Auto Insurance Glossary

  • Accident
    A sudden and unforeseen event. In insurance terms, often referred to as a collision where there is some degree of loss involved.
  • Accident Forgiveness
    In some states, customers who haven't been in an at-fault accident in 3-5 years may qualify for an Accident Forgiveness program. This means that some carriers may not increase your premium after your next at-fault accident.
  • Accident Frequency
    The number of times an accident occurs. Used by actuaries to predict losses and appropriately base premiums.
  • Accidental Death Benefit (ADB)
    A supplementary life insurance policy benefit that provides additional death benefits in the event of a death of the insured in a covered accident.
  • Act of God
    A natural occurrence that is not controlled by or caused by humans. Also called an "act of nature", an act of god may include a hurricane, earthquake or flood.
  • Actual Cash Value
    The market value of a specific property. Can be calculated as replacement cost minus depreciation.
  • Additional Insured or Additional Interest
    A person or company, aside from there main policyholder, who is protected under the policyholder's auto policy. In the instance of a leased vehicle the lease holder may be listed as the named insured.
  • Adjuster
    See Claims Adjuster
  • Admitted Company
    An insurance provider authorized and licensed to do business in a particular state.
  • Adverse Carrier
    A term used to refer to the other party's insurance carrier.
  • Adverse Selection
    The tendency of higher risk individuals to seek more insurance coverage than those at a lower risk.
  • After-Market Parts
    Parts or accessories that are not a part of the original factory installed parts.
  • Agent
    An individual who acts as a representative for the company and sells insurance, usually on a commission basis. This individual could be an 'exclusive' or 'non-exclusive' agent. An exclusive agent sells insurance for one carrier only. A non-exclusive agents sells insurance for multiple carriers.
  • Aggregate Limit
    This is the maximum amount that will be paid for a claim on an insured vehicle, regardless of the number of people injured, the number of items damaged or the extent of the damage.
  • Agreed Price
    The cost of repairs as agreed to by the claims adjuster or independent appraiser and the automotive repair shop representative.
  • Amendment
    A change to a basic insurance policy contract. An amendment alters the policy whereas an endorsement adds to it.
  • Anti-Lock Braking system (ABS)
    A computer-controlled high pressure system that aids the vehicle's normal braking system. ABS allows all wheels to slow at the same rate, thereby preventing loss of vehicle control.
  • 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.
  • Application
    A signed statement by a prospective insured requesting insurance.
  • Appraisal
    A process that determines the value of property, and/or the extent of damage.
  • Assigned Risk
    A vehicle owner or driver who cannot qualify for insurance in the regular market. They must purchase coverage through a state-assigned risk plan which specifies that each company must accept a proportionate share of these owners/drivers.
  • At-Fault
    The party that is legally responsible for the damages in an accident.
  • Auto Damage Adjuster
    The auto damage adjuster is responsible for estimating the extent of and cost of repairs for your vehicle.
  • Auto Insurance Premium Discounts
    A discount offered to drivers/vehicle owners for such safeguards as air bags, seat belts, good driving record, anti-theft devices, multiple vehicles, training courses, good grades, group membership, employment or degrees, pre-purchasing, low mileage, and renewal or prior insurance.
  • Auto insurance quote
    A statement regarding the premium that will be charged for certain auto insurance coverage.
  • Auto Theft
    When a vehicle is stolen, it is covered under the comprehensive coverage portion of an auto insurance policy.
  • Automobile Insurance
    An insurance policy that protects against losses involving automobiles. See also Car Insurance.
  • Binder
    A temporary agreement proving that a policy is in effect. Used in certain cases to protect a policyholder when it is not possible to issue or endorse the policy immediately.
  • Blue Book
    A publication used for evaluating the estimated value of used cars and trucks.
  • Bodily Injury
    An injury sustained by a person.
  • Bodily Injury coverage
    Coverage that protects the insured , up to the policy limits, when the insured becomes legally obligated to pay for bodily injury sustained by a third party. Bodily Injury liability limits are usually split; the first figure is the payment limit to a single person per accident, the second defines payment limits as a total for all persons injured.
