Insurance Dictionary

Actual Cash Value

You’ll see this term a lot in auto insurance policies or if you ever have to file an auto insurance claim. That’s because most auto insurance coverage reimburses you only for the actual cash value of your car. Your car’s actual cash value is calculated by determining its original value, minus the amount your car has depreciated since you bought it.

Adjuster

An adjuster is the person who investigates and settles auto insurance claims.

Agent/Broker

Agents and brokers both sell and manage insurance for their customers. Agents are the authorized representatives of an insurance company or companies, while brokers are the authorized representatives of people looking for insurance.

Anti-Theft Recovery System

These systems consist of an electronic device that’s installed in a concealed area of your car. If your car gets stolen, you can activate the device and it will emit a signal that can be used to locate your car.

Such systems can be effective over a radius of several miles, depending on local geography. Ask your car dealer or nearby police department which brand of recovery systems are supported in your area.

By installing an anti-theft recovery system, you may be eligible for an auto insurance discount.

Benefit

A benefit is the amount paid by an auto insurance company to you or your beneficiary when you file an auto insurance claim.

Bodily Injury Liability Coverage

Bodily injury liability coverage protects you if you are held responsible for injuring someone in a car accident.

This coverage helps pay for the injured party’s medical expenses and lost wages. Bodily injury liability may also help pay your expenses in a related lawsuit.

The amount covered is capped at the limits you select when you buy your auto insurance policy.

Business/Commercial Use

This classification means that you mainly use your car for business purposes (such as sales, service, and delivery calls) or work-related errands (like trips to the bank or post office), and other work-related driving. Commuting to and from work is not considered business use.

Claim

An auto insurance claim is a policyholder’s request to be reimbursed for a loss that’s covered by car insurance.

Collision Coverage

Collision coverage helps pay for auto repair or replacement costs if your car hits another vehicle/object or if your car rolls over.

The maximum amount paid for repair or replacement is the car’s actual cash value, minus the amount of the deductible you choose when you buy your auto insurance policy.

Collision Deductible Waiver (CDW)

This auto insurance coverage pays the deductible for your collision coverage if you’re involved in an accident in which an uninsured motorist is held legally responsible.

This particular auto insurance coverage isn’t available in all states. If it is available, you have to buy this coverage with collision coverage when you buy your auto insurance policy.

Commuting

If you primarily use your car for commuting, this means that you mainly use the car to drive it to and from work or school.

Comprehensive Coverage

Comprehensive coverage helps pay for damage to your car/boat/trailer/RV/ATV, etc, resulting from fire, certain natural disasters, falling objects, and vandalism. Theft’s also covered.

The maximum amount paid for repair or replacement is the subjects actual cash value, minus the amount of the deductible you choose when you buy your auto insurance policy.

Some policies allow for an endorsement allowing for “new vehicle replacement cost” or “agreed value” amount. Contact your agent for more info.

Continuously Insured

The length of time you’ve been continuously insured is the number of years you have been covered by one or more insurance companies without a lapse in your auto insurance coverage.

Deductible

For some types of auto insurance coverage, you’re asked to choose a deductible. A deductible is the amount of damages you agree to pay for if you file an auto insurance claim.

Though choosing a higher deductible can substantially lower your auto insurance premium, if you file an auto insurance claim, you’ll have to pay the full, pre-established amount of the deductible out of your own pocket in order to receive payment from your auto insurance company.

Declarations

The declarations page of your insurance policy summarizes the factual information essential to your insurance coverage: the policyholder’s name and address, a description of the insured vehicles/property, the insurance premium, as well as the coverages, limits, and deductibles.

Defensive Driver and Driver Improvement Courses

These courses consist of defensive driving training for drivers of all ages as well as “mature driver safety courses” intended for drivers age 55 and over.

In certain states, you may qualify for an auto insurance discount if you’re in the eligible age range and if you’ve taken one of these safety courses.

Depreciation

Depreciation is the decline in an object’s value due to age, wear and tear, or obsolescence.

Effective Date

The effective date is the date your auto insurance coverage begins. You are not covered by insurance prior to an insurance policy’s effective date.

Emergency Road Service

This optional auto insurance coverage pays a fixed amount toward vehicle towing if your car breaks down or if your car gets disabled in an accident.

Endorsements

Also known as riders, endorsements are changes to the original insurance contract. In auto insurance coverage, endorsements may include changing your deductibles or adding a new car to your auto insurance policy.

Exclusions

Exclusions are situations that are not covered by a given insurance policy. Specific exclusions are listed in the insurance policy.

