Actual cash value - When a vehicle is damaged so severely that it becomes more costly to repair than the vehicle is worth, it is "totalled". The value that is placed on the vehicle is its worth just before the accident took place. There are several databases that value used vehicles for this purpose, taking into account excess or light mileage, body condition, prior damage, engine condition, etc. This valuation results in the "actual cash value" of the vehicle in the marketplace.
Additional equipment coverage - This provides coverage for optional equipment added to the vehicle by other than the original manufacturer. Examples: upgraded stereo, car phone, special paint, special tires, etc.
Additional Interest - A person or company other than the named insured or listed driver who is protected under the insurance policy.
After-market parts - In case of damage to an insured vehicle, there are several alternatives for purchasing replacement parts. One of these options is "after-market" parts, where companies that are not vehicle-makers manufacture common parts for popular vehicles. This fairly recent development has served to offer the competition necessary to force the vehicle manufacturers to lower their prices on those parts. There is a governing body to assess and assure the quality of these parts.
Agent - A person who represents one or more insurance companies in selling insurance to consumers.
Application Form - A questionnaire to be filled in by the person seeking insurance, used to determine the insurance coverage to be afforded, as well as the acceptability of the insurance risk and the correct premium.
Automobile Insurance Plans - government sponsored (but industry managed) plans providing auto insurance for those that cannot obtain coverage in the voluntary market. Sometimes called the Assigned Risk Plan.
Assigned Risk - A driver or owner who cannot qualify for insurance in the regular market. He/she must get coverage through a state assigned risk plan which specifies that each company must accept a proportionate share of high risk applicants. Premiums are usually higher and coverage is restricted.
Automobile insurance - Insurance against loss to the insured due to damage to or destruction of automobiles, or due to claims for damages arising from the ownership, maintenance, or use of automobiles; also, loss to persons insured in certain specific ways due to cost of medical, surgical or hospital care necessitated by automobile accidents.
B.I. (Bodily Injury liability insurance) - A coverage protecting against injury to the body of a person. The term is usually specifically defined in the policy and these individual definitions have variations, however, it normally applies to injuries the insured causes to others.
Bind, bind coverage, binder - An insurance agent is usually authorized by the insurance company to bind coverage, stating that certain specified coverage is in force with a specific insurance company as of a particular date and time (or immediately). A binder is a statement that coverage is in force. Its purpose is to provide temporary coverage (in our case, no more than 5 calendar days) until an actual insurance policy can be issued.
Broker - A term generally used to describe one who places business with more than one company, and who has no exclusive contract requiring that his business first be offered to a single company. Unlike the agent, who is considered to represent his company, the broker usually is considered as representing the insured. Many states require that companies license agents rather than selling through brokers. This ensures that the company has responsibility for the actions of their representatives.
Flat - Cancellation of a policy at or before it becomes effective with all the premium refunded to the policyholder.
Claim - A notification by a person or business that is seeking to recover for a loss. A claim may be made against an individual or against an insurance company.
Claimant - Anyone who presents a claim that might be covered by insurance. For a liability insurance loss, the claimant is a person or business that has suffered a loss and seeks to collect for that loss from an insured. For a property insurance loss, the claimant is the insured who wants the insurance company to pay for repairing or replacing his or her damaged property.
Collision Insurance - One vehicle running into or being struck by another vehicle or object.
Comprehensive, Other than Collision - Covers losses to the insured’s vehicles, by many potential perils other than collision. Comprehensive coverage is not truly comprehensive in scope; as it does not cover losses as described in the exclusions to the policy (like loss caused by the insured, etc).
Conditions - In an insurance policy, provisions that explain the duties, rights, and options of the insured and the insurance company.
"Damage to your Auto" Coverage - Damage to your auto coverage, also known as auto physical damage coverage, insures against loss resulting from damage to an auto owned by the insured, and it also provides coverage if the car is stolen.
Damages - Money that the law requires one party to pay to another because of loss or injury suffered by the other party.
Declarations, declarations page, dec page - The page or pages of an insurance policy containing information, such as the insured’s name and address, that the policyholder declared (stated as facts) on the applications for insurance. It includes the coverages purchased and the premiums charged.
Deductible - The first portion of a covered loss that is not paid by insurance. The deductible amount is subtracted from the amount the insurer would otherwise be obligated to pay.
Depreciation - Loss in value of property that develops as items age, wear out, or become obsolete. In a sense, depreciation reflects value that has already been used up.
Direct Billing - A process through which the insurance company send bills directly to the policyholder and the policyholder makes payments directly to the insurance company. The insurance company pays to the producer (agent) commissions or other compensation for producing new business and servicing renewal business.
Discovery Period - A stated period, often 60 days, at the beginning of a policy term during which an insuror has the option to cancel a policy for any cause. After that period, the policy may be canceled only for reasons permitted by the policy or state law.
Draft - Essentially the same as a check written on the insurance company’s checking account. Drafts are used to pay claims and may be written by a claims representative or by a producer (agent) with draft authority. A draft is only fully paid after it is presented to the insurance company for payment. The company has until then to withdraw their offer to pay.
Estimate - An evaluation of the cost to repair a damaged car. The estimate may be made by a body shop or a physical damage appraiser, also called a material damage appraiser.
Exclusions - Insurance policy provisions that restrict the broad terms of the insurance agreement stating some exceptions to coverage - certain activities, loss causes, types of property, persons, and places - for which the insurer does not provide coverage.
Expiration, expiration date, expire - An insurance policy’s coverage ceases, or expires, at the end of the policy term or policy period.
Financial Responsibility (company) - this form of financial responsibility revolves around the bill-paying behavior of applicants for insurance as reflected in their credit reports. This usually takes the form of a discount or eligibility for lower priced programs.