  • Cancellation
    Termination of an insurance policy before the end of the policy period. Can be initiated by the insured or the insurer.
  • Car Insurance
    Insurance that protects against losses involving cars. Also see auto insurance.
  • Carrier
    An insurance company, provider or insurer.
  • Catastrophe
    A disaster that causes human injury or even death, and typically extensive property damage. Hurricanes, floods, tornadoes, and even large hailstorms can be catastrophic.
  • Certificate of Financial Responsibility
    Depending on the state DMV requirements, this is certificate showing that specific coverage has been purchased to meet the state's financial responsibility laws. This certificate may also be called an SR-22, FR-44 or SR-50.
  • Certificate of Satisfaction
    A form signed by the insured when he or she takes delivery of the car from the repairer. It certifies that he or she is satisfied with the vehicle operations, appearance, and visible quality of the repairs.
  • Claim
    A request for payment under the terms of an insurance policy.
  • Claim Adjuster
    A person responsible for investigating and settling a claim.
  • Claimant
    The individual or entity presenting a claim.
  • Clause
    The section of an insurance policy that defines specific conditions of coverage.
  • CLUE® Report
    CLUE stands for a Comprehensive Loss Underwriting Exchange report. It provides claim history information.
  • Collision Coverage
    Car insurance coverage that protects your car or truck against loss by collision with another vehicle or fixed object. 
  • Combined Single Limit
    Bodily Injury and property damage coverage expressed as one amount of coverage.
  • Commercial Lines
    Products designed for and purchased by businesses.
  • Commission
    A portion of the insurance premium that is paid to the agent as compensation for the agent's services.
  • Competitive Estimate
    An estimate that can be compared to another estimate of equivalent scope of work to ensure that the price is fair.
  • Comprehensive Coverage
    Auto insurance coverage that covers losses caused by something other than collision. This may include such perils as vandalism, riots, floods, hitting an animal, wind and hail, fire, theft, and broken glass.
  • Conditions
    The portion of the insurance contract which outlines the duties and responsibilities of both the insured and the insurance company.
  • Continuous Coverage
    Continuous coverage refers to the length of time you have maintained insurance on your vehicle.
  • Coverage
    Protection provided for in an insurance contract.
  • Covered Person
    This refers to the individuals (named insured, spouse, resident relatives, etc.) covered under an auto 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.
  • Damage
    Loss or harm to a person or property.
  • Declaration Page
    Often called a "Dec page", it is the page of the insurance policy which lists the insurance company, its address, name of the policyholder, starting and ending dates of coverage, and the actual coverages given in the contract, including the covered locations and amounts.
  • Declarations
    The part of your policy that includes your name and address; the property that is being insured, its location and description; the policy period; the amount of insurance coverage and the applicable premiums.
  • Deductible
    The dollar amount the insured must pay on each loss to which the deductible applies. The insurance carrier then pays the difference on a covered loss.
  • 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.
  • Defensive Driver Discount
    Certain drivers who have voluntarily taken a defensive driving course may qualify for this discount on their auto insurance premiums.
  • Depreciation
    The decrease in value of any property due to wear, tear, and/or time.
  • Direct Loss
    The immediate reduction in value arising from damage to property. 
  • Discount
    A lowering of your premium by the insurer if you or your car meets certain conditions that are likely to reduce your risk of loss. For example, auto insurance discounts are given for cars with safety bags and for drivers who complete defensive driver programs.
  • Domestic Insurance Company
    An insurer domiciled in this state.
  • Drive-In Claims Office - Concierge Claims Service
    An office or location that allows drivers to have simple, one-stop access for claims coverage.
  • Driver Education
    State accredited educational programs that consist of professional classroom instruction.
  • Driver Improvement Course
    A voluntary refresher course available for drivers age fifty-five (55) and older to enhance their driving skills.
  • Driver Training
    State accredited training course that consists of time spent behind-the-wheel with professional instruction.
