Automobile Insurance Glossary

ABCDEFGHIJKLMNOPQRSTUVWXYZ

Accident

When an automobile makes unintended contact with another automobile, person, debris, or any other obstacle.  It may or may not lead to damage, injury, and even death.  

Actual Cash Value

How much a vehicle is determined to be worth compared to other vehicles of similar makes and models.  The year, mileage, and condition may contribute to the final value.  

Admitted Insurance Company

An insurance company that is required to follow guidelines set by the state where it operates. This type of company's rates, advertisements, and cash reserves are designated by that state's Department of Insurance.

Agent

Someone who sells insurance policies to consumers. Once a policy is purchased, they generally serve as the point of contact between a customer and the insurance company. They are sometimes referred to as brokers.

Aircraft Insurance

A type of insurance coverage for airplanes, helicopters, and any other type of aircraft. It includes aviation-specific language and is required when an aircraft is purchased, leased, or rented.

Anti Theft Device

A device designed to deter or prevent criminals from stealing or vandalizing a vehicle.

At Fault

When a driver is responsible for most or all of the damage caused by an automobile accident.

Automobile Insurance

A type of insurance coverage for an automobile, which often includes the driver as well. It is usually mandatory in most states and provides financial protection in the event of an accident, theft, or other unforeseen circumstances.

Binder

A temporary insurance policy that covers an automobile until a permanent policy is put into place.

Bodily Injury

Any injury or death caused by an automobile accident.

Bodily Injury Liability Coverage

The portion of an automobile insurance policy that pays for any injuries or death caused by the driver. Bodily injury claims can include anything from medical bills to loss of income.

Boiler Insurance

A type of insurance coverage for any machine that generates electricity. This type of policy will usually cover any damage to the machine, as well as to the surrounding area.

Broker

A person who sales insurance contracts to consumers. They are often referred to as agents.

Burglary

The act of breaking and entering into an automobile with the intent to commit a crime, usually some type of theft.

Cancellation

When an insurance company cancels a driver's insurance policy due to lack of payment, loss of driving privileges, misrepresentation of important information, or any other offense.

Car Insurance

A type of insurance coverage for an automobile, which usually also includes the driver of the vehicle. This type of insurance is usually mandatory in every state.

Claim

A request to your insurance company for a payment based on the terms laid out in your policy.

Claimant

A party that files an insurance claim.

Collision Deductible Waiver

Pays your collision deductible for you in the event you are involved in an accident with an uninsured driver.

Collision Insurance

This type of insurance pays for the damage or replacement of your vehicle in the event of an automobile accident.

Combined Single Limit

A type of liability policy that places a single limit on the amount covered per accident, regardless of whether it goes toward property damage or bodily injury.

Common Carrier Liability

A type of coverage generally used by transportation companies who transport and deliver goods. It covers the damage or loss of the goods.

Comprehensive Glass Insurance

An addition to your automobile policy that covers the breakage of any windows on your vehicle.

Comprehensive Insurance

A type of automobile insurance that covers a wide range of situations. It is usually purchased to supplement collision insurance.

Coverage

The total of everything included in your insurance policy.

Covered Person

The insured driver, as well as anyone else he or she allows to become a claimant on his or her policy. This usually includes a spouse, children, or other family members residing in the household.

Credit Life Insurance

Is a type of insurance used to pay off a car loan or other type of debt if you die or become disabled. Basically, it insures the borrower in favor of the lender and is usually part of your loan contract if you decide to purchase it.

Customized Vehicle

Any vehicle with additions made by the customer after it was purchased, such as added stereo equipment, custom paint jobs, and custom wheels and rims. Most of the time, these customizations are not covered in your general automobile insurance policy and must be insured separately.

Declarations

The first page of your automobile insurance policy, which summarizes the information that is located within the policy. It may include the policy number, the name of the company, deductibles, a monetary run-down, and any extra endorsements.

