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Auto Insurance Glossary

Illustration of a Auto Insurance Glossary



An event that occurs unexpectedly without deliberate intent

Accidental Death & Dismemberment

An insurance contract that applies when a covered event results in death or dismemberment

Actual Cash Value

What property is worth if it needs to be replaced, less depreciation.


Person who examines risk and helps calculates premiums

Additional Insured

A person or organization for whom insured status is arranged by endorsement.


A person who investigates and settles insurance claims.

Adverse Carrier

The other party’s insurance company


A person or entity with ties to an insurer

After-Market Parts

Aftermarket parts are replacement vehicle components made by a company other than the vehicle’s manufacturer. In general, these after-market parts cost less than original equipment parts.


An individual who sells insurance coverage and acts as the authorized representative of an insurance company or several companies.


The maximum amount an insurance company will pay during the policy.

Agreed Price

The price of repairs agreed to by the insurance company and the repair shop.

Allied Lines

Additional coverages with property insurance

All Risk Coverage

Property insurance covering loss arising from all causes except those specifically excluded.


A change to the basic policy contract.

Anti-lock Braking System (ABS)

A computer-controlled high pressure system that allows the wheels to maintain positive contact with the road surface according to driver inputs while braking, preventing the wheels from locking up and avoiding uncontrolled skidding.

Anti-Theft Device

A device that discourages auto theft. Vehicles using these devices may receive a discount on insurance premiums.


Process that calculates a property’s value, or the degree of damage, usually carried out by an independent expert.


A process of resolving a disagreement through a neutral party. It is used as a substitute to legal action.

Assigned Risk (AIP)

Typically a last resort for a high-risk driver with a bad driving record who cannot find the legally-required car insurance. Insurance companies collectively must participate in assigned risk groups and offer insurance to these drivers.


Has the same meaning as policyholder or insured.


The party who’s considered legally responsible for damages caused in a car accident.

Auto Insurance

A car insurance policy that provides financial protection from the expenses (personal liability and property damage) arising from a covered event.

Auto Theft

Vehicle theft is a category of loss that is covered under comprehensive coverage.


A legal agreement issued on behalf of insurance companies to provide temporary evidence of insurance until a policy can be issued.

Bodily Injury

An injury sustained by a person resulting from an accident.

Bodily Injury Liability Coverage

Coverage pays damages for bodily injury or death in the event of an accident.


When someone carries more than one policy with the same insurance company, they will typically receive a discount on their insurance premium. An example may be carrying your car and homeowners insurance with one company.


The termination of an insurance policy at a date before its stated expiration date.


Another name for an insurance company.


A severe calamity or disaster (such as hurricanes, floods, or tornadoes) affecting a widespread geographic area and causing considerable financial loss.

Certificate of Financial Responsibility (CFR)

Filed with the state to show proof of required insurance. See SR-22

Certificate of Satisfaction

Signed form when policy holder retrieves car from auto repair certifying satisfaction with vehicle’s state.


A request for payment under a policy of insurance.


The person presenting a claim.

Classic Car Insurance

Classic car insurance is typically used to cover a car that is of a certain age or rare make and model. This insurance is usually in an amount agreed upon by the owner and the insurer.

CLUE® Report

CLUE reports contain a history of losses on personal property experienced by an individual policyholder.

Collision Insurance Coverage

Provides payment for damages to a covered automobile after a covered event.

Comparative Negligence

In an accident where property damage or bodily injury results, comparative negligence laws determine how the responsibility will be divided between the parties directly involved.

Competitive Estimate

Submitting multiple repair estimates to your insurance company.

Comprehensive Coverage

Covers an automobile for loss or damage for all causes except for those specifically excluded. Typically, covers damage from events other than collision.


Things agreed upon in an insurance policy that state the rights and the requirements of the insured and the insurer.


The amount of financial protection specified in your contract.

Customized Vehicle

A vehicle that has been modified mechanically or visually by equipment or accessories not usually included in a personal vehicle.


Harm to a person or to property that affects or impairs normal function.


Typically, money awarded to one or more parties to compensate for harm caused.

Date of Issue

The date an insurance company issues a policy.


The part of an insurance contract that covers the basic information, such as name and address, contract dates, coverage and premiums.


The amount paid out of pocket by the insured after a covered event and before the insurance kicks in.

