Accident: An unexpected and unplanned event, which occurs suddenly and at a definite place.
Accident Forgiveness: A benefit offered by auto insurance companies that allows the insured driver to have one at-fault accident without it affecting their premium rate. Typically, the insured has to meet a set of prerequisites in order to qualify for the benefit.
Accident Frequency: The rate of occurrence of accidents over time.
Act of God: An event arising out of natural causes. Examples include floods, lightning, and earthquakes.
Actual Cash Value: An amount equivalent to the replacement cost of lost or damaged automobile at the time of the loss, less depreciation.
Actuary: A specialist trained in mathematics, statistics, and accounting who is responsible for rate, reserve, and dividend calculations and other statistical studies.
Additional Insured: A person other than the named insured who is protected under the insurance policy.
Adjuster: A representative of the insurance company who seeks to determine the extent of the company’s liability for loss when a claim is submitted.
Admitted Company: An insurance company authorized and licensed to do business in a given state.
Agency: An insurance sales office.
Agency Contract (or Agreement): The document that establishes the legal relationship between an agent and an insurer.
Agent: One who solicits and negotiates contracts of insurance on behalf of the insurance company.
Agent’s License: A certificate of authority from the state that permits the agent to conduct business.
Agent’s Qualification Laws: Education, experience, and other requirements imposed by the state for insurance agents.
Alien Insurer: An insurer formed under laws of a country other than the United States. In foreign countries, a U.S. company is an alien insurer.
Amendment: A document that revises an insurance policy.
Application: A form where those seeking insurance fill out facts requested by the insurance company. This form is the basis of which the insurance decides to cover you and what exactly your premium will be.
Appraisal: Process used to ascertain the appropriate amount of insurance to be written or the amount of loss to be paid.
Approved: When the person or object to be insured meets the underwriting standards of the insurer.
At-Fault: The motorist who is to blame in an accident. The person responsible for the collision.
Automobile Insurance: Insurance that protects you against losses involving automobiles. Examples of different types of automobile insurance include: bodily injury liability, property damage liability, medical payments, and the physical damage coverages of collision and comprehensive.
Basic Limits of Liability: Minimum amounts of automobile insurance. This is often either the minimum amount of coverage the insurance company is willing to underwrite, or the minimum amount of insurance required by law.
Binder: An agreement that puts the insurance into force before the policy can be written or the premium paid.
Blue Book: A publication used to determine the value of used cars and trucks.
Bodily Injury: An injury suffered by a person.
Bodily Injury Liability: Insurance coverage that protects a person against financial loss and pays legal defense costs when the person is legally liable for injuring other people in an automobile accident.
Cancellation: Termination of an insurance policy by the insured or the insurance company.
Carrier: Another term for the insurance company.
Caveat Emptor: Let the buyer beware.
Certificate of Insurance: A form that verifies that a policy has been written and states the coverage. It can be used as proof of insurance.
Claim: A demand made by the insured for payment of the benefits provided by the policy.
Claimant: The person making a demand for payment of benefits.
Clause: A section of a policy contract that deals with a particular subject.
Collision Insurance: This policy covers loss to the insured’s own vehicle by its collision with another vehicle or object but doesn’t cover bodily injury or property damage liability arising out of the collision.
Commission: The portion of the premium that is paid to the insurance agent as compensation for their services.
Commissioner of Insurance: The title of the head of most state insurance departments.
Comprehensive Coverage: This policy covers losses by fire, theft, vandalism, falling objects and various other perils. Does not include losses for a collision with another vehicle.
Comprehensive Policy: An open peril (all risk) coverage with certain named exclusions.
Compulsory Insurance: Any form of insurance that is required by law.
Conditions: Part of the insurance policy that states the rights and duties of the insured, or the rights and duties of the insurance company.
Contract: The insurance policy.
Countersignature: The signature of the insurance agent on a policy.
Coverage: The scope of the protection provided under the insurance policy.
Covered Loss: Injury, property loss, legal liability, or any other situation or loss that an insurance company will pay benefits for.
Cut Rate: This term generally applies to insurance companies who charge premiums below a national or average rate.
Date of Issue: The date the insurance policy was issued. This is not necessarily the effective date of the policy.
Declarations: The portion of the insurance policy that states the name and address of who is insured, the cars insured, its location and description, the length of the policy, the amount of insurance coverage, and the premium.
