Glossary of Insurance Terms

Accident Forgiveness – Accidents Forgiveness programs are offered by most major carriers and are designed to prevent your rates from increasing should you have an accident but have been a safe driver historically. Program qualifications vary by carrier and state but most require you to be accident free for at least 3 years and a loyal customer for at least 5 years.

Actual Cash Value – the cost of replacing stolen or damaged property, minus depreciation

Actuary – mathematician responsible for analyzing the possible outcomes of events that could cause policyholders to make a claim against their insurance policy and assessing the cost associated with the event should it occur. Their goal is to ensure that the insurance companies are collecting enough money from policyholders to cover the cost of settling claims.

Adjuster – business professional responsible for investigating and evaluating insurance claims. They determine if a claim will be paid by the insurance company, and if so how much.

Adverse Carrier – if you are involved in an accident with another party, this term is used to refer to the other party’s insurance carrier

After-Market Parts – parts or accessories used to repair or enhance a vehicle that did not come as original equipment with the vehicle

Agent – an individual representing an insurance carrier(s) and selling policies

Agreed Price – the cost of repairs agreed upon by the insurance adjuster or appraiser and the entity fixing your vehicle

Amendment – a document that modifies or changes your original insurance policy

American International Underwriters – a leading international insurance organization serving customers in more than 130 countries

Anti-lock Braking System (ABS) – an automobile safety system that prevents the wheels from locking during emergency braking situations, allowing drivers to maintain better control over the vehicle

Anti-Theft Device – a mechanism or tool designed to discourage or prevent auto theft. Vehicles featuring such devices may entitle you to a discounted premium

Appraisal – the valuation of property or estimate of damage, normally made by an unbiased professional

Arbitration – the method of settling a dispute through a neutral party rather than through the legal system

Assigned Risk – a driver or class of drivers who have been denied coverage by insurance companies but are required to be covered under law. The state will assign such divers to insurance companies and each company is required to accept a certain number of these drivers.

Assured – a driver or vehicle owner that is currently insured

At-Fault – the driver or vehicle owner that is deemed legally responsible for damages or losses in an accident

Auto Damage Adjuster – the individual responsible for preparing the estimate of costs associated with the repair of your vehicle as well as answering your questions in regards to the repair process, rental vehicle or total loss settlement

Auto Insurance – provides financial protection against damage, loss or injury resulting from owning and operating a motor vehicle and any liability that may arise. Specific insurance requirements vary by state.

Auto Theft – comprehensive coverage is the type of coverage that will cover auto theft

Binder – an interim document issued to state that a consumer’s insurance policy is in effect, necessary to protect a consumer if their policy cannot be issued immediately

Bodily Injury – a physical wound, injury or trauma sustained to an individual

Bodily Injury Liability Coverage – should you cause an accident that results in bodily injury or death, this coverage will pay for resulting costs including medical bills and your legal defense. Most states require at least a minimum level of this coverage.

Cancellation – the termination of a policy, either by the insured or insurer, before its expiration date

Carrier – the company providing insurance

Catastrophe – a large scale natural disaster causing injury, death and significant property damage

Certificate of Financial Responsibility (CFR) – also known as an SR-22 or FR-44, this is a certificate from your auto insurance carrier that is required by the state to prove you have auto insurance liability coverage

Certificate of Satisfaction – a document that is signed by the insured after their vehicle has been repaired, confirming that the insured is fully satisfied with the repairs made
Claim – a formal request to an insurance company asking for payment in accordance to the terms of the policy

Claimant – person submitting an insurance claim

Claim Examiner – the individual in charge of reviewing and resolving claims submitted to the insurance company

Collision Coverage – an optional form of coverage that will pay for any damages sustained to the insured’s vehicle. If a vehicle is financed, the financer will most likely require collision coverage.

