Glossary of Car Insurance Terms
Additional Interest: This is defined as a company, such as a bank, that has an interest in your automobile and the corporation or company may be listed on your insurance policy. The most common example of this is when you finance a vehicle through a bank. The car is considered to be collateral for the loan. This is why the law requires a vehicle's owner to maintain full coverage on the vehicle if it has an outstanding balance on it. It is to protect the bank's collateral, as well as being for your own safety.
Anti Theft Device: An anti theft device is any sort of mechanism that is designed to reduce the chances that a vehicle has of being vandalized, violated, or stolen. Common anti theft devices include car alarms, starter disablers, and motion detectors. Even a vehicle's VIN number is considered to an anti theft device. You may qualify for discounts through your insurance company if your vehicle has one or multiple of these features.
Bodily Injury Liability: This form of car insurance coverage protects a motorist financially if he or she is involved in an accident for which they are at fault. Common claims that are filed under bodily injury liability include medical expenses, loss of income, or claims of pain and suffering. This portion of liability is designed to protect passengers in a vehicle, not the vehicle itself. Its coverage does not extend to you, as a motorist, or other passengers in your vehicle.
Car Insurance Coverage: Car insurance coverage's purpose is to protect an at fault driver financially in a vehicular crash. There are many different forms of coverage; however, the most common forms include collision, comprehensive, liability, medical payments, and uninsured or underinsured motorist insurance.
Claim: Essentially, a claim is a request to your, or another party's, insurance company for financial reimbursement for medical expenses or vehicle repair costs that are associated with being involved in an accident. A claim will require for the requester to provide proof of the claim. The levels of proof you will be required to furnish, as well as the insurance regulations for filing a claim, vary widely amongst states and insurance companies.
Collision Coverage: This form of insurance coverage pays for the cost of repairing your vehicle when you hit, or are hit by, another vehicle or object. Repairs cannot commence until your deductible has been paid. If your vehicle has an outstanding loan or balance on it, you are required by law to maintain this form of coverage until the car in question has been paid in full.
Collision Deductible Waiver: This waiver is only required in certain states. Essentially, a motorist is required to purchase this waiver in conjunction with their collision insurance. The waiver will pay for the cost of your deductible if the insured vehicle is involved in a collision for which an uninsured motorist is found to be responsible. If your deductible amount is high, this is an especially helpful document to have.
Comprehensive Coverage: This form of insurance coverage will pay for the cost of repairing your vehicle if it is damaged by methods other a vehicular accident. Common examples of the scenarios comprehensive coverage would cover include damage by a flood or hailstorm, striking an animal, or if your vehicle is stolen. This form of coverage is required only if the vehicle you own has an outstanding balance owed or loan on it.
Continuous Coverage: This term refers the amount or length of time that a motorist has maintained uninterrupted, legally compliant insurance coverage on a vehicle. Extended periods of lapsed coverage can result in higher insurance premiums for a motorist. Most insurance companies will extend a discount to motorists who conduct business with them for extended periods of time.
Continuously Insured: This term is another way to phrase “continuous coverage”. It is, essentially, the length of time a motorist has been insured without any gaps in their insurance coverage.
Credit Rating: There are three primary credit bureaus within the United States; Equifax, Experian, and TransUnion. Each of these bureaus use a complex series of equations and formulas to devise a credit score for an individual. An insurance company takes a person's credit score into account when determining what you will pay for an insurance policy. An individual's credit score is also used as a gauge to determine how likely he or she is to honor the financial agreement laid out in the purchase of your insurance policy.
Deductible: A deductible is a pre selected monetary amount that an individual must pay to their insurance carrier before the insurance provider will commence with paying for the repairs on a vehicle. The amount of your deductible has a direct correlation to how high your monthly premiums are. The higher your deductible is, the lower your monthly premiums will be.
Declarations Page: This particular document can usually be found within the first five pages of your insurance policy. It is a general summary of your policy. The information it contains includes your name, your address, and the vehicles that are covered under the policy, the deductible, and the forms of coverage provided by your insurance policy.
Defensive Driver Course: This is a class that is offered and approved by your state's Department of Motor Vehicles. Its sole aim is to enhance and develop one's defensive driving skills. They are open to all age groups, and most insurance companies offer a discount on insurance premiums to those who have successfully completed one.
Depreciate: To depreciate means, simply, for an object to lose value over a period of time. In the car insurance industry, the term depreciation is applied to vehicles who suffer from age, wear and tear, and excessive mileage.
Drive Other Car Endorsement: This document is a rider that is added to an individual's car insurance policy to extend the policy's coverage to include vehicles that are operated by, but not owned by, the insured motorist.
