Sunday, January 25, 2015

Insurance Glossary

Accident
The incident 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 entity, other than the named insured or covered person, who is protected under the named insured 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.

Anti-Theft Device
Devices intended to prevent theft or vandalism or to assist in the recovery of a stolen vehicle. Some examples include etched VIN numbers, car alarms, the "Club" and other such devices, etc. By installing an anti-theft recovery system, you may be eligible for an auto insurance discount.

Assigned Risk Pool
Every auto insurer that does business in a particular state must participate in the state's assigned-risk pool. This is established to make sure there's always an avenue for buying auto insurance in order to reduce the number of uninsured drivers. High-risk level drivers who fall into the assigned-risk pool are assigned randomly to a company and the insurance company is compelled to cover them under state laws.

Auto - Car Insurance
A contractual relationship, which exists when an insurance company, for a premium, agrees to reimburse an insured or policyholder for vehicle-related losses. The six major automobile insurance coverages are: bodily injury liability, property damage liability, medical payments and no-fault coverage, uninsured/underinsured motorist protection, collision and comprehensive physical damage.

Basic Limits of Liability
These vary locally and are the lowest amounts of liability coverage that you can legally buy in your state.

Bodily Injury Liability
Coverage that protects you against financial loss by paying for damages when you are legally liable for injuring or killing other persons in an auto accident. It also pays for legal defense costs if you are sued, regardless of fault. The two are often referred to simply as liability insurance.

Classic Car Insurance
A special type of coverage, which applies to collector cars that could not be otherwise insured through regular methods.

Collision Coverage
Automobile insurance coverage that reimburses you for damage to your own vehicle, when the damage results from overturn or collision with another object not necessarily a vehicle.

Combined Single Limit
Bodily Injury and Property Damage coverage combined into one single amount of coverage.

Comprehensive Coverage
Insurance coverage which pays for loss or damage to your covered vehicle caused by any event other than collision. This includes damages due to events such as fire, theft, windstorm, flood, and vandalism.

Continuous Coverage or Continuous Liability Insurance
The length of time you have had your vehicle insured without a break in coverage.

Covered Person
The person(s) insured under a policy contract.

Deductible
The amount you pay before the insurance company begins paying on a loss. For example, a $300 deductible means that in a loss of $1,000, you would pay the first $300 and the insurance company would pay the remaining $700. However, if the loss were only $300, you would pay the entire loss and the insurance company would pay nothing.

Defensive Driver Course
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. You may qualify for a discount on your insurance premium if you have completed such courses.

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.

Drive-Other-Car Endorsement
A part of your policy that extends coverage to any other car you might be driving. For example, a rental car.

Driver Education Course
A course accredited by your state's DMV, consisting of a predetermined number of hours of professional classroom instruction. Often required for teenage car insurance.

Driver Training
A course accredited by your state's DMV, consisting of a set number of hours of behind-the-wheel training.

Earned Premium
The part of your premium used up by any given point in the life of your policy. After six months of coverage on a twelve-month policy, one half of your premium will have been "earned".

Effective Date/Inception Date
The effective date is the date your insurance coverage begins. You are not covered prior to a policy's effective date.

Expiration Date
The date your coverage ends. There is also usually a time involved, for example Midnight of such and such day.

Financial Ratings
Ratings, similar to credit ratings, of insurance providers meant to accurately represent a carrier's ability to meet claims. Often these ratings are done by agencies such as Standard and Poor's and AM Best.

Financial Responsibility Filing (SR22)
An SR-22 is a document that shows proof of financial responsibility. Courts may require an SR-22 for people convicted of certain traffic violations.

Financial Responsibility Laws
State laws requiring drivers to maintain enough insurance to cover accidental losses to others. Law and limits vary state-by-state.

First Party Benefits
Also known as Personal Injury Protection (PIP) or Medical Coverage, this policy pays for physical injuries sustained by the occupants of your car in the event of any accident, regardless of who was at fault. This is generally not a good deal, as a good health insurance policy would cover these injuries anyway.

Gap Auto Insurance
A gap car insurance policy insures you for the difference between what you owe on your car and what your insurance company says it's worth. Often required when buying or leasing a new car.

Garage Address
The garaging location is where an insured vehicle is primarily parked. This location is usually the ZIP code of the policyholder's primary residence.

Good Driver Discount
Better insurance companies offer discounts to customers with good driving records.

Good Student Discount
A discount granted to students with high scholastic ratings. Statistics show that there is a proven relationship between good grades and safe driving.

Identification Card
A document identifying you as having liability coverage for the vehicle that you are driving. Liability insurance is required in most states.

Installment Fee
A fee often required if you prefer to spread your payments over time.

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 Person
The person(s) insured under a policy contract. This is the same as a covered person.

Insurer
The insurance company providing the coverage.

Lapse in Coverage
Also known as a policy lapse, this is the point in time when a policy is canceled for any reason, including failure to pay, change of provider, etc.

Liability Coverage
Liability coverage protects you from having to deplete your assets to pay for damages if you are held responsible for injuries or damages arising from an auto accident. The two main types of liability coverages in an auto insurance policy are bodily injury and property damage.

Liability Insurance
Insurance that pays your legal defense costs and claims made against you, when you are responsible for an accident in which you have injured or killed someone or damaged their property.

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.

Longevity
Insurance companies often reward their long-time customers with premium discounts. An insurer may provide a discount after an insured has been with the company for a specified amount of time.