Decline

This occurs when an insurance company refuses to insure a driver, usually due to a poor driving record or because they have filed multiple claims in the past

Deductible

The amount of money you must pay out of your own pocket before your insurance company will pay your claim. This amount is often set when you first buy your policy and is generally up to the customer and his or her needs.

Depreciation

The decline of a vehicle’s value due to age, wear, and other factors.

Disability Insurance

A type of insurance that guarantees income in the event a person becomes sick or disabled and unable to work. The policy usually includes how much he or she will be paid, how often, and for how long.

Discount

The reduction of the price of your automobile insurance based on special factors. Many insurance companies will offer you lower prices if you are a student, a driver with a good record, a senior citizen, if you agree to take a driving course, and for other various reasons.

Earned Premium

How much of an insurance premium is actually earned by the insurance company, based on how long the policy has been in effect and how long the policy holder has been exposed to risk. If a policy’s term is over and no claims have been filed, the insurance company has earned all premium payments.

Effective Date

The date an insurance policy’s coverage begins.

Endorsement

Any modification attached to an existing insurance policy. It is often called a rider.

Exclusion

Part of your automobile insurance policy that refuses coverage to certain people, property or situations.

Expiration Date

The date a driver’s insurance policy and all coverage associated with it ends.

Face Amount

The amount set by an insurance policy to be paid in the event of the insured’s death or the policy’s maturity.

Financed Car

A car that is purchased or leased through a loan.

Financial Guarantee Insurance

A type of insurance that favors a lender should a borrower fail to repay a loan. In some cases, it may also favor the lender when insurance rates decrease.

First Party

Another name for the person who is insured.

Flat Rate Cancellation

The termination of an insurance policy before it even goes into effect.

GAP Insurance

Guaranteed automobile protection insurance. When a financed car is completely totaled, this type of insurance will cover the difference between the actual cash value and how much is still owed on the loan.

Garage Location

Where a vehicle is kept when it is not in use.

Good Driver Discount

A discount received on an insurance policy due to having a clean driving record or other criteria set forth by an insurance company. In some states, a good driver discount is mandatory by law.

Good Student Discount

A discount received on an insurance policy based on a high school or college student’s grades, age, marital status, and other criteria set forth by an insurance company.

Grace Period

An additional period of time beyond the due date of a premium, during which the insured party can still make the payment without being penalized.

Hit and Run

An event in which a vehicle is involved in an accident and the driver fails to stop or make his or her identity known afterwards.

Inception Date

The day an automobile insurance policy begins.

Incontestable Clause

A condition set in an insurance policy which states that the insurance company will not dispute the validity of a contract or revoke coverage due to misstatements made by the insured after a certain period of time.

Indemnity

Compensation for any loss suffered.

Insurance Score

The numerical ranking of a potential insured person’s financial status, usually based on their credit history.

Insured

A party who is covered by any type of insurance policy.

Insurer

A party who agrees to compensate the insured party in the event of a loss, based on the terms and conditions laid out in an insurance policy.

J

There are not any terms for this letter.

K

There are not any terms for this letter.

Lapse

A period of time during which an insurance policy has been canceled or terminated due to lack of payment or other reasons.

Liability Insurance

A type of insurance that provides protection against claims filed against the insured person by other parties.

Liability Limits

A limitation placed by an insurance company on the amount they will pay under liability coverage contracts.

Limit

The maximum amount of a specific type of coverage, based on decisions made by the insured and the insurer when an insurance policy was purchase.

Medical Payments

The payment of any medical expenses related to injuries gained from an automobile accident.

Misquote

An inaccurate estimation of a premium given by an insurance company.

Misrepresentation

When a person makes untrue or misleading statements to an insurer.

Multi Vehicle Policy

When multiple vehicles are insured under the same policy. In most cases, the vehicles must be owned and operated by the same person or any family member living in their household. Some companies offer discounts for this type of policy.