  • Driver Training Discount
    A discount for people who have taken an approved driver training course. This discount is not available in all states or for all individuals.
  • E-Bill
    An electronic version of your bill that you can review and usually pay online. A few HomeInsurance.com providers offer this service.
  • Earned Premium
    A portion of the auto insurance premium which represents coverage already provided.
  • Economic Loss
    Total financial loss resulting from the death or disability of a wage earner, or from the destruction of property. Includes the loss of earnings, accrued medical expenses, funeral expenses, the cost of restoring or replacing property and legal expenses.
  • Effective Date
    The date that coverage begins on an insurance policy.
  • Electronic Funds Transfer (EFT)
    EFT is an electronic payment method that lets you pay your monthly, bi-annual or annual premiums by automatic deduction from your checking account.
  • Emergency Road Service Coverage
    Protection for problems that are not typically handled but your auto insurance, such as: being locked out of your car, towing not related to an accident, having a dead battery re-charged, inflating a flat tire, filling an empty gas tank. (Also referred to as Towing and Labor)
  • Endorsement
    A document, which is attached to a policy that modifies the original insurance policy in some way.
  • Estimate
    As assessment of the cost to repair your damaged property.
  • Exclusion
    A section of an insurance policy that lists property, perils, person, or situations which are not covered under the policy.
  • Expiration Date
    The date your coverage ends. There is usually a time of day associated with this date, for example, an expiration date of 5/1/2025 at 12:01am. This means your coverage ends one minute after midnight on the date listed.
  • Exposure
    A policyholder's possibility of loss. Insurance companies determine rates based upon exposure.
  • Field Adjuster
    An insurance adjuster who works outside of an office and often meets personally with the public. Field adjusters can conduct face-to-face meetings, negotiations with claimants, scene investigations, and damage inspections.
  • Financial Ratings
    Financial ratings reflect a current view of the financial strength of any given insurer. The rating organizations most commonly identified with the insurance industry are AM Best, Standard & Poor's and Moody's.
  • First Party
    Term used to refer to an insured party.
  • 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.
  • First Party Claims
    A claim for damage, loss or injury made by a policyholder or insured person.
  • Flat Rate Cancellation
    Termination of an insurance contract at inception before the policy ever went into effect.
  • Forced Placed Insurance
    Insurance purchased by a bank or creditor on an uninsured debtor's behalf to cover the property, so that the creditor receives payment if the property is damaged or destroyed.
  • Foreign Insurance Company
    An insurer domiciled in another state.
  • Fraud
    A false statement intended to deceive an insurer. Fraud may void a policy.
  • Full Glass Coverage
    When available and chosen, any comprehensive car insurance deductible would be waived for glass claims. This option is not available in all states. 
  • 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 the vehicle. Gap insurance pays the difference. Read our questions and answers section for more information.
  • Garage Location
    The zip code where your vehicle is parked when not in use which is usually your primary residence.
  • Good Student Discount
    A discounted premium awarded to full-time students who maintain a grade average of "B" or better. Each carrier has specific rules that may apply in order to be eligible for this discount.
  • Guarantee Funds
    All 50 states, the District of Columbia and Puerto Rico require licensed insurers to assume some of an insolvent insurance company's policyholder liabilities. These funds are used to bail out the policyholders of companies that fail.
  • Hazard
    Anything that increases the chance of an automobile accident occurring. (e.g., icy roadways, fog).
  • Hit and Run
    An accident where an at-fault party does not stop to assist or provide information.
  • ID Card
    A card issued by your insurance provider containing basic information about your insurance policy. Some states require you to keep an ID card in your vehicle at all times so that you can produce it in the event of an accident or traffic violation.
  • Inception Date
    The date that coverage begins on an auto insurance policy.
  • Indemnity
    A principle of insurance which provides that when a loss occurs, the insured should be restored to the approximate financial condition occupied before the loss occurred, no better, no worse.
  • Independent Adjuster
    An individual who estimates losses on behalf of an insurance company, but is not an employee of that company.
  • Inspection
    Verification of a vehicle's current physical condition.