Comparative Negligence – a rule of law that allows the negligence of all parties involved in an accident to be considered, should multiple parties be deemed negligent damages are assigned to each party accordingly

Competitive Auto Repair Parts – parts used to repair a vehicle that are not made by the manufacturer of the vehicle, parts are comparable in quality to manufacturer’s parts but less expensive.

Competitive Estimate – when an insurance company requires the insured to obtain several repair estimates for review

Comprehensive Physical Damage Coverage – pays for damage or loss to your vehicle due to fire, theft, flood, vandalism or other related hazards

Condition – the section of an insurance contract that defines the obligations of the insured and the insurance company

Contributory Negligence – a rule of law that can limit or prevent the claimant from collecting any damages if they are deemed to have been negligent in any way

Coverage – the extent of protection afforded by an insurance company

Customized Vehicle – a vehicle that has been changed or equipped in a way that is not typical of a standard personal vehicle

Damage – any form of injury, loss or harm to an individual or their property

Damages – a sum of money awarded by a court of law for loss or injury

Declarations – the portion of an insurance policy containing the insured’s contact information, the location and description of the property being insured, the time frame of the policy as well as the amounts of coverage and premium

Deductible – the amount of a claim that the insured is personally responsible for paying
Defensive Driver Discount – discount offered by an insurance company for individuals that have taken a defensive driving course

Depreciation – the reduction in value of property due to normal use

Discount – a savings in premium offered by insurance companies should an individual meet certain qualifications that decrease the insurance company’s losses or expenses

Driver Training Discount – discount offered by an insurance company for individuals that have taken an endorsed driver training course

Emergency Road Side Service Coverage – protection for situations that are not covered by standard auto insurance including being locked out of your car, towing for a reason other than an accident, dead battery, flat tire, run out of fuel

Endorsement – a document that adds to your original insurance policy

Estimate – a statement of the approximate cost to repair damaged property

Exclusion – particular hazards, individuals, possessions or places for which your insurance policy restricts or does not offer coverage

Expiration Date – the date that your current insurance policy ends

Field Adjuster – an insurance professional who rather than working in an office, travels to different locations to examine property for which claims have been filed. May work for a single insurance company or contract their services to multiple companies.

Financed Car – a vehicle paid for with a loan, the institution which provided the loan holds a lien against the vehicle until the loan has been paid in full

First Party – term used to reference the insured individual(s) in an insurance contract

First Party Claims – a claim issued to the insurance company by the insured individual

Gap Insurance – also known as Guaranteed Auto Protection, if your vehicle is stolen or totaled this coverage will pay the difference between the cash value of the vehicle and the loan balance

Good Student Discount – discount offered by insurance companies, normally for individuals who are full time students maintaining a grade point average equivalent to a ‘B’ or higher

Hazard – something that increases the risk of an accident

Homeowners insurance – coverage for homeowners offering protection from losses to their home, personal property and certain types of damage or injury to others that the owner is liable for

Indemnification – the act of making reparation for a loss made in the form of cash, repair or replacement with the intent of returning an individual or property to their approximate financial situation before the loss was incurred

Indemnity – reparation for a loss made in the form of cash, repair or replacement with the intent of returning an individual or property to their approximate financial situation before the loss was incurred

Independent Adjuster – business professional who does not work for an insurance company but is responsible for investigating and evaluating claims on their behalf

Inspection – evaluation of the physical state of a vehicle or property

Insurable Interest – when an insured person would experience financial loss due to the damage of property, normally established by ownership. For example, you have an insured interest in your own home, but not your neighbors.