Declination: Rejection of an application for insurance.
Deductible: The portion of a loss that has to be paid by the insured before the recovery of any benefits from the insurance company.
Deductible Clause: The part of the policy that states the amount of the deductible.
Defensive Driver Discount: A discount off the premium for an insured driver’s who has successful completed a defensive training course or class. The insured must usually present a certificate that verifies their completion of the course to earn the benefit.
Depreciation: A decrease in the value of an automobile over a period of time resulting from use, wear, and tear.
Drive-In Claim Service: A facility maintained by an automobile insurer where the extent of the damage to a person’s automobile can be determined.
Driver-Other-Car Endorsement: Coverage for cars not necessarily owned by the person covered by the insurance policy.
Earned Premium: The amount of the premium that has been “used up” during the term of a policy. For example, if a one-year policy has been in effect six months, then half of the total premium has been earned.
Effective Date: The date the insurance policy begins coverage.
Emergency Road Service Coverage: Extra coverage that includes flat tire changes, battery jumpstarts, emergency fuel deliveries, locksmith services, and reimbursement for towing costs.
Endorsement: A form attached to the policy that alters the contract.
Estimate: An assessment of the cost of repair to a vehicle.
Exclusion: A contractual provision that denies coverage for certain perils, persons, situations.
Experience Rating: A method of adjusting the premium for a risk based on past loss experience for that risk compared to loss experience for an average risk.
Expiration Date: The date on which the policy ends.
Expiration Notice: Notification to the insured of the impending termination of the policy.
Exposure: The state of being subject to the possibility of loss.
Extra Premium: An added premium charge for extra hazardous exposures that is levied because the normal rate does not take these into account.
Face Amount: The amount of insurance provided by insurance policy, usually found on the face of the policy.
Field: An area or territory covered by an agent, agency, or insurance company.
Financial Responsibility Law: A state law that requires the insured to furnish evidence of ability to pay for losses.
First Party Insurance: Insurance coverage for the insured’s own property or person.
Flat Cancellation: A policy that is cancelled upon its effective date. Usually under a flat cancellation no premium is charged.
Foreign Insurer: An insurer located in a state of the U.S. other than the state in which the insured’s insurance is written.
Fractional Premium: A proportionate amount of the annual premium, such as semiannual, quarterly, or other fraction.
Fraud: Deceit, trickery, or misrepresentation in an attempt to steal money from an insurance company.
Full Coverage: Insurance that provides for the payment of all insured losses in full.
Garage Coverage Form: A commercial automobile insurance coverage to insure automobile dealers, repair shops, service stations, and garage risks.
Garage Location: The zip code in which the insured’s automobile is parked.
Good Driver Discount: A system that entitles good drivers (as defined by driving safety record, number of miles driven annually, number of years driving experience, and other factors) to discounts on car insurance rates.
Good Student Discount: A discount granted to students with high grades. The students usually have to maintain at least a B average and be under the age of 25.
Hazard: A specific situation that increases the probability of loss.
Hearsay: Testimony based on what someone else has said or told a witness.
Hired Automobile: Autos the insured leases, hires, rents, or borrows, but not autos the insured owns.
Hit and Run: An accident in which the party at-fault does not stop to assist or provide information.
Identification Card: A card given to each person covered under the plan that identifies them as being eligible for benefits.
Incurred Expense: Expenses not yet paid.
Indemnify: To restore the victim of a loss to the same position as before the loss occurred.
Initial Premium: An amount paid at the beginning of an insurance contract, usually subject to changes at the end of the policy period.
Inspection: Independent checking on facts about an applicant, policyholder, or claimant, usually by a commercial inspection agency.
Insurability: Acceptability to the insurance company of an applicant for insurance.
Insurance: A formal social device for reducing risk by transferring the risks of several individual entities to an insurance company.
Insurance Department: A government bureau in each state charged with the administration of insurance laws, including the licensing of insurance agents.
Insurance Policy: The contract between an insurance company and an insured.
Insured: The person covered by an insurance company.
Insurer: The insurance company.
Insuring Agreement (or Clause): That portion of an insurance policy that states the coverage, the person and/or vehicle insured, their locations, and the period of the contract.
Lapse: Termination of a policy because of a failure to pay the premium.