  • Insurance
    Insurance is a system in which groups of people transfer their risk of loss to an insurance provider who pools the risk of many people together. In exchange for payment of premium, the insurer promises to reimburse the person for their covered losses.
  • Insurance Fraud
    The act of falsifying or exaggerating the facts of an accident to an insurance company to obtain payment that would not otherwise be made. Also see Fraud.
  • Insurance Score
    Confidential ratings used by underwriting in some states as a rating tool. An insurance score may include information about the consumer's payment history, the number of open accounts and if bankruptcy has been filed.
  • Insured
    A person or organization covered by an insurance policy.
  • Insurer
    An organization that provides insurance.
  • Joint Underwriting Association/JUA
    Insurers which join together to provide coverage for a particular type of risk or size of exposure, when there are difficulties in obtaining coverage in the regular market, and which share in the profits and losses associated with the program.
  • Lapse in Coverage
    A period of 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.
  • Leased Vehicle
    A vehicle rented under a long-term lease contract. A lease contract may be in effect for anywhere from 24-66 months.
  • Lender
    A lender is the bank or other financial institution to which you make car payments.
  • Lessor
    A lessor is the bank or other financial institution to which you make your lease payments.
  • Liability
    This means that one party is legally responsible for, or liable for, the injuries or damages suffered by another party.
  • Liability Insurance
    Insurance coverage for a policyholder in the event bodily injury or property damage has been caused to another person and covered in the policy.
  • Liability Investigation
    The process of gathering information to determine the cause of an accident.
  • Limit
    The maximum amount of coverage offered under a particular policy
  • Line of insurance
    The type or kind of insurance such as automobile, homeowners, life insurance or business
  • Loss
    Any measurable dollar amount of damage and/or injury suffered by a party.
  • Medical Payments
    Auto insurance coverage that pays up to a specific amount for injuries sustained by you and covered persons in your vehicle, regardless of who is at fault. Unlike Personal Injury Protection (PIP) medical payments only covers medical expenses.
  • Medical Payments Coverage
    Pays medical expenses related to an automobile accident. This coverage is subject to the terms, limits and conditions of your policy contract.
  • Motor Vehicle Record (MVR)
    A report from your state DMV that lists your history of accidents and violations. This report may be used to verify information provided by insurance applicants.
  • Motor Vehicle Report
    A report that lists moving violations (such as speeding tickets) and serious violations that a driver has accumulated in the past several years. 
  • Multi-car discount
    A discount offered by some insurance providers for those with more than one vehicle insured on the same policy.
  • Named Insured
    A person or organization designated by name as the insured party in an insurance policy.
  • No-Fault Insurance
    Insurance coverage that may pay for your medical treatment, lost wages, or other accident-related expenses regardless of who caused the accident. This coverage is subject to the terms, limits and conditions of your policy contract and is not available in all states.
  • No-Loss Form
    A statement that is a signed form telling the insurance company there have not been any losses since a certain date. The document usually includes a cancellation date, expiration date, and reinstatement date. etc.
  • Non-Owned Auto
    Any vehicle that is not owned, borrowed, or leased by the insured, and which is used primarily for a business purpose.
  • Non-Renewal
    When an insurer chooses not to renew a policy at the end of its policy period.
  • Occasional Driver
    A person who is not the primary or principal driver of a vehicle.
  • Payment Plans
    The plan agreed upon by a policyholder and provider that sets expectations on when and how the premium will be paid. Some common payment plans include monthly, bi-annual and annual payment plans.
  • Peril
    A danger or hazard that is capable of causing loss, for example, wind and hail or fire.
  • Personal Injury Protection
    May pay for your medical treatment, lost wages, or other accident-related expenses regardless of who caused the accident. This coverage is subject to the terms, limits and conditions of your policy contract
  • Personal Property
    Personal property that is not land or connected to land, this can include jewelry, furniture or clothes.
  • Physical Damage Coverage
    Pays for damage to your car this could be included under collision coverage or comprehensive coverage
  • Policy
    The written documents of an insurance contract between the insurance company and the insured.