Insurance – coverage by contract where one party (insurer) assumes the risk for loss or damage of many parties and redistributes that risk across all parties, in return for payment the insurer guarantees payment for any covered losses

Insurance Fraud – occurs when an insured individual misrepresents or embellishes the circumstances of an accident to an insurance company in order to receive a payment for losses that they are not actually entitled to

Insurance ID Card – card supplied by your insurance company showing all the pertinent policy information, your state may require you keep an insurance card in your vehicle

Insurance Score – a numerical calculation based on certain characteristics of an individual’s credit report, used by an insurance company to predict risk and determine a person’s premium

Insured – the individual or group covered in an insurance policy

Insurer – the company providing insurance

Leased Vehicle – a vehicle that is owned by an entity (leasing company) and rented to an individual under a long term contract, leasing company normally requires the individual leasing the vehicle to provide proof of insurance

Legal Liability – liability that is enforceable by law rather than agreement or contract

Liability – to be responsible for the injury, damages or losses suffered by another person or their property

Liability Examiner – business professional responsible for investigating and researching an accident including determining payouts for collision and property damage, bodily injury settlements and medical claims

Liability Insurance – coverage providing protection should another person be injured or their property damaged

Liability Investigation – the process of researching and collecting evidence in order to decide the cause of an accident

Lien – a charge held against personal property until the debt on that property has been paid

Lienholder – the entity which has provided the loan on financed property

Limit – the highest amount of protection offered by an insurance policy, as selected by the insured for a particular coverage

Limits of Liability – the maximum amount of coverage the insured will receive, as specified in your policy

Loss – the monetary cost associated with any damage or injury suffered by an individual

Loss of Use – payment to a third party claimant should they suffer economic hardship because of damages sustained to their property in an accident

Malicious Mischief – damages to personal property as a result of actions that were deliberately destructive

Material Damage – any losses or damage to a property covered in an insurance policy including property damage, comprehensive damage, collision damage, Fire/Theft, rental reimbursement or uninsured motorist property damage

Mechanical Breakdown Insurance – coverage that protects the insured from costly repairs by paying for repairs to all mechanical parts of a vehicle

Medical Payments Coverage – provides payment of any medical expenses caused by an automobile accident

Misrepresentation – a false statement of fact

Motorcycle Insurance – coverage specifically protecting against the risks associated with owning and operating a motorcycle
Motorcycle Safety Foundation – an international association providing motorcycle safety training, research and awareness; completing the MSF courses may qualify you for discounts with certain insurance companies

Motor Vehicle Report – a report issued by the license bureau siting any accidents and violations on a driver’s record, used by insurance companies to validate data given by applicants and policyholders

Mulit-Car Discount – savings provided by insurance companies to individuals who insure multiple vehicles with that company

Named Insured – the individual or group stated on the declarations page of an insurance policy

National Insurance Crime Bureau – a non-profit group with the mission of identifying and prosecuting insurance criminals by working with insurance companies and law enforcement

Negligence – the failure to use the caution or judgment of a sensible person in a comparable situation

No-fault Insurance – intended to cover an insured’s medical treatment, lost pay and any other expenses associated with an accident regardless of who caused the accident

Non-Renewal – when an individual chooses not to renew a policy when it expires

Occurrence – an incident that happens during the term of an insurance policy that causes injury or damage

Original Equipment Manufacturer Parts – vehicle parts provided by either the original manufacturer of the vehicle or the supplier of the original part

Overseas Insurance – coverage to protect the vehicles and property of individuals living outside the USA

Passive Restraint System – a type of passenger safety system that initiates automatically if the vehicle is in an accident

Payment Plans – many insurance carriers offer the option of paying your premium in scheduled installments throughout the year rather than a lump sum, however a service fee may apply

Payment Recovery – also known as subrogation, your insurance company will seek to recover your deductible and any expenses incurred as a result of an accident due to another driver’s negligence from the other driver’s insurance company

Payment Recovery Examiner – business professional in charge of recovering your deductible from the other driver’s insurance company

Peril – a dangerous or hazardous situation that may lead to a damage, injury or loss; such as a fire

Personal Injury Protection – coverage that will pay for your medical expenses, lost pay and any other costs incurred as a result of an accident regardless of who caused the accident

Personal Property – possessions other than land or real estate, such as jewelry or furniture

