Learn how to decipher the fine prints on an auto insurance policy document. Here is an A-Z glossary of frequently used terms and definitions used in car insurance policy documents.
Actual Cash Value: The market value of a vehicle or other property after deducting depreciation.
Amendment: A change to a clause or stipulation to a contract after the original contract has been negotiated.
Appraisal: The assessed value of property or a dollar amount of estimated damages.
Assigned Risk: An insurance plan administered through the state of residence for a driver who does not qualify for traditional auto insurance coverage.
Claimant: A person or other entity filing a requested payout after a covered incident.
Collision Coverage: The amount paid by a claim, up to a certain amount, when an insured vehicle, or a vehicle driven by the insured is involved in a collision.
Comprehensive Coverage: Insurance coverage to a vehicle that pays in the event of vandalism, theft, natural disaster, or other covered incidents.
Contributory Negligence: A law, which varies from state to state, that could prevent a claimant from collecting damages if they are partially or fully at fault for an accident, or if they are found negligent.
Coverage: The amount of benefits and coverage one will receive, pursuant to the terms of their insurance contract.
Deductible: Amount paid by the insured after each covered incident. The deducible amount is agreed upon at the inception of the insurance coverage and, generally, a higher deductible