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Auto Insurance Glossary

Accident: An unintended and unforeseen event, identifiable in time and place, usually resulting in personal injury or property damage.

Actual Cash Value: The traditional measure of property insurance loss. Usually defined as the cost of replacing the destroyed property with new property, minus an allowance for depreciation resulting from physical wear and tear and/or by changing technology or user preference.

Adjuster: An individual who assesses the validity of an insurance claim on behalf of an insurance company. The adjuster authorizes appropriate payment, repairs, or other action.

Application for Insurance: Refers to a questionnaire or form filled out by a customer, which provides pertinent information about the customer to the insurance company. The form is a preliminary step in the application process to obtain insurance.

Automobile Insurance Policy: There are six different types of automobile insurance coverages. Some are optional and, depending on the state you live in, some are required by law. The following list represents the six most common types of automobile insurance coverages:

• Bodily Injury Liability
• Collision
• Comprehensive
• Medical Payments
• Property Damage Liability
• Uninsured Motorist Coverage

Bodily Injury / Property Damage: Also referred to as BI/PD. This insurance covers injuries to people in an accident as well as damage to property associated with it. You may see 25/50/10 coverage, which means $25,000 per person per accident for bodily injury/$50,000 total per accident for bodily injury/$10,000 in property damage per accident.

Binder: Formal notification from an agent that the insurance policy has been paid for and is in full force. This Binder protects the policyholder for a specified period of time until the actual insurance policy has been issued.

Bodily Injury Liability: Insurance coverage that protects the insured against financial loss when a person is held liable (legally) for injuring other individuals in an auto accident. Bodily Injury Liability also protects the insured against the cost of legal defense.

Cancellation: Refers to the termination of an insurance policy before the end of the stated policy period.

Claim: A formal request by the policyholder/insured to be reimbursed for losses covered by the insurance policy.

Collision Insurance: The portion of an auto insurance policy that pays for collision damage to the insured vehicle resulting from another vehicle or object. This may include a collision with a garage door or a tree. Collision Coverage Insurance pays for damage to the insured's car regardless of who is at-fault in the accident.

Comprehensive Coverage: Helps cover damages to an automobile resulting from accidents or incidents outside of those outlined under collision coverage. This may include damage resulting from hail, flood, fire, vandalism, or theft.

Coverage: The amount and type of protection an insurance policy provides to the insured.

Deductible: An agreed upon amount that must be paid by an insured person making a claim against an insurance policy before an insurer will pay any compensation for losses (i.e., a $500 deductible).

Grace Period: A period of time following the date the premium is due, during which a policy remains in force even though the premium has not been paid.

Insurance: Financial protection against loss or harm. An agreement by which a company provides a customer with financial protection against loss or harm in return for the customer regularly paying a premium.

Insured: An individual or object covered by insurance, also referred to as a "policyholder."

Lapse in Coverage: When a policyholder neglects to pay his/her premium, this results in a break in continuous insurance coverage. During the time of nonpayment the vehicle is not covered. This time period is called a lapse in coverage.

Liability: Under the law, liability is the legal responsibility for someone's negligent acts that have resulted in costs and damages.

Liability Coverage: Refers to coverage for bodily injury and property damage.

Medical Payments Coverage: A coverage provided in the auto insurance policy that pays certain medical and funeral expenses, resulting from an automobile accident, regardless of fault. This coverage protects all passengers in the insured vehicle. This coverage also protects the policyholder and relatives residing in the household while in other vehicles or if struck as a pedestrian. For individuals residing in states that require personal injury protection benefits, this coverage may not be available.

Physical damage: Refers to damage from risks such as collision, comprehensive, fire, theft, or any damage to the vehicle itself.

Policy Term: Length of time a policy is in effect.

Premium: The amount of money paid to an insurance company for automobile insurance protection.

Property Damage Liability (PD-Liability): A type of insurance coverage that pays for the policyholder's monetary loss if they are found liable for damages to a third party.

Statutory Limits: The minimum limit of liability required by law to be carried.

Total Loss: Damages that are so severe, restoration is not possible.

Underinsured Motorist Bodily Injury Coverage (UIM): A form of auto insurance that protects the insured if hit by a legally liable individual who does not carry enough insurance to cover damages.

Uninsured Motorist Coverage (UM): A form of auto insurance that protects the insured if he/she is hit by a legally liable individual that is uninsured.

Violation: Refers to a traffic moving violation, involving an illegal operation of a motor vehicle. Some violations include:

• Driving under the influence of alcohol
• Driving without lights
• Evading police
• Failure to obey a safety zone
• Failure to stop at a stop sign or light
• Following too closely
• Illegal lane change
• Improper turning
• Leaving the scene of an accident
• Obstructing traffic
• Speeding

Waiver: An official form stating the relinquishment of right or privilege signed by an individual, voluntarily.