Auto Insurance Glossary
What auto insurance is designed to cover. Accidents may be considered either at fault or not at fault. If you have at fault accidents on your driving record, your rates will be higher.
Additional Insured or Additional Interest
A person or an organization, other than the named insured or covered person, that 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.
Devices intended to prevent theft or vandalism, or to assist in the recovery of a stolen vehicle. Examples include car alarms, keyless entry, starter disablers, motion detectors, parts of the vehicle etched with the Vehicle Identification Number, and recovery systems.
A poor risk that an insurance company is compelled to cover under state laws.
A form of insurance that protects against losses involving automobiles. 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.
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.
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.
Bodily Injury Liability
Legal liability for causing physical injury or death to another.
Covers loss to the insured person's own auto caused by its collision with another vehicle or object.
Combined Single Limit
Bodily Injury and Property Damage coverage expressed as one single amount of coverage.
Covers damage to a vehicle caused by an event other than a collision or overturn. Examples include fire, theft, vandalism, and falling objects.
Continuous Coverage or Continuous Liability Insurance
Continuous coverage refers to the length of time you have maintained insurance on your vehicle.
This refers to the individuals (named insured, spouse, resident relatives, etc.) insured under a policy contract.
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.
The amount that the insured must pay before the insurance company pays covered expenses.
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.
Discount Auto Insurance
A policy is eligible for premium discounts if something about the driver or car that makes the policy a better-than-average risk.
Optional coverage that broadens the definition of a covered auto to include non-owned vehicles the insured person operates.
State accredited educational course that consist of at least 30 hours of professional classroom instruction.
State accredited training course that consists of at least 6 hours of behind-the-wheel professional instruction.
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.
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.
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.
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 a policy.
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.
First Party Benefits
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.
If you are making lease or loan payments and you experience a total loss, there may be a difference (that is gap) between the market value of your vehicle and what you still owe on it. This optional coverage pays that difference.
Good Driver Discount
Better insurance companies offer discounts to customers with good driving records.
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.
Hit and Run
An accident caused by someone who does not stop to assist or provide information.
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.
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.
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.
Insurance coverage to protect against claims alleging that one's negligence or inappropriate action resulted in bodily injury or property damage.
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.
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.
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.
Motor Vehicle Record (MVR)
Also referred to as DL printout, or MVR, contains information obtained from an individual's driver license application, abstracts of convictions and accidents.
The first person in whose name the insurance policy is issued.
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.
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.
Any vehicle that is not owned, borrowed, or leased by the insured, and which is used primarily for a business purpose.
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.
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.
Personal Auto Policy (PAP)
The most common auto insurance policy sold today. It is written in simple wording and provides coverage for liability, medical payments, uninsured/underinsured motorist coverage, and physical damage protection.
Personal Injury Protection (PIP)
Similar to medical payments insurance, but usually provides broader coverage such as compensation for lost wages, funeral expenses, and pain and suffering.
Damage to your covered vehicle from perils including, but not limited to collision or upset with another vehicle object, fire, vandalism and theft.
A written document that serves as evidence of an insurance contract and contains the pertinent facts about the policy owner, the insurance coverage, the insured, and the insurer.
Any risk considered to be better than the standard risk on which the premium rate was calculated.
The price of insurance an insured person pays for a specified risk for a specified period of time.
Private Passenger Automobile
A four-wheeled motor vehicle that is subject to motor vehicle registration and used for private personal use.
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.
The process of keeping an active policy in force through the issuance of a renewal policy.
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.
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.
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.
One who commits tort.
Towing and Labor Costs
Endorsement added to the physical damage coverage. It provides reimbursement up to a specified limit to tow your vehicle or pay for on-site labor costs.
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.
Uninsured Motorists Bodily Injury
Uninsured motorists bodily injury coverage pays for a covered person's bodily injuries of which an uninsured or hit-and-run motorist is legally liable, but unable to pay.
Underinsured Motorists Bodily Injury
Underinsured motorists bodily injury coverage pays for a covered person's bodily injuries of which a person with not enough insurance is legally liable.
Uninsured Motorists Property Damage
Uninsured Motorist Property Damage Liability coverage pays for property damages caused by uninsured drivers.
The portion of your premium that remains 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.
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.
This refers to the primary function or purpose in which you intend to operate your vehicle. For instance, if you primarily drive your car to and from work, the usage is considered "commute. Another example is if you are self-employed and you primarily drive to see customers. Then the usage is considered "business". If you are retired, your usage is considered "pleasure."
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.
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.