Lapsed Policy: Policy that has expired because of nonpayment of premiums.
Leased Vehicle: Vehicle that is under a long-term contract. Under the contract, the lessee must carry full-coverage insurance until the contract is paid off.
Legal Liability: Requirement of liability under the law
Lessee: The person to whom a lease is granted.
Lessor: The person granting the lease.
Liability Insurance: Insurance that pays for damages caused to another person’s property on behalf of the insured.
Liability Limits: The maximum amount for which a liability insurance company provides protection in a particular policy.
Limit: Maximum amount of insurance provided by the policy.
Loss: An amount of dollars reduced in the insured’s property.
Loss Severity: The amount of a loss expressed in financial terms.
Lump Sum: A method of settlement where the beneficiary receives the proceeds of a policy all at once instead of in installments.
Malicious Mischief: Purposely damaging someone else’s property.
Medical Payments Insurance: Insurance that pays for medical costs that result from injury in an accident.
Minimum Premium: Smallest amount of premium that an insurance company will issue coverage for.
Misrepresentation: When a person makes false or untrue statements.
Monoline Policy: Insurance coverage written as a single line policy, as opposed to Multiple Line or Package Policy.
Motor Vehicle Record (MVR): The record of an automobile driver’s accidents and traffic violations.
Multiple Line Policy: Policy that includes several different coverages.
Named Insured: Any person, firm, or corporation specifically designated by name on a policy. Others may be protected as insureds even though their names don’t appear on a policy.
Named Non-Owner Policy: A policy issued to someone who doesn’t own an automobile, but who drives borrowed or rented cars.
Named Perils: Specific perils or risks that covered by the insurance policy.
National Insurance Crime Bureau (NICB): A non-profit organization devoted to the prevention and persecution of insurance crime and fraud.
Negligence: Failure to use reasonable care that would be expected of an ordinary person.
Newly Acquired Autos: Any automobile purchased after the effective date of the policy, but before the end of the term of the policy. Newly Acquired Autos usually receive automatic coverage for a period of thirty days.
No-Fault Insurance: Insurance that pays for an insured’s medical expenses regardless of was at-fault in the accident.
Non-renewal: Termination of insurance coverage at an expiration date. This could be put in effect by an insured person who doesn’t wish to renew, or an insurance company who refuses to cover an insured for an additional term.
Notice Of Cancellation: Written notice by an insured that he/she is canceling the insurance policy.
Notice Of Loss: Notice to an insurance company that a loss has occurred.
Nuisance Value: An amount that an insurance company is willing to pay, not because it is a valid claim, but because it is not worth the cost to the insurance company to investigate it.
Occasional Driver: A person who is not the primary driver of an automobile.
Occurrence: An event that results in an insured loss. Different than an accident in that it is not a sudden event, but rather occurs from an exposure to a risk over a period of time.
Open Perils: Insurance against loss or damage to property from any cause that isn’t exempted or excluded on the policy.
Outstanding Premiums: Premiums due but not yet collected.
Overinsured: Condition of having more insurance than is necessary. Insurance coverage that is worth than the value of what is being insured.
Package Policy: Insurance policy that includes two or more lines of coverage in the same contract.
Paid-For: Insurance where the premium has been paid.
Partial Loss: A property loss that is not total.
Per Occurrence Limit: The maximum amount the insurance company will pay for in an incident. This is the sum total amount of all claims in an automobile accident.
Per Person Limit: The maximum amount the insurance company will pay for a person’s injuries in a single incident (for example, an automobile accident).
Peril: The cause of a possible loss.
Personal Auto Policy (PAP): The most common auto insurance policy sold today. It’s written in simple wording and covers liability, medical payments, uninsured/underinsured motorist coverage, and physical damage protection.
Personal Injury Protection (PIP): Insurance coverage for medical expenses, loss of wages resulting from injury, essential services, accidental death and funeral expenses.
Physical Damage: Any damage to the vehicle itself. It could come from a collision, fire, vandalism, theft, and any other peril.
Policy: Written form of the insurance contract. It includes all forms, clauses, riders, endorsements, and attachments.
Policy Anniversary: The anniversary date of when the policy was issued.
Policyowner: The insured.
Policy Period: Term of the insurance contract. Usually six months or one year.
Preferred Risk: Any risk considered to be better than the standard risk on which the premium rate was made.