Defensive Driver Discount

Some companies offer discounts to drivers who have voluntarily taken a defensive driving course.


The decline in a property’s value over a period of time. Usually from the effects of age, wear and tear, or economic obsolescence.

Direct Pay

Pay your insurance premium automatically from your bank account and possibly qualify for a discount on your premium.


A decrease in your premium based on you or your vehicle meeting certain conditions (such as anti-theft devices, anti-lock brakes) that are likely to reduce the insurer’s losses.


A refund from the premium

Effective Date

The date your insurance policy goes into effect.

Electronic Funds Transfer (EFT)

Paying your insurance premium by allowing an automatic deduction from your bank account.

Emergency Road Service Coverage

Basic 24/7 protection for emergency vehicle-related problems such as a dead battery, a flat tire or running out of gas.


A document attached to an insurance policy that changes the original policy provisions.


A calculation of the cost to repair/restore your damaged property.


A circumstance or peril that is not covered by the policy.

Expiration Date

The ending date of an insurance policy.

Field Adjuster

Assesses damage after a claim is filed and has a direct impact on the amount the insurance company pays.

Financed Car

A vehicle that is purchased with a loan.

First Party

Identifies the insured person.

Foreign Insurer

Selling policies in a state other than the state in which the insurance company is incorporated or domiciled.

Full Coverage Insurance

A term used by many to describe a combination of liability, comprehensive and collision insurance.

GAP Insurance

Guaranteed Asset Protection (GAP) insurance covers the difference between what your car is worth and what you still owe on it.

Good Driver Discount

AKA Safe driver discount, these discounts reward motorists who drive for a certain number of years with no blemishes on their record.

Good Student Discount

A discount for students who keep their grades up to the required level.


A condition that encourages or increases the possibility that a loss will happen.

High-risk Car Insurance

Insurance for drivers who are labeled risky to insurers, generally due to poor driving habits, multiple citations, convictions for DUI or for simply being young and inexperienced.

Homeowners Insurance

Insurance package that covers real and personal property in combination with liability coverage.


Indemnification is the part of an agreement that provides for one party to pay the monetary costs, either directly or by reimbursement, for losses incurred by a second party.


An indemnity is a sum paid by party A to party B by way of compensation for a particular loss suffered by B.

Independent Adjuster

A claims adjuster who provides adjustment services to insurance companies, but is not employed by them.

Independent Agent

An agent who represents multiple insurance companies.

Insurable Interest

Exists when an individual would undergo a substantial economic loss as the result of bodily injury or property damage.


A system where an insurer promises to reimburse the insured for a covered loss.

Insurance Card

Card that shows an insured person is carrying insurance. In most states, a driver must show this card when asked by an officer of the state.

Insurance Fraud

This is a criminal act and consist of a person filing a deceptive claim against an insurance company.

Insurance Score

A number created by insurance companies based on your credit score and claim history to estimate the likelihood that a policyholder will file a future claim.


An organization that provides insurance.


Termination of policy due to non-payment of premium.

Leased Vehicle

A vehicle rented under a long-term contract, typically two or three years. The leasing company keeps ownership of the vehicle and must be included on your insurance policy as an insured party.

Legal Liability

Liability enforced by law, versus liability resulting from a contract or agreement.


The legal obligation to pay a monetary award for injury or damage caused by one’s negligent or statutorily prohibited action.

Liability Examiner

Examiners review settled insurance claims to determine that payments and settlements have been made in accordance with company practices and procedures.

Liability Insurance Coverage

Insurance that provides protection from claims arising from injuries or damage to other people or property. In some states, liability pays claims of the insured, no matter who is at fault.

Liability Investigation

The process of collecting information to identify the cause of an accident.


Security in the form of physical property for the payment of a debt.


An organization or individual holding a financial interest in property (limited to the amount of money borrowed or still owed on the property).


The maximum compensation an insurance company agrees to pay in the case of loss.

Limits of Liability

The coverage amount stated in your policy.


Any damage that causes loss of use or loss of income.

Loss Frequency

The number of claims filed during a policy premium period.

Loss of Use

Reimbursement to a third-party claimant for the damage a person suffers from the inconvenience of not having their car after it has been in an accident.

Malicious Mischief

Intentional destroying or damaging of the personal property of another, from actual ill will or resentment towards its owner or possessor.