  • Policy Limit
    The maximum amount a policy will pay, either overall or for a particular coverage.
  • Policy Period
    The period of time in which a policy is in effect as outlined in the policy.
  • Policyholder
    One who maintains ownership of an automobile insurance policy.
  • Preferred Risk
    Any risk considered to be better than the standard risk on which the premium rate was calculated.
  • Premium
    The price of insurance that a policyholder pays for the length of the policy term.
  • Primary Use
    What your vehicle is mainly used for. i.e. driving to and from work, for business, farming, etc.
  • Principal Driver
    The person who drives the car most often.
  • Property Damage Liability
    Similar to Bodily Injury Liability but limited to damage caused by you to another person's property, such as an auto, fence, telephone pole, etc.
  • Rating Plan
    The rules that determine an insurance premium.
  • Renewal
    The process of keeping an active policy in force through the issuance of a renewal policy.
  • Renewal Date
    The date that your current insurance policy expires and the date that your renewed policy will begin.
  • Rental Reimbursement
    Coverage available to drivers who chose comprehensive coverage for their car. This coverage helps to reimburse rental expenses that you may incur if you rent a car while your auto is being repaired due to a covered accident or your covered vehicle is temporarily disabled.
  • Renter's Insurance
    Insurance that provides protection from losses that arise out of the rental of a home. Protection covers losses to the insured's property, not to losses that occur as a result of owning a home.
  • Replacement Cost
    The cost to repair or replace an insured item. Some insurance only pays the actual cash or market value of the item at the time of the loss, not what it would cost to fix or replace it. This will pay the full cost to repair an item or buy a new one to replace the damaged item.
  • Replacement Value
    The full cost to repair or replace damaged property with no deduction for depreciation, subject to policy limits and contract provisions. This is unlike actual cash value which factors in depreciation.
  • Resident Adjuster
    Staff adjuster who handles claims in remote areas of a region.
  • risk
    The chance of suffering a loss.
  • SR-22
    An SR-22 is a certificate required by the state to verify that an individual is maintaining auto insurance liability coverage.
  • Term
    The length of time for which a policy is in effect.
  • Third Party Claim
    Claims for injury or property damage of a third party alleged to have been caused by the insured.
  • Total Loss
    The condition of an automobile or other property when damage is so extensive that repair costs would exceed the value of the vehicle or property.
  • Towing and Labor
    This coverage reimburses expenses up to the limits of the policy that a policyholder may incur if their vehicle is in an accident or becomes temporarily disabled and needs to be towed to a repair shop.
  • 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.
  • Umbrella Insurance
    Provides high limits of additional liability coverage above the limits of your homeowner's and auto policy. In addition, it provides coverage that may be excluded by other liability policies.
  • Umbrella Policy
    A liability insurance policy that provides additional coverage to extend beyond the limits stated in your car insurance policy. 
  • Underinsured
    The result of the policyholder’s failure to buy sufficient insurance. An underinsured policyholder may only receive part of the cost of replacing or repairing damaged items covered in the policy.
  • Underinsured Motorist Coverage
    This coverage pays for an insured party's injuries when a legally liable third party has insufficient coverage to pay for the claimants injuries. Underinsured motorist property damage protects an insured party from property damage that results from an accident with a legally liable underinsured motorist or hit and run driver.
  • Underwriting
    The process an insurer goes through to determine whether or not it will provide coverage for an applicant.
  • Uninsured Motorist Coverage
    This coverage pays for an insured party's injuries when a legally liable third party has no insurance coverage to pay for the claimants injuries. Uninsured motorist property damage protects an insured's property from property damage that results from an accident with a legally liable uninsured motorist or hit and run driver.
  • Vandalism
    Destruction or defacement of personal property.
  • Vehicle Identification Number (VIN)
    A 17-digit number assigned to each vehicle manufactured in the United States after 1980. This number is used for identification purposes and is visible on the dashboard when viewed from the outside of the car. It indicates many identifiers including make, model, options, and year in official records (like a Social Security number for your car).
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