Guide to Auto Insurance Terms and Definitions
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.
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.
Basic Liability Limits - The lowest amounts of liability coverage that you can legally buy in your state.
Bodily Injury Liability -
Your risk if you cause physical harm to another in an accident.
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
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.
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.
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.)
Expiration Date -
The date your coverage ends. There is also usually a time involved, for example Midnight of such and such day.
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 any accident, regardless of who was at fault. This is generally not a good deal, as a good health insurance policy would cover these injuries anyway.
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.
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.)
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.
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.
Premium - The amount of payment due to the insurance company in exchange for the insurance.
Pro-rata Cancellation - The amount of your refund premium is calculated only for the period coverage was provided.
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 estimated price to get you the same vehicle. Many carriers will only give you the Some insurance only pays the 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
Short-rate Cancellation - When the policy is terminated before renewal at the policyholder's request
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
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 unisured motorist.
|
|