MVR

Motor vehicle record. This provides information about your driving history, any infractions you may have committed, and whether your license is up to date. Most insurance companies will view it when deciding whether they want to insure you or how much your premium will be.

Named Insured

The party whose name is actually stated in the insurance policy.

No Fault System

When an insurer pays for the policyholder’s losses no matter who is at fault in an accident. This type of system is only available in some states.

Occasional Driver

A person who is insured while driving a particular vehicle, but who is not the primary policyholder or named insured on that vehicle’s insurance policy.

Per Occurrence Limit

The total or maximum amount a company will pay for all claims that result from a single automobile accident.

Physical Damage

Insurance that protects your vehicle in the event that it is harmed. This usually includes both collision and comprehensive insurance.

PIP Insurance

Personal injury protection. This type of insurance pays for the insured person’s medical expenses that result from an automobile accident, regardless of who is at fault.

Policy

A written contract that certifies an insurance agreement.

Policy Holder

The party who owns and maintains an insurance policy.

Policy Limit

The maximum amount an insurance company will pay per policy.

Pre-accident Condition

The state of a vehicle before an accident occurs. This might include the mileage, any previous damage, and age of the vehicle.

Premium

The actual amount of money a policyholder pays for active insurance coverage.

Principal Driver

The person who drives a vehicle most often.

Property Damage

A liability part of your automobile insurance that pays for any physical property you damage or destroy in an accident.

Quote

An estimation provided by an insurance company of how much a person will pay for an insurance policy.

Reinstatement

Restoration of an insurance policy once it has been canceled due to lack of payment or other various reasons. Once a policy is reinstated, it usually returns to its full previous condition.

Renewal

The process of requesting to keep an insurance policy in full effect without allowing it to lapse.

Rental Reimbursement

An optional addition to your automobile insurance policy that helps pay for the cost of a rented vehicle in the event yours is damaged or destroyed.

Rider

Any modification attached to an existing insurance policy. It is often called an endorsement.

SR-22

A form that must be provided for your state to prove that you do have the minimum amount of automobile insurance required by law. Most states require all drivers to be insured.

Surcharge

An additional charge on an insurance policy, usually added when a driver is thought to be a high risk to the insurance company.

Terms

The amount of time during which a policy is in full force.

Third Party

A party not directly involved with an insurance policy, but who may have an interest in filing a claim against it. The insured person is usually considered the first party, while the insurer is usually considered the second party.

Tort System

The system most states use when dealing with automobile accidents. When an accident occurs, one party is considered to be at fault and therefore is responsible for paying all costs associated with the accident, either out of their own pocket or through their insurance company.

Total Loss

When a vehicle is damaged beyond reasonable repair, usually meaning it would cost more to repair it than replace it.

Towing and Labor Coverage

An addition to your insurance policy which pays for towing service and any labor necessary to fix your vehicle. It does not pay for the purchase of parts; it is strictly for the labor.

Underinsured Motorist Insurance

A type of insurance that protects you in the event you are in an accident involving a driver who does not have insurance.

Unearned Premium

The amount of money that has not yet been earned by an insurance company, based on how long the policy has left to come to term. For example, if a policy has only reached the half-way point of its lifespan, the insurance company has not yet earned half of the full premium due.

Uninsured Motorist Insurance

A type of insurance that protects you in the event you are in an accident involving a driver who does not have insurance.

Usage

The primary function of your vehicle.

VIN

Vehicle identification number. This is your vehicle’s unique serial number, which is often used to identify it.

Waiver

This is when a person chooses not to accept a certain form of insurance coverage. Signing this type of form proves you were offered the insurance but did not accept it.

X

There are not any terms for this letter.

Y

There are not any terms for this letter.

Z

There are not any terms for this letter


Nationwide
Automobile
Insurance

Enter Zip Code

Get the Lowest

Quote in 3 Minutes

TRUSTe online privacy certification
McAfee SECURE sites help keep you safe from identity theft, credit card fraud, spyware, spam, viruses and online scams