Manufactured Home Insurance

Insurance to cover your manufactured (or mobile) home. Very similar to regular homeowners insurance.

Material Damage

Includes all policy covered property-related damage losses. This includes the following: collision damage, property damage, comprehensive damage, rental reimbursement, uninsured motorist property damage, or Fire/Theft Combined Additional Coverage.

Mechanical Breakdown Insurance

Covers repairs to your vehicle’s critical mechanical parts, protecting you from costly repair bills.

Medical Claim Examiner

Handles the review of all medical bills, replacement/essential services, and lost wages submitted to the company for injuries sustained by you and/or the passengers in your vehicle.

Medical Payments Coverage

This coverage, which is optional in most states, pays for medical expenses for bodily injury caused by an auto accident, regardless of fault. Coverage for persons other than the named insured and his or her family members is typically restricted to circumstances when they are occupants of the insured auto.

Military Discount

An auto policy discount based on former or current military service.


A false or misleading statement, either directly or indirectly that, if intentional and material, can allow the insurer to void the insurance contract.

Mobile Home Insurance

Insurance that protects your mobile (or manufactured) home. Very similar to regular homeowners insurance.

Motorcycle Insurance

Covers your motorcycle for losses and injuries sustained through a covered event. Is required in all 50 states.

Motor Vehicle Report (MVR)

Generated from the agency that issues your driver’s license, this report lists accidents and violations that appear on your driving record. This report is used to confirm information provided by policyholders and insurance applicants.

Multi-Car Discount

Policyholders who insure more than one vehicle with the same insurer may be able to save money with a multi-car discount.

Multi-policy Discount

A discount offered for those who bundle their insurance policies with one company.

Named Insured

The individual defined as the insured in the policy contract.

National Insurance Crime Bureau (NICB)

The National Insurance Crime Bureau (NICB) is the nation’s premier not-for-profit organization dedicated exclusively to fighting insurance fraud and crime, and is the only organization in the United States that convenes the collective resources needed to prevent, detect and deter these crimes.


The failure to exercise reasonable consideration, resulting in loss or damage to oneself or others.

New Car Replacement Insurance

Typically for cars that are one year old or less. Pays for the replacement of a brand new vehicle of the same or similar make and model if the car is totaled or stolen.

No-fault Insurance

No-fault insurance is available in certain states and pays medical expenses, and in some cases, loss of income, essential services, accidental death, funeral expenses, and survivor benefits, regardless of who is at fault in an accident.

Non-Owner Car Insurance

Car insurance purchased by someone who does not own a car, but plans to drive frequently, using a borrowed vehicle or rental vehicles.


When your auto insurance company notifies you of a non-renewal, it means that your current coverage will continue until the end of the policy period, and thereafter cease to exist.


An unexpected injury or damage caused by an event or repeated exposure to certain conditions.

Optional Car Insurance

Refers to car insurance coverage that is not mandatory but may add value to an individual’s insurance policy. Coverage is for items such as GAP, rental car reimbursement, new car replacement, non-owner insurance and classic car insurance.

Original Equipment Manufacturer (OEM) Parts

OEM designates a replacement part made by the manufacturer of the original part. OEMs cost more than after-market parts.

Package Policy

Combining more than one policy into a single contract.

Paperless Billing

Using an automated system to deduct a policy premium payment from a bank account. Sometimes eligible for a discount.

Passive Restraint System

A safety device, such as an airbag or special seat belt, that is activated automatically to protect an automobile’s occupants at the moment of impact when a collision occurs.

Personal Injury Protection (PIP)

An automobile insurance coverage mandated by law in some states. The statutes typically require insurers to provide or offer to provide first-party benefits for medical expenses, loss of income, funeral expenses and similar expenses without regard to fault.

Personal Property

All tangible property not classified as real property.


The contract an insurance company issues to an insured person.


The person or entity entitled to covered benefits in case of an accident or loss.

Policy Period

The specified time during which an insurance policy is in effect.


A group of insurers who absorb losses through shared risks, particularly when insuring high-risk drivers.

Pre-accident Condition

The condition of the vehicle prior to the accident, including damage not related to the accident, mileage, options, and other factors.


The amount of money an insurance company charges to provide coverage in a policy.

Private Passenger Auto (PPA)

Filings that include singularly or in any combination coverage such as the following: Auto Liability, Personal Injury Protection (PIP), Medical Payments (MP), Uninsured/Underinsured (UM/UIM); Specified Causes of Loss, Comprehensive, and Collision.