Full Coverage Auto Insurance

Full coverage auto insurance denotes an insurance policy containing all auto insurance coverage legally required in a given state. The term “full coverage” does not imply the policyholder will always be fully covered.

GAP

Gap or Loan-lease coverage pays the difference between the actual cash value of your vehicle and the amount due on your loan or lease. You are often “upside down” in the early term of a lease or loan and this coverage pays that balance.

Garaging Location

The garaging location is where your insured car is parked most of the time. This location is usually indicated by the ZIP Code of the policyholder’s primary residence. Your garaging location will affect your auto insurance rates.

Home

This could be a private dwelling, townhouse, condo, or even a rented home, condo, or apartment. You have exposure for at least liability and personal property at each.

Indemnity

An indemnity is a pre-determined sum paid for a covered loss.

Insurance Claim Report

Insurance claim reports provide details about auto insurance claims you or other insured drivers have filed with insurance companies. These reports are provided by independent consumer reporting agencies that collect auto insurance claim information from a variety of insurance companies. One of the most common agencies issuing such reports is C.L.U.E., the Comprehensive Loss Underwriting Exchange.

Insurance Score

Insurance scores are based on analytical models that objectively measure the relative likelihood of future insurance losses based on your credit history. These scores and analyses of their significance are provided by independent consumer reporting agencies.

Insured

The insured is an individual covered by a given auto insurance policy.

Judgment

A judgment is a final decision rendered by a court of law. For example, in a lawsuit related to an auto accident, where Kate hit Eric’s fence, the court determined that Kate was wholly responsible for the accident. The judgment determined that Kate should pay for the costs of repairing Eric’s fence.

Liability

Liability is a term that broadly means legal responsibility. If you run a stop sign and hit another car, you may be found liable for the damages to the other driver’s car.

Liability Coverage

Liability coverage protects you from having to deplete your assets to pay for damages if you’re held responsible for injuries or damages arising from a car accident.

The two main types of liability coverages in an auto insurance policy are bodily injury and property damage.

Limits

Limits are the maximum amount an insurance company will pay for a covered loss. Though you can choose your limits for certain coverages, some states require you to buy certain levels of auto insurance coverage. In such states, you’ll have to choose limits that at least meet your state’s auto insurance requirements.

Loan-Lease (GAP)

Gap or Loan-lease coverage pays the difference between the actual cash value of your vehicle and the amount due on your loan or lease. You are often “upside down” in the early term of a lease or loan and this coverage pays that balance.

Medical Benefits

Medical Benefits coverage is sometimes a part of your insurance policy’s Personal Injury Protection.

Medical expenses that are the direct result of accident-related injuries are covered. Covered medical expenses are capped at the limits you choose when you buy your insurance policy.

Medical Payments Coverage

This insurance coverage pays medical bills if a covered driver and/or accompanying passengers are injured or killed while in an insured vehicle, regardless of fault in an accident.

This may also cover policyholders and their family members when in others’ vehicles, or when policyholders and their family members are on foot and hit by a car.

The amount paid by medical payments coverage is capped at the limit you choose when your buy your insurance policy.

Motor Vehicle Report

A Motor Vehicle Report (MVR) provides information on your driving record. This report includes accidents and moving violations. Auto insurance companies obtain MVRs from states where you or other insured drivers have been licensed to drive.

National Credit File

The National Credit File provides objective consumer information regarding the financial history of an individual. Information contained in this report is often used to calculate insurance scores.

No-Fault Insurance

If a type of auto insurance coverage is described as no-fault, this generally refers to the way the insurance company settles a covered auto insurance claim.

Generally, if a certain coverage is no-fault, responsibility doesn’t have to be assigned before an auto insurance claim gets settled.

No-Fault States

In some states, called no-fault states, insurance companies are legally required to pay a policyholder’s covered losses, regardless of who’s held responsible for an accident.

Some no-fault states also restrict the right to sue for damages. In states without no-fault regulations, the insurance company covering the person who caused an accident is forced to pay for covered losses.

Non-Passive Alarm

A non-passive alarm has to be manually activated every time you leave the car. If someone attempts to open your car, the alarm sounds, and the system disables the automobile’s starter, ignition system, and/or fuel circuit.

You may qualify for an auto insurance discount if your car is equipped with such an alarm.

Passive Alarm

Passive alarms are automatically activated and emit warning sounds when someone tries to get into your car. Once the passive alarm has been triggered, the system disables the automobile’s starter, ignition system, and/or fuel circuit.

You may receive an auto insurance discount if your car is fitted with such an alarm.