Earned Premium: An earned premium is a portion of your monthly car insurance premiums that is “absorbed” during a portion of your policy's term. If the policy is terminated early, for any reason, the insured is held financially responsible only for the “earned” premium portion, regardless of the monetary amount one might have paid for the policy.
Effective Date: This is the date that the coverage offered by your insurance policy officially goes into effect. The effective date of your insurance coverage can be located on your policy's declarations page.
Emergency Road Service: This is a service that is offered by many insurance companies for a small monthly premium. It is completely optional, but it offers services to a motorist such as the changing of a tire, gas delivery, and assistance if a motorist locks their keys in their car. Within limitations, emergency road side services will offer towing for a disabled vehicle.
Endorsements: An endorsement is also commonly known as a rider. When changes are made to your policy after its coverage date has begun, the rider or endorsement documents the changes that are made, such as adding a new car to your policy or raising or lowering your deductible.
Exclusions: Exclusions are situations or scenarios in which your insurance policy's coverage is not extended. The terms and conditions portion of your insurance policy will list these specific scenarios.
Extraordinary Medical: This optional form of automobile insurance coverage is designed to cover the expense of medical needs beyond what is covered by a car insurance company. The precise particulars for this form of coverage vary by federal and state laws and by insurance company. The form of coverage would be utilized in the event that an individual was permanently disabled or suffered long term hospitalization due to an accident.
Expiration Date: This is the time and date that the protection afforded by your automobile insurance policy ceases to exist. It can be located on your insurance policy's declarations page.
Extended Non Owner Liability: This is an endorsement that is added to an automobile insurance policy; it extends the coverage of the insurance policy to include a motorist who does not own the vehicle, but is a frequent operator of it.
Financial Ratings: This is a term that is applied to the financial stability of an insurance company. Agencies, such as Standard & Poor's, assign financial ratings to automobile insurance companies. It is important for a potential customer to review the financial rating of an insurance company they are considering conducting business with. It could be potentially financially devastating if an insurance company was unable to pay a claim for a client.
Financial Responsibility Laws: A motorist is required to possess the power to financially compensate the victims of an automobile accident for which the motorist is considered to be responsible. Each state maintains unique, differing laws concerning the monetary amounts, and forms, of insurance coverage a motorist must maintain. Liability insurance is the most common and most basic form, of coverage.
Full Coverage Car Insurance: Full coverage car insurance is comprised of collision and comprehensive insurance. A motorist is only required by law to maintain these forms of coverage if the vehicle they own has an outstanding loan or balance on it. Liability insurance is not considered part of full coverage car insurance because it is not concerned with paying for the repairs or medical expenses the insured drive could incur in an accident.
Funeral Benefits: This is an optional form of insurance coverage that is offered by most insurance companies. If the insured was to die due to injuries sustained in an accident, the insurance company would pay for a portion of the funeral expenses.
Gap Insurance: This is primarily an optional form of insurance coverage; however, it is required in a handful of states. If a vehicle with an outstanding loan or balance was totaled in a collision, your insurance company would only pay the current market value for the vehicle. This would leave a difference between the money that is owed on the loan and what your insurance company believed the car was worth. Gap insurance would step in to pay this difference.
Garaging Location: Most insurance companies assume that a vehicle's owner stores the vehicle at their primary residence. However, an insurance company will ask if you store your vehicle in a different location. The location where the car is primarily kept will influence your insurance premiums.
Good Student Discount: This is a discount extended to young motorists (usually under the age of 24) who are enrolled in high school or college full time. In order to qualify, the student in question must maintain a 3.0 grade point average or above. An insurance company believes that if a student is responsible in their school obligations, then they will be responsible in other aspects of their lives, such as driving habits.
HEV: Hybrid Electric Vehicle: A hybrid electric vehicle uses a mixture of gasoline and electricity to power itself, and it is considered to be much more eco friendly than traditional gasoline powered cars. Many insurance companies offer discounts to customers who drive these types of vehicles.
Hit and Run: The term is applied to an accident that is caused by a motorist who leaves the scene of the accident before the police or other emergency medical personnel arrive. The motorist also neglects to leave their insurance information.
Income Loss: This is another form of optional insurance that is similar to funeral coverage insurance. If a motorist is injured in a vehicular accident to the point that he or she is unable to work, this form of insurance will step in to compensate the insured for any lost wages they may incur.
Indemnity: Indemnity is the restoration of a motorist to their state of financial well being before an accident occurred. An insurance policy is designed to “complete” a motorist, rather than to “enrich” them. Therefore, an insurance company that provides indemnity to a motorist is “completing” the motorist.