Premium: The price of an insurance policy.
Primary Use: The primary use of an automobile. It could be for work, school, pleasure, etc.
Primary Driver: The person who uses an automobile the most.
Private Passenger Automobiles: Standard cars, trucks, vans, jeeps, and other vehicles that are designed for public roads and are regulated by the Department of Motor Vehicles.
Proof Of Loss: Formal statement from the insured to the insurance company stating the extent of a loss.
Pro Rata Cancellation: Termination of an insurance contract before the period has ended. The premiums due are adjusted based on the duration contract before it was terminated.
Property Damage Liability: Legal protection against damage caused to the property of another.
Provisions: Statements in the insurance policy that explain benefits, conditions, and other parts of the insurance contract.
Rating Plan: Rules used to determine the cost of an insurance premium.
Reinstatement: Restoration of a lapsed policy.
Rider: An attachment that modifies an existing policy.
Risk: An uncertainty. A chance of suffering a loss.
Settlement: A policy benefit or claim payment.
Short Rate Cancellation: Cancellation where the premium returned to the insured is not directly proportional to the number of days left in the policy period.
Short Term Policy: Policy written for a period of time that is less than normal for that type of policy.
Single Limit: Insurance coverage that is expressed as a single amount. Contrast this with “Split Limit” below.
Split Limit: Insurance coverage that is expressed in different amounts for different types of losses. For example, an automobile liability of 100/300/100 means bodily injury limits of $100,000 per person, $300,000 bodily injury per accident, and property damage limit of $100,000 per accident.
Stacking Of Limits: Applying the limits of more than one policy to an occurrence, loss or claim. In some cases, courts have required a stacking of limits from multiple policies in order to cover a loss.
Term: Period of time for which a policy is issued.
Termination: When an insurance policy ends, either because the term has expired, or because it has been cancelled.
Theory of Probability: The mathematical principle upon which insurance is based.
Threshold Level: The point at which the tort system can take affect in a No-Fault auto insurance state. This level can either be qualitative, which is based on the court’s discretion for serious bodily injury claims, or it can be quantitative, which is based on a certain dollar amount that has been reached in medical payment claims.
Time Limits: Limits in which a notice of a claim or proof of loss can be submitted.
Tort System: System by which the party that is to blame for an accident has to pay for the victim motorist’s property damages and medical payments from bodily injury claims. The at-fault motorist’s insurance company would be liable for all the damages caused to the other victim motorist.
Total Loss: An automobile (or other property) that has suffered such a loss that it now longer has any value.
Towing Costs: Coverage that will pay for the cost of having an automobile towed.
Transportation Expenses: Coverage from transportation expenses incurred when in the event of a theft of a covered auto. This coverage is under the physical damage auto policy and is subject to a daily limit.
Umbrella Policy: A separate insurance policy that provides for coverage beyond the limits of the other policies the insured may have. It often includes coverages that are excluded by other liability policies.
Underinsurance: When there is not enough insurance to cover the amount of a loss.
Underinsured Coverage: Insurance coverage that will pay for damages to the insured when the liable party’s insurance has been exhausted.
Underwriting: Process in which an insurance company decides if they will insure a motorist or not, and what exactly the motorist’s insurance rates will be.
Unearned Premium: Portion of the premium that has been paid for, but still is remaining in the policy term. For example, if the insured has paid a yearly premium and only one month has expired in the term, the unearned premium is eleven-twelfths.
Uninsured Coverage: Insurance coverage that will pay for damages to the insured when the liable party is unable to pay because he or she does not have insurance. This coverage usually applies to bodily injury only.
Usage: The primary function or purpose in which an automobile is operated for. This is usually divided into two categories: business or pleasure.
Valuation: Estimation of the value of an item, usually by an adjuster.
Vandalism: The defacement or destruction of a property.
Vehicle Identification Number (VIN): A unique seventeen-digit serial number that is used to identify automobiles. It is placed on the dashboard of a vehicle and has been in use since 1980.
Void: An insurance policy that is completely free of legal effect.
Waiver: Act of giving up a privilege or right that is known to exist.
Whole Dollar Premium: In most insurance contracts, the amount of premium is rounded to the nearest dollar. An amount of 51 cents or more is rounded up to the nearest dollar, while an amount less than 51 cents is rounded down.