Pleasure Use

If you use your car for pleasure, this means that you typically drive it for fun, with no regular commuting or business use.

Policy Expiration Date

Your auto insurance policy’s expiration date is the date when auto insurance coverage ends if your auto insurance policy isn’t renewed. The expiration date can be found on the declarations page of your auto insurance policy, on a proof of insurance card, or on a recent auto insurance renewal notice.

Policy Term

A policy term is the length of time an auto insurance policy is valid.

Primary Driver

The primary driver is the person who drives a car most frequently.

Primary Use

A vehicle’s primary use is how the car is typically used. Auto insurance companies usually classify primary use as commuting, business/commercial, or pleasure use.

Primary Policyholder

The primary policyholder is the person who serves as the main point of contact with your insurance agent. Since he/she is the main point of contact, your agent needs the primary policyholder’s valid email address so that we can send account updates, auto insurance renewal notices, and other policy-related communication.

Typically, the primary policyholder is also the person billed for your insurance policy.

Property Damage Liability Coverage

Property damage liability coverage protects you if you are held responsible for damaging someone else’s property.

Property damage coverage helps you reimburse another person for their damaged property (such as a car, a fence, a boat, or a home). This type of coverage also helps pay your expenses in a related lawsuit.

The amount covered by property damage liability may be capped at the limit you choose when you buy your insurance policy.

Rental Car Reimbursement

Rental car reimbursement is an optional kind of auto insurance coverage that helps pay for your rental car expenses if an insured car is damaged or stolen and you need a rental car.

SR-22

An SR-22 is an official document that shows proof of financial responsibility. Courts may require an SR-22 or a similar form for people convicted of certain traffic violations.

Secondary Driver

A secondary driver is one of the drivers listed on your auto insurance policy who’s insured for driving an insured vehicle. However, this driver is not a car’s primary driver.

A secondary driver is also sometimes known as an occasional driver in auto insurance terminology.

Tort

Tort is a legal term used to describe instances when someone is deemed legally responsible for injuring another person or damaging his/her property.

Some states ask you to select a tort provision. In these states, you can limit your right to sue for non-monetary damages (like pain and suffering) in exchange for a reduced auto insurance premium.

Towing Coverage

This type of auto insurance coverage is optional, and pays a fixed amount toward towing if your car breaks down or if it’s disabled in an accident.

Trip Interruption

Trip Interruption coverages vary widely. They can include reimbursements for hotel, transportation, etc if you are stranded. In addition, they may also include Towing & Labor reimbursements / coverage.

This Emergency expense coverage can be extremely helpful and offset expenses when stranded.

Uninsured Motorist Bodily Injury Coverage

Uninsured motorist bodily injury coverage is available in some states, where it’s often mandatory.

This kind of insurance coverage might apply to Auto / Boat / RV coverages, and pays for your medical expenses, lost wages, and other general damages when you or your passengers are injured in an accident caused by a driver who has no insurance. Uninsured motorist coverage also pays for injuries sustained in hit-and-run accidents.

The amount covered by uninsured motorist bodily injury is capped at the limit you choose when you buy your insurance policy.

Uninsured Motorist Property Damage Coverage

Uninsured motorist property damage coverage is available in some states, where it’s often mandatory.

This kind of auto insurance coverage protects you if your property is damaged in an accident caused by a driver who has no similar insurance. Other protection afforded by this type of insurance coverage varies from state to state.

The amount covered by uninsured motorist bodily injury is capped at the limit you choose when you buy your insurance policy. In some states, you’ll need to pay a deductible each time you file an auto insurance claim.

Uninsured/Underinsured Motorist Bodily Injury Coverage

In some states, both uninsured and underinsured motorist bodily injury are bundled into a single coverage. In the states where this type of insurance coverage offered, it may be mandatory.

This kind of insurance coverage pays for your medical expenses, lost wages, and other damages when you or your passengers are injured in an accident caused by someone who doesn’t have enough insurance, or who completely lacks the correct insurance coverage. This type of insurance coverage also pays for injuries sustained in hit-and-run accidents.

The amount covered by uninsured/underinsured motorist bodily injury is capped at the limit you choose when you buy your insurance policy

VIN (Vehicle Identification Number)

The VIN, short for Vehicle Identification Number, is the unique 17-digit number found on every car. The VIN contains the vehicle’s serial number, as well as abbreviations for the make, model, and year.

The VIN appears on your vehicle registration card. It’s also engraved in your car, near the base of the windshield on the driver’s side dashboard and/or on the edge of the driver’s side door.

Waiting Period

The period before any benefit begins.

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