Independent Agent: This is an insurance agent who does not work on behalf of one specific insurance company. He or she works in a manner similar to that of a broker; they search through various insurance companies to locate the policy that most adequately suit their client's needs.
Insurance Premium: An insurance premium is the monetary amount that an insurance company charges a motorist for their policy. The monetary figure is determined by the insurance company, based upon what their expectations of the motorist are in incurring a loss for the insurance company. Premiums are generally paid monthly; however, they can also be paid quarterly or semi annually.
Insurance Score: This is a score that is assigned to each motorist. The score is devised by a complex system of equations and calculations that insurance companies have created. The more risk an insurance company assumes you pose to them, the higher your insurance premiums will be.
Insured: This is a term that is commonly found in your insurance policy. It refers to the owner of the vehicle, and other motorists, who are covered under the terms of your contract.
Judgment: This is a decision that is rendered in a court of law. It generally involves the ordering of one party to make financial restitution to another party for a specific monetary amount. Further legal action may be needed to ensure that a judgment is satisfactorily met. If so order, the guilty party's wages may be garnished or their assets may be liquidated to ensure that restitution is made.
Liability: Liability is a legal obligation to perform certain actions. In regards to the car insurance industry, it refers to specific monetary amounts that must be paid in order to compensate for damages a motorist caused to another party. Liability can also mean responsibility.
Liability Coverage: The is a form of insurance that is used to render financial restitution to another party for repairs to a vehicle or medical expenses incurred in an accident for which the insured is at fault.
Lien Holder: The term applies to an individual or a corporation who shares a legal interest in the vehicle you own. If your vehicle has an outstanding loan on it, the institution that loaned you the money has a financial interest in your vehicle because it is considered to be collateral for the loan.
Limits: Limits are the maximum monetary amounts, as set by your insurance policy's terms and conditions that a car insurance company will pay for damages incurred in an accident. If the damages incurred in the accident exceed the limits of your insurance policy, then you are responsible for the remainder of the balance if you are found to be at fault in the accident.
Medical Payments Coverage: This form of insurance is designed to pay for any medical expenses that the insured and their passengers may incur in an automobile accident. The payments are made regardless of who may be at fault in the collision. It is an optional form of coverage, but there are a small handful of states that require a motorist to maintain it.
MVR (Motor Vehicle Record): This document may also be referred to as a DL Printout. It is a printed record of a motorist's driving history. It documents any tickets, moving violations, or collisions a motorist may have had for the last ten years.
No Fault Insurance: This form of insurance provides monetarily for the damages and medical expenses that their insured suffered. The aim of no fault insurance is to expedite the claims process for insurance companies and motorists alike.
No Fault State: This is an operating system that many states use when it comes to dealing with automobile accidents. Under the tenements of this system, no one driver is considered to be at fault in the accident. Each party's insurance company is responsible only for the repair costs and medical bills that their insured party suffered.
Non Passive Alarm: This is a type of car alarm that must be manually activated by the driver of the vehicle. Most alarms automatically set themselves. An insurance company will offer a discount to any motorist who has an anti theft device on their vehicle.
Passive Alarm: This is a type of car alarm that automatically activates itself each time the car is locked. As with a non passive alarm, an insurance company will offer a motorist a discount for this anti theft device; however, the discount that is associated with a passive alarm may be slightly greater than a non passive alarm.
Personal Auto Policy: This is a term that applies to an industry standard insurance policy. Such a policy will include liability insurance, medical payments insurance, and uninsured or underinsured motorist protection.
Personal Injury Protection: This form of insurance coverage is required in states that subscribe to a no fault policy when it comes to dealing with automobile accidents. It is designed to provide financial indemnity to the insured, and their passengers, for medical expenses that are incurred due to an automobile crash. It is not partial to fault in the accident.
Physical Damage: Physical damage is used to reference damages that your vehicle incurs in a collision. This type of damage is generally covered under a motorist's comprehensive or collision insurance policies.
Pleasure Use: Pleasure use occurs when a vehicle is not used for the regular commuting of to or from work or school. Pleasure use occurs when the vehicle is used primarily for enjoyment.
Policy Lapse: This is any length of time in which a motorist does not have insurance coverage on their vehicle. Multiple lapses in coverage generally result in higher insurance premiums from insurance companies for motorists.
Policy Period: This term refers to the length of time that your insurance policy is active. The dates of your policy period can be located on the declarations page of your policy. Policy period may also be referred to as “policy term”.