Insurance - A system by which a risk is transferred by a person, business, or organization to an insurance company (insurer), which reimburses the insured for covered losses and provides for sharing the costs of losses among all insureds.
Insurance company - Also known as an insurer, an organization that sells insurance policies that protect insureds against financial hardship caused by financial loss.
Insurance policy - A contract that states the rights and duties of the insurance company and the insured.
Insurance rate - The price of insurance for each unit of exposure. The rate is multiplied by the number of exposure units to arrive at a premium. In automobile insurance, the unit of exposure is one vehicle insured for one year.
Insurance Regulation - Insurance is regulated by the individual states. Each state has an insurance department headed by an insurance commissioner. All insurance commissioners are members of the National Association of Insurance Commissioners.
Insured - A person, business, or organization that is covered by an insurance policy.
Insurer - See Insurance Company
Insuring Agreement - A provision in an insurance policy stating, in broad terms, the promises made by the insurance company. An insurance policy provides coverage only if the claim is within the scope of the promise expressed in an insuring agreement.
Liability Coverage (auto) - Automobile liability coverage will apply if an insured person or business is responsible for hurting someone else or damaging someone else’s auto or other property as a result of an auto accident.
Limits, limits of insurance, limits of liability - Limits, also called limits of insurance, limits of liability, or policy limits, indicate in an application how much insurance is requested. Once the policy is issued, the limits in the policy set the maximum dollar amount the insurance company will pay. The purchased limit appears on the declarations page.
LKQ (like kind and quality) - This is another option for obtaining replacement parts for a damaged vehicle. On an older vehicle, there is a database available for locating salvaged parts of the same model and age as the damaged vehicle. These represent a virtual replacement for the damaged parts, are often available faster and offer a sizeable discount over new parts.
Loss Reserve - An insurance company’s best current estimate of the total dollar amount that will be paid in the future for an accident that has already occurred.
Loss payable clause - A clause in an insurance contract that states the loss payee will receive the proceeds paid out by the insurance company in the event of a loss.
Loss payee (lienholder) - The party that loaned money for the automobile, usually a bank or other financial institution. The lienholder must be shown on the declarations page in order to have legal standing in case of a loss to the vehicle.
Misrepresentation - Statements or facts included in the application for insurance that fail to disclose all the requested and/or pertinent characteristics of the insured. Examples would be the failure to disclose all drivers in the household, or failing to list all driving violations. Material misrepresentations can be grounds to void the insurance policy.
MVR - Abbreviation for Motor Vehicle Record, a report provided by states which details the driving record, accidents and convictions of a driver.
No-Fault auto insurance - Loosely, no-fault insurance means that each policyholder has a right to recover financial losses from his or her own insurance company, regardless of whose fault caused the accident. Strictly, no-fault auto insurance applies only to accidents under a state no-fault law that (1) requires insurance companies to pay policyholders regardless of fault and (2) restricts the ability of accident victims to sue others for their injuries.
Nonrenew(al) - When an insurer decides not the renew a policy at the end of a policy period. This is not a cancellation but a nonrenewal. The insurer "nonrenews" the policy.
Physical Damages coverage (auto) - Auto physical damage coverage insures against loss resulting from damage to an auto owned by the insured and it also provides coverage if the car is stolen. Auto physical damage coverage is property insurance.
Pleasure Rental - this optional coverage provides a replacement for the coverage strongly recommended at the rental car counter. It provides protection for the renter in case of accident or theft of the vehicle. In some states, it will also provide excess liability coverage over that provided in the rental contract.
Policy - A contract that states the rights and duties of the insurance company and the insured.
Policy Period - The period during which a policy contract affords insurance protection.
Policy Limits - See Limits
Property Damage, or PD - A coverage protecting the legal liability of the policyholder for damage on account of injury to or destruction of property of another.
Premium - An amount of money paid to an insurance company in return for insurance protection.
Prior Proof - Proof that the insured and/or driver listed on the policy had an insurance policy prior to being written through a new insurance company. Also referred to as transfer proof.
Renewal - Continuation of an insurance contract beyond the original date of expiration.
Renewal Questionnaire - A form that asks questions to the insured about changes during the past coverage period.
Rental Reimbursement - optional coverage available to pay for a rental replacement vehicle if the insured vehicle is disabled due to a covered collision or non-theft comprehensive claim. The coverage has a per day $ limit and a limit for the number of days of coverage per covered incident. This does not provide coverage for rentals for pleasure use, just replacement.
Return Premium - A refund to the policyholder of part of the premium he/she has paid caused by cancellation, rate reduction, reduction in the amount of insurance, or similar reasons.
Risk - Simply, the possibility of financial loss.
Stated amount value - When an applicant feels that his/her vehicle is worth more than the normal value for a vehicle of that make and age, a professional appraisal is usually done to document that belief, and the vehicle will then be insured to the appraised value. This is called a "stated amount" valuation.
Subrogate, subrogation - When the insurer pays the insured for a loss, the insurer takes over the insured’s right to collect damages from the other party responsible for the loss through a process called subrogation. The insurance company may subrogate against the party directly responsible for the loss. If you are hit by an uninsured driver, your insurance company would pay for your loss (if you purchased Uninsured Motorist protection), and then possibly negotiate with the uninsured driver.
Towing and Labor - Coverage with a specified dollar limit that provides for the cost of towing an insured vehicle to the location of the insured’s choice.
Uninsured Motorist coverage (UM) - A coverage in personal or commercial auto policies that provides protection against bodily injury loss (also property damage in some states) when the insured is injured in an accident with a hit-and-run motorist or a motorist who has no insurance.
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