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

Minimum Liability Limits
These vary locally, they are the lowest amounts of liability coverage that you can legally buy in your state.

Multi-car discount
Discount often given when insuring multiple vehicles under the same policy. By choosing this option, you will almost always save over having separate policies for each car.

Named Driver Exclusion
An individual specifically identified on the policy as an excluded driver. This often applies to teenaged family members, whose inclusion in a policy would raise the premium considerably.

Named Insured
Entities or individuals named on the policy as insured by that policy. This commonly this refers to spouses and other relatives living in the household.

No Fault Insurance
An auto insurance policy that insures the holder for injury-related benefits caused by an auto accident, regardless of fault in the accident. Covered benefits may include medical costs, loss of wages, loss of services, and funeral expenses. In return for these guaranteed benefits, the right to sue for damages caused by an auto accident is limited. Not all states require no fault insurance.

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. $125,000 per person/$350,000 per occurrence)

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. $125,000 per person /$350,000 per occurrence)

Personal Auto Policy (PAP)
Personal auto policies are the most common type of auto insurance policies sold. They include coverage for liability, medical payments, uninsured/underinsured motorist coverage, and physical damage protection.

Personal Injury Protection (PIP)
A broader form of medical payments coverage that implements the no-fault concept. PIP offers protection for expenses actually incurred, up to a specific, per-person dollar amount. States, which have no-fault laws, require drivers to buy PIP. It is also offered as an optional coverage in some states without no-fault laws. This coverage varies from state to state but usually includes medical expenses, lost wages, essential services and a death benefit.

Physical Damage
A term indicating damage from such perils as collision, comprehensive, fire and theft or any damage to the vehicle itself.

Policy
The actual contract between you and the insurance company which spells out your coverage's, rights and obligations.

Policy Period
The period of time during which you are covered by your policy.

Premium
The cost of your insurance policy and all the included coverage.

Pro Rata Cancellation
What happens when you cancel your policy before it expires. Pro Rata refers to the amount of money that may be refunded to you based on the amount of time left on your policy that you have already paid for.

Property Damage Liability
Property damage liability coverage protects you if you are held responsible for damaging someone else's property in an auto accident. Property damage coverage helps you reimburse another person for their damaged property (such as a car, a fence or a home). This coverage also helps pay your expenses in a related lawsuit. The amount paid by property damage liability coverage is capped at a limit you select.

Rated Annual Mileage
This is the annual mileage that is used to determine the mileage rating classification that is applied to a vehicle.

Rental Reimbursement
Rental car reimbursement is optional coverage that will help pay for your rental car expenses if an insured vehicle is damaged or stolen and you require a rental car.

Safety Equipment
Enhancements to your car, such as automatic seat belts and driver-side and passenger-side airbags, that reduce your risk of being injured in a collision. Vehicles with safety equipment often qualify for discount car insurance.

SR-22 (Financial Responsibility Filing)
A requirement by a state regulatory entity (usually the state Motor Vehicle Department) for an insurance company to certify on a driver's behalf that the driver has the ability to pay future claims up to the state required limit. The certification is done by means of a form called an SR-22.

Term
The period of time during which the policy is in effect.

Threshold Level
The point at which the insured may bring tort (see definition of tort) action under a modified No-Fault Auto Plan. Many of these plans prohibit tort action for pain and suffering unless medical bills exceed some figure, such as $1,250 or if disfigurement or death occurs.

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. Many states ask you to select a tort provision. In these states, you can limit your right to sue for non-monetary damages such as pain and suffering in exchange for a reduction of your premium.

Underinsured Motorist Bodily Injury Coverage
This coverage pays for your medical expenses, lost wages and other damages when you or your passengers are injured in an accident caused by a driver who has insufficient insurance coverage. This coverage typically pays the difference between your coverage and the other driver's bodily injury coverage. The amount paid by this coverage is capped at a limit you select. In many states, both uninsured and underinsured motorist bodily injury are bundled into a single coverage and may be mandatory.

Underinsured Motorist Property Damage Coverage
This coverage protects you if your vehicle is damaged in an accident caused by a driver who has insufficient insurance coverage. This coverage pays the difference between the coverage limit you select and the other driver's property damage coverage limit. The amount paid by underinsured motorist property damage coverage is capped at a limit you select. Underinsured motorist property damage coverage is mandatory in states.

Unearned Premium
The portion of your policy term remaining before expiration.

Uninsured Motorists Bodily Injury Coverage
This coverage 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 paid by uninsured motorist bodily injury coverage is capped at a limit you select. Uninsured motorist bodily injury coverage is mandatory in some states. Furthermore, both uninsured and underinsured motorist bodily injury are bundled into a single coverage in some states.

Uninsured Motorists Property Damage Coverage
This coverage protects you if your vehicle is damaged in an accident caused by a driver who has no insurance. The amount paid by this coverage is capped at a limit you select. In many states, you will need to pay a deductible each time you make a claim. Uninsured motorist property damage coverage is available in some states, where it may be mandatory.

Waiver of Collision Deductible
If you have collision coverage on your car, this option pays your deductible for damage caused by an uninsured or hit-and-run driver, if you can identify the driver and car that caused the damage.

Whole Dollar Premium
Premiums are usually rounded to nearest dollar, up for amounts over 51 cents and down for fifty cents and lower.