Proof of Loss

A formal statement made by the insured to the insurer regarding a claim, so that the insurer may determine its liability under the policy.

Property Damage Liability Coverage

Helps pay for the damage that you cause to another vehicle, or other types of property resulting from an accident for which you are at fault.

Proximate Cause

An event that is legally recognized as having caused injury or damage.


The amount that will be charged for the insurance premium, based on provided information about drivers, vehicles and driving history.


Rates are often confused with an insurance premium. Rates are set by the state in which the insurance company operates. A premium for coverage is arrived at by multiplying units of cost called rates to affect necessary coverage while still allowing for profits and expenses by the insurer.

Rating Plan

The guidelines that are used to calculate the cost of your insurance premium. Based on your personal characteristics, these guidelines adjust the base rates by applying discounts and surcharges.


A review of an adjuster’s estimate or appraisal during or after repairs to a vehicle to guarantee that the required work is being completed by the body shop and to check the accuracy of the adjuster.


A legally binding contract signed by an insured or a third party claimant dismissing the insurance carrier of any further liability (or any liability at all) regarding a specific claim.

Renewal Date

The date your renewed policy starts after the previous contract has expired.

Rental Car Reimbursement

Coverage that helps pay expenses towards a rental vehicle while your insured vehicle is being repaired as the result of a covered accident or loss.

Renters Insurance

Personal property and liability insurance providing coverage to an individual living in an apartment, condominium or single family home owned by another party.

Replacement Cost

Replacing property without taking depreciation into account.

Replacement Parts

After a covered event, a vehicle may be repaired with new parts or after-market or original equipment parts.

Reported Losses

Expected payment for losses after a covered event that have not yet been paid.


A rider typically adds some specific coverage to a base insurance contract.


Damaged property that may be retrieved, reconditioned, and sold by the insurance company after payment of a claim.

SR-22, Certificate of Financial Responsibility (CFR)

An SR-22 is a form that certifies an individual has the minimum liability insurance as required by law.

State-required Minimum Liability Car Insurance

The minimum amount of liability car insurance required by each state.


If your car is damaged because of another driver’s negligence and you request your insurance carrier to settle the claim for damage to your car, they will attempt payment recovery (including your deductible) from the other party. This method of payment recovery is called subrogation.

Supplement/Supplemental Estimate

Used to cover damage not accounted for in the original estimate.


Period when insurance policy is in effect.


The unlawful acquiring of another person’s property with the goal of permanently denying the owner of its use or possession.

Third Party

Person or entity with an interest in but not party to a contract or transaction.

Third Party Claim

Claims for injury or property damage of a third party asserted to have been due to actions by the insured.


A private wrong or harm (other than a contract breach) carried out against another, resulting in legal and possible financial liability.

Total Liabilities

The entire financial amount expected to be paid by the insurance company.

Total Loss

The condition of an automobile or other property when damage is so extensive that repair costs would surpass the value of the vehicle or property.

Towing and Labor Coverage

Optional coverage, provides reimbursement up to a specified limit to tow your vehicle or provide roadside assistance.

Umbrella Insurance

A policy designed to provide additional protection against catastrophic losses covered under liability policies, it provides excess limits when the limits of the existing liability policies are exhausted by claim payments.


The process an insurer takes to determine if it will accept the risk of providing insurance and, if so, how much it will charge.

Underinsured Motorist Coverage

Similar to uninsured motorist coverage, financial protection for when a driver who causes an accident does not have enough insurance to cover the injured party’s costs. Required in some states.

Uninsured Motorist Coverage

An addition to a standard automobile insurance policy that provides coverage in the event the other driver is not insured and is found liable for the accident. Uninsured motorist coverage is required in some states, and optional in most others. Most states also use this coverage for hit and run accidents.

Unpaid Losses

Claims that have not been reported or have not been paid yet.


Action involving deliberate destruction of or damage to public or private property.

Vehicle Identification Number (VIN)

Used for identification purposes, the VIN is a 17-digit number assigned to every vehicle manufactured in the United States after 1980. This number is visible on the dashboard when viewed from the outside of the vehicle.


A written assurance of the reliability of a product and of the manufacturer’s accountability for the repair or replacement of defective parts.