Physical Damage – material harm to property or belongings

Policy – a contractual agreement with your insurance company

Policy change – any modification made to your insurance policy while it is in effect

Policyholder – the individual or group listed on the policy declaration page

Pre-accident Condition – refers to the condition of a vehicle prior to an accident, including mileage, options, any damage not a result of the accident, etc

Premium – the amount charged by the insurance company to provide insurance coverage

Primary Insurance – acts as the first layer of insurance and normally covers up to the policy’s limit regardless of whether or not other policies cover the same risk

Proof of Loss – a report outlining the size and scope of a claim, often asked for along with the conditions of the policy

Property Damage Liability Coverage – should you be responsible for causing an accident that results in damage to another’s property, this coverage will pay for those damages and your legal defense

Proximate Cause – an event sufficiently related to and determined to be the cause of an injury or damage to property

Quote – an estimate of the cost of insurance coverage based on information provided by the applicant, such as number of drivers and vehicles to be insured and each driver’s record

Rate – the base rating units used to establish an individual’s final premium

Rating Plan – guidelines used to establish the cost of your insurance premium, based on an individual’s particular characteristics (number of cars insured, driving record) certain discounts and surcharges are applied

Reinspection – when an adjuster assesses an estimate during or after repairs to a vehicle to ensure the estimate was accurate and the body shop completed the required work

Release – legal agreement expressing that any current, previous or prospective obligations stemming from an accident have been satisfied

Renewal Date – the date your current policy expires and your new policy begins

Rental Reimbursement – coverage that will pay for a rental car if your insured vehicle cannot be driven due to a covered accident, an optional coverage normally available at an additional cost

Renters Insurance – coverage offering protection to a person who is living in a home owned by someone else

Replacement Parts – parts used to repair a vehicle including original equipment parts and after-market parts

Rider – the operator of an insured motorcycle: the authorization of a life or health insurance policy

Risk – the possibility of a loss or injury occurring

Salvage – property that has been damaged and is confiscated by the insurance company after the claim is paid

Self-Insured Retention – similar to a deductible, but applicable to umbrella insurance; the amount the insured must pay out of pocket before the insurance company will begin to cover a loss

SR-22 – also known as a Certificate of Financial Responsibility, an SR-22 is a document from your auto insurance carrier that is required by the state to prove you have auto insurance liability coverage

Subrogation – when your insurance company seeks to recover your deductible and any expenses incurred as a result of an accident due to another driver’s negligence from the other driver’s insurance company

Supplemental Estimate – used if there is additional damage that was not included in the original estimate

Theft – the criminal act of stealing or attempting to steal another person’s property

Third Party – an individual or party with interest in an agreement but not directly included in the agreement

Third Party Claim – a claim made by a third party for injury or property damage assumed to have been caused by the insured

Tort – a wrongful act other than a breach of contract that results in injury or harm to another for which monetary relief may be obtained

Tortfeasor – a person who committed a tort

Total Loss – any property that has suffered massive damage so that the cost of repairing it is unreasonable either because repairs cannot be done safely or are too expensive

Towing Coverage – usually an additional coverage that will pay the cost of towing the insured vehicle

Umbrella Insurance – an additional coverage offering liability protection above and beyond the limits of a standard home or auto policy, also may provide coverages otherwise excluded by other liability policies

Underwriting – the procedures and algorithms used by insurance companies to determine if they will provide coverage for an individual

Uninsured Motorist Coverage – should you incur medical expenses or property damage due to the actions of an uninsured or underinsured motorist or unidentified driver, this coverage will pay your accident related expenses

Vandalism – deliberate or malicious damage or destruction of property

Vehicle Identification Number (VIN) – a 17-digit number assigned to every vehicle to be used for identification purposes and visible on the dashboard from outside the vehicle

Warranty – a binding guarantee from the manufacturer of a product that provides assurance to the consumer as to the integrity of a product and the manufacturer’s obligation to repair or replace faulty parts