Preferred Risk: A preferred risk is an individual who is considered to present an insurance company with less risk of filing a claim or being involved in a collision than the average motorist.
Premium: A premium is the unique individual price that each motorist is charged for their automobile insurance policy.
Primary Driver: This is the owner of the vehicle, or the motorist, who drives an insured car the most often. If multiple drivers are listed for one vehicle, the primary driver's driving record is taken into account more so than the any secondary driver's.
Primary Use:The primary use of a vehicle is the purpose for which it is most often used. An insurance company will generally divide a vehicle's primary use into three categories; commuting, business, or pleasure. The primary use of a car determines the annual mileage the car is likely to receive. The more often a vehicle is on the road, the more likely the insurance company believes that it is to be involved in an accident.
Property Damage Liability Coverage: This is a form of insurance in where the insurance company is legally responsible for paying any property damage costs (such as car repairs) that the insured individual is found to be responsible for.
Pro Rata Cancellation: This term refers to the cancellation of an insurance policy before the date of expiration occurs. In this event, the policyholder is only responsible for the premium portion of the insurance premiums. Any dollar amount over the earned premiums must be returned to the individual by the insurance company.
Property Damage Liability Insurance: This form of insurance coverage is designed to cover any physical damage that another party's (besides the insured) may receive to their vehicle or other possessions, such as a mailbox or fence post. If a motorist were to damage their own property in an accident, it would be covered by the collision or comprehensive insurance.
Rental Car Reimbursement: This is an option form of coverage that can be added to an insurance policy where the motorist is paid back for the expense of renting a car if their primary vehicle is rendered unusable in an accident.
Secondary Driver: This term refers to any motorists who use an insured vehicle besides the main driver. He or she is covered by the insurance policy, and their driving record is used to a lesser degree than the primary driver's in figuring out the cost of an insurance policy.
Short Rate Cancellation: Short rate cancellation is similar to pro rata cancellation. If a motorist cancels their insurance policy before the expiration date, any monetary amount beyond the earned premium must be refunded to the motorist.
Split Limits: This term references the three sets of numbers that are concerned when it comes to liability insurance. Here is an example this number could appear as 25/35/10 on your insurance policy. This would mean that the monetary maximums of your insurance policy are $25,000.00 for liability bodily injury coverage for each individual, $35,000.00 worth of liability coverage for each accident, and $20,000.00 worth of property damage coverage per collision.
SR 22: This is an official document, issued by an insurance company, that provides proof of that a motorist has met the state's laws for financial responsibility. This document must remain on file with a state's Department of Motor Vehicle's for individuals who have committed serious moving violations, such as a DUI, in order for the individual's driver's license to be reinstated. Typically, such a document must remain on file for three years.
Tacking:Tacking is a process that applies to uninsured/ underinsured motorist insurance coverage. It allows a motorist to increase the limit of the policy's coverage by the # of vehicles found on the insurance policy.
State Minimum: A state minimum refers to the minimum financial obligations for motor vehicle insurance that a motorist must meet in order to be in compliance with the law. Each state has differing requirements for the monetary amounts of insurance that a motorist must meet.
Steering Restraint :A steering restraint is a anti theft device that prevents a would be thief for accessing a vehicle's ignition system. Most insurance companies give discounts for vehicles that are outfitted with such devices.
Term: This is the length of time for that an insurance policy is valid.. The terms for one's insurance policy can be found on the declarations page of the policy.
Tort: This term applies to legal misconduct, and it is used most commonly to refer to acts of negligence or omission. A court system provides a solution to torts takes care of monetary damages awarded to a complainant.
Towing Coverage: This is an optional form of coverage that can be added to one's insurance policy as a rider. It provides monetary compensation for the expenses one would pay if the insured's vehicle were to break down or be disabled in an automobile accident.
Underinsured/Uninsured Motorist Coverage: This form of insurance is optional, but it is required in some states. It provides monetary coverage for the physical damages or medical expenses a motorist incurs if they are struck by another party who is uninsured or whose insurance meets state guidelines but is insufficient to satisfy all the damages incurred.
Unsatisfied Judgment Fund: An unsatisfied judgment fund is funding that a state has set aside to reimburse victims who are injured in an automobile collision and who can’t collect damages from the party responsible for the accident.
Usage: Usage is the term that applies to how a motorist uses their vehicle. Insurance companies typically have three divisions for usage business, pleasure and commuting.
VIN (Vehicle Identification Number): Each automobile has a unique number that can generally be found on the driver's side of the windshield. A VIN number has 17 numbers and is used by an insurance company to identify and track a vehicle.
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