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Auto Insurance Glossary - Car Insurance Terms
The following list of auto insurance terms is in alphabetical order. Scroll down to find the terms you are looking for. If you cannot find your terms or need additional help, click on the Chat Live link on the right and a customer service rep. will be more than happy to assist you!
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Additional
Insured or Additional Interest
A person or an organization, other than the named insured or covered person,
who is protected under the named insured's auto insurance 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.
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Anti-Theft Device
Devices designed either to reduce the chance an auto will be vandalized or stolen, or assist in its recovery. Examples include car alarms, keyless entry, starter disablers, motion detectors, parts of the vehicle etched with the Vehicle Identification Number, and recovery systems.
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Assigned Risk
A risk not ordinarily acceptable to insurers which is, according to state law, assigned to insurers participating in a plan in which the insurers agree to accept their share of these risks.
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Automobile Insurance
A form of insurance that protects against losses involving autos. Different types are available depending on the needs and wants of those buying policies. Examples of coverage types include: bodily injury liability, property damage liability, medical payments, and collision and comprehensive coverage for physical damage to the insured's vehicle.
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Automobile
Insurance Plans
The name for "assigned risk" plans. These are plans set up and monitored
by the state to help people who are unable to secure auto insurance through
standard insurance carriers. See Assigned Risk.
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Basic
Auto Policy
Although still used today to insure substandard risks,
two-wheel motorized vehicles, and commercial autos, the
Basic Auto Policy has been primarily replaced by the Personal
Auto Policy, which combines both physical damage coverage
and liability insurance for claims arising out of the ownership
or use of a vehicle.
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Basic
Limits of Liability
The least amount of liability coverage that can be purchased,
which is generally equivalent to the minimum amount required
by state law. In determining rates, a carrier will use
the basic limits to develop the base rates. If an insured
person wants higher limits, the carrier applies an increased limits factor
to the base rate in calculating the new premium for the increased coverage.
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Bodily
Injury Liability
Legal liability for causing physical injury or death to
another.
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Collision
Insurance
This covers loss to the insured person's own auto caused
by its collision with another vehicle or object.
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Combined
Single Limit
Bodily Injury and Property Damage coverage expressed as
one single amount of coverage.
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Commission
That portion of the premium paid to the agent as compensation
for the agent's services.
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Comprehensive
Coverage
Covers damage to your vehicle caused by an event other than
a collision or overturn. Examples include fire, theft,
vandalism, and falling objects.
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Continuous
Coverage or Continuous Liability Insurance
Continuous coverage refers to the length of time you have
maintained insurance on your vehicle.
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Covered
Person
This refers to the named insured, spouse, resident relatives,
etc. that are insured under a policy contract.
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Customized
Equipment/Special Equipment
Items not included in standard insurance options available
for cars. These may include extra electronic equipment,
special paint or exterior items, or amenities added to
the inside of a van or truck.
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Deductible
The amount an insured person must pay before insurance companies pay the remainder of each covered loss, up to the policy limits.
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Defensive Driver Course
These are classes either offered through or approved by Departments of Motor Vehicles to enhance driving skills. These courses may make drivers eligible for discounts on their premiums. Courses taken for traffic school because of a moving violation are not eligible.
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Drive-Other-Car
Endorsement
Optional coverage that broadens the definition of a covered
auto to include non-owned vehicles the insured person operates.
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Driver
Education
State accredited educational course that consist of at
least 30 hours of professional classroom instruction.
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Driver
Training
State accredited training course that consists of at least
six hours of behind-the-wheel professional instruction.
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Earned
Premium
The portion of a premium that has been "used up" during a policy term. With
a one-year policy, half of the total premium has been earned after six months.
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Effective
Date/Inception Date
The date that coverage begins on an insurance policy.
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Expiration
Date
The date your coverage ends. There is usually a time
of day associated with this date, for example, an expiration
date of 5/1/2002 at 12:01am. This means your coverage ends
one minute after midnight on the date listed.
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Extended
Non-Owner Liability
An endorsement that provides broader liability coverage
for specifically named people operating any non-owned automobile
or trailer. It covers non-owned autos, use of autos to
carry people or property for a fee, and individuals driving
employer-furnished cars who do not own vehicles themselves.
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Family
Automobile Policy
Now replaced by the Personal Auto Policy, the Family
Auto Policy was a package policy in which both liability
and physical damage protection to an insured's vehicle
was offered under one policy.
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Financial
Ratings
Financial ratings reflect a rating organization's opinion
on the financial strength and ability to meet ongoing obligations
to policyholders. The ratings organizations most commonly
identified with the insurance industry are AM Best, Standard & Poor's
and Moody's.
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Financial
Responsibility Laws
Financial responsibility laws require owners and operators
of autos to maintain enough money to compensate those they
injure. Liability insurance is the most common way to satisfy
these requirements.
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First
Party Benefits
This pays policyholders and others covered by the policy
in the event of injury, no matter who caused the accident.
The benefits can include medical expenses, loss of income,
funeral and death benefits. This may also be called Personal
Injury Protection.
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Gap
Insurance
If you are making lease or loan payments and you experience a total loss, there
may be a difference (gap) between the market value of your vehicle and what
you still owe on it. This optional coverage pays the difference.
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Good
Student Discount
A premium discount for students with high scholastic grades.
Some statistical research has shown a relationship between
good grades and safe driving.
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Hit
and Run
An accident caused by someone who does not stop to assist
or provide information.
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ID Card
An identification card issued by your insurance company that provides evidence of liability insurance. Such evidence is required in most states.
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Lapse in Coverage/Policy Lapse
A point in time when a policy has been canceled or terminated for failure to pay the premium, or when the policy contract is void for other reasons.
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Lender/Lessor
Your lender is the institution to which you make car payments.
Your lessor is the institution to which you make your lease
payments.
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Loss
Payee/Lien holder
A person or entity with a legally secured insurable interest
in another's property, usually a financial institution
that loaned money to buy a car. The car is the loan collateral.
If the auto is damaged in an accident, loss payments will
be made to you and to the loss payee on your policy.
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Medical
Payments
This pays for medical and funeral expenses incurred in an auto accident, regardless
of fault. It will also cover injuries sustained by passengers in your car,
or while you're operating someone else's car (with their permission), in addition
to injuries you or your family members incur when you're pedestrians.
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Multi-car
discount
A discount offered by some insurance companies for those
with more than one vehicle insured on the same policy.
In some cases, if you drive a company car insured by your
company, your own insurance company may give you the multi-car
discount.
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MVR
- Motor Vehicle Record
A motor vehicle record, also referred to as DL printout,
or MVR, contains information obtained from an individual's
driver license application, abstracts of convictions and
accidents.
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Named
Insured
Any person, firm or corporation designated by name as the
insured person(s) in a policy. Others may be protected
by policy definition even though their names aren't on
the policy, such as other drivers operating (with consent)
the named insured's covered auto.
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Named
Non-Owner Policy
A policy endorsement for one who operates any non-owned
automobile on a regular basis, such as driving a car provided
by one's employer.
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No-Fault
Insurance
Many states have enacted auto accident compensation laws
permitting auto accident victims to collect directly from
their own insurance companies for medical and hospital
expenses regardless of who was at fault in the accident.
Although there are many legal variations of no-fault insurance, most states
still allow people to sue the negligent party if the amount of damages
exceeds a certain state-determined threshold.
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Non-Owned
Auto
Any vehicle that is not owned, borrowed, or leased by the
insured, and which is used primarily for a business purpose.
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Per
Occurrence Limit
This refers to the cap amount an insurance company will pay for all claims
arising from a single incident. In an automobile accident, it comprises bodily
injuries sustained by all parties. When Bodily Injury coverage is purchased
in split limits, the second limit is the "per occurrence" limit: e.g. $100,000(per
person)/$300,000(per occurrence)
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Per
Person Limit
This refers to the cap amount an insurance company will pay
for any one person's injuries arising from a single incident.
In an automobile accident, it comprises bodily injuries sustained
by each person. When Bodily Injury is purchased in split
limits, the first limit is the "per person" limit: e.g. $100,000(per
person)/$300,000(per occurrence)
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Personal Auto Policy
The most common auto insurance policy sold today. Often referred to as "PAP," this policy is written in simple wording and provides coverage for liability, medical payments, uninsured/underinsured motorist coverage, and physical damage protection.
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Personal Injury Protection
The name usually given to no-fault benefits in states that have enacted mandatory or optional no-fault auto insurance laws. Personal Injury Protection (PIP) usually includes benefits for medical expenses, loss of income from work, essential services, accidental death, funeral expenses, and survivor benefits.
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Physical
Damage
Damage to your covered vehicle from perils including (but
not limited to) collision or upset with another vehicle
object, fire, vandalism and theft.
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Policy
The written documents of a contract for insurance between the
insurance company and the insured. Such documents include forms,
endorsements, riders and attachments.
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Policy
Period
The period of time in which a policy is in effect. For
example, six months or one year, are standard policy periods.
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Policyholder
One who maintains ownership in an insurance policy. This may
refer to the policy owner or those covered under the policy.
See also Named Insured.
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Preferred
Risk
Any risk considered to be better than the standard risk
on which the premium rate was calculated.
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Premium
The price of insurance an insured person pays for a specified
risk for a specified period of time.
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Private
Passenger Automobile
A four-wheeled motor vehicle that is subject to motor vehicle
registration and used for private personal use.
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Pro
Rata Cancellation
Termination of an insurance contract before the policy
expiration date on which the premium returned to the insured
person is adjusted in proportion to the amount of time
the policy was in effect.
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Property
Damage Liability Insurance
Protection against liability for damage to another's tangible
property, including loss of use. Although this coverage
is different than liability for bodily injury to another
person, Bodily Injury and Property Damage Liability protection
are generally written together.
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Renewal
The process of keeping an active policy in force through the
issuance of a renewal policy.
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Rental
Reimbursement
This optional coverage will reimburse you for a rental
car if your vehicle is disabled due to a covered loss.
This coverage will pay all or part of your rental car costs.
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Safe
Driver Plan
A rating system that assigns points for traffic convictions and certain accidents.
Similar to a merit-rating plan, each point increases the surcharge percentage
to the baseline rates.
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Short
Rate Cancellation
A policy termination in which the refunded premium is not
proportional to the amount of time remaining in the policy
period due to the fixed expenses incurred by the company.
The insured will generally pay more for each day of coverage
than if the policy had remained in force throughout the
entire policy period.
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Split
Limit
Any insurance coverage with separately stated limits for
different types of coverage. Example: an automobile liability
policy of 100/300/50 provides a maximum of $100,000 bodily
injury coverage per person, $300,000 bodily injury coverage
per accident, and a property damage limit of $50,000 per
accident.
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Stacking
of Limits
The application of more than one policy limit to the same
loss or occurrence. In some jurisdictions, courts have
required stacking of limits when multiple policies, or
multiple policy periods, cover an occurrence. For example,
Uninsured motorist bodily injury limits of $100,000/300,000
on two policies owned by the same person may be added together
to pay a loss. In this event, the total amount of coverage
available for an accident would be $200,000/600,000.
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Term
The length of time for which a policy or bond is in force.
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Threshold
Level
Under some no-fault insurance laws, the threshold level
represents the degree of injury a claimant must establish
before being allowed to sue the negligent party. The threshold
may be verbal (regarding the severity of the injuries)
or a dollar amount ($10,000), or both. For example, with
a threshold of $5,000, an injured person may sue if his/her
injuries and other economic damages (rehabilitation expenses,
loss of income, etc.) exceed $5,000.
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Tort
A private wrong or harm (other than a breach of contract) committed against another, resulting in legal liability. A tort is either intentional or accidental (negligent). Automobile liability insurance is purchased to protect one from suits arising from unintentional torts.
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Tort Feasor
One who commits a tort.
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Towing and Labor Costs
This endorsement, which is added to the physical damage coverage, provides reimbursement up to a specified limit to tow your vehicle or pay for on-site labor costs.
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Transportation
Expenses
Subject to a daily and maximum dollar limit, this coverage
(under the physical damage portion of an automobile policy)
pays for transportation expenses incurred by the named
insured only in the event of theft of an entire covered
auto. Coverage generally begins after a stated minimum waiting period.
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Uninsured
Motorists Bodily Injury
Uninsured motorists bodily injury coverage (which must be offered in most states)
pays for a covered person's bodily injuries of which an uninsured or hit-and-run
motorist is legally liable, but unable to pay. How to Determine Your Auto Insurance Coverage Needs
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Underinsured
Motorists Bodily Injury
Underinsured motorists bodily injury coverage (which must
be offered in most states) pays for a covered person's
bodily injuries of which a person with not enough insurance
is legally liable. How to Determine Your Auto Insurance Coverage
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Uninsured
Motorists Property Damage
Uninsured Motorist Property Damage Liability coverage pays
for property damages caused by uninsured drivers. How to Determine Your Auto Insurance Coverage
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Unearned
Premium
The portion of your premium remaining on your policy term.
For example, with a six-month premium, at the end of the
first month of the premium period, five-sixths of the premium
is unearned by the insurance company.
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Unsatisfied
Judgment Fund
Some states have established laws to reimburse those injured
in auto accidents that have been unable to collect from
the responsible party.
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Usage
This refers to the primary function or purpose in which you intend
to operate your vehicle. For example, if you primarily drive
your car to and from work, the usage is considered "commute; "if you're self-employed and you
primarily drive to see customers, the usage is considered "business;" if
you're retired, your usage is considered "pleasure."
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VIN
Vehicle Identification Number
A Vehicle Identification Number is a 17-digit alpha-numeric
code that provides valuable information concerning the
vehicle's serial number, make, model, options, and year
in official records (like a Social Security number for
your car).
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Waiver
of Collision Deductible
This option pays your collision deductible when you carry
collision coverage on a vehicle that is damaged by an uninsured
or hit-and-run motorist who is at fault. Coverage applies
only when there is actual physical contact and when you
can identify the uninsured driver or vehicle.
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Whole
Dollar Premium
Generally, insurance premiums are rounded to the nearest
dollar; an amount of 51 cents or more being rounded up
to the next dollar, and any amount less than that being
dropped.
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