, also called personal injury protection (PIP), covers physical injuries to you and your passengers (within limits).

Minimum Liability Limits – Lowest amounts of liability you must buy in your state.

Multi-car discount – Applies when you have two or more cars on the same policy.

Negligence – When a defendant’s conduct imposes an unreasonable risk upon another, which results in injury to that person.

No fault insurance – A system of law making insurance carrier responsible for your medical injuries in an auto accident, in an attempt to reduce the number of lawsuits.

Nonrenewal – The termination of an insurance policy at its normal expiration date.

Plaintiff – The injured party.

PLPD – Public Liability and Property Damage. It satisfies your obligation to the state, and offers no coverage to your vehicle’s damage. PLPD doesn’t cover theft, fire, comprehensive, loss of use, repairs, or replacement in case of damage to your vehicle.

Policy – Written contract of insurance.

Premium – The amount of payment due to the insurance company in exchange for the coverage.

Premium Finance Company – A lending institution that finances insurance premiums for a fee.

Pro-rata Cancellation – The amount of your refund premium is calculated only for the period coverage was provided.

Producer – A term applied to an agent, solicitor or other person who sells insurance.

Quote – The estimated cost of insurance, based on your address, vehicle, driving and claims record, credit, etc.

Redlining – Controversial practice by insurance companies to charge more in certain geographic locations (usually urban areas) where claims are higher and demand for coverage is lower.

Replacement Cost – The amount of money it would take to exchange your vehicle with a similar one. Many carriers will only give you actual cash (ACV) or market value of the vehicle at the time of the loss

Replacement Value -The full cost to get you the same vehicle with no deduction for depreciation

Reinstatement – Restoring of a lapsed policy to full force and effect

Salvage – A totaled vehicle taken over by an insurer and usually sold at an auction to reduce its loss.

Short-rate Cancellation – When the policy is terminated before renewal at the policyholder’s request

SR-22 – A document that shows proof of financial responsibility in the case of a traffic violation.

Stated Value – The lessor amount the auto insurance company will pay of the stated amount, cost to repair the covered auto (not to exceed the stated amount) or the actual cash value.

Subrogation – When an insurance company seeks to recover cost from an at fault party in a claim.

Surcharge – An extra charge applied by the insurer for accidents or moving violations

Tort – A legal term describing when someone is deemed legally responsible for injuring another person or damaging his/her property. Some states encourage you to make a tort provision, thereby reducing the cost of your premium by limiting your right to sue for non-monetary damages.

Window etching – Letters or numbers inscribed on the drivers side window or windshield that identify the vehicle and are alleged to deter theft. Usually a high mark up item charged by dealers.

Uninsured Motorist Bodily Injury – Will pay the injured parties for bodily injury cause by a hit-and-run driver, a negligent uninsured motorist or by a driver whose insurer is insolvent.

Uninsured Motorist Property Damage – Will pay for damages to your automobile up to a specified limit, when caused by a negligent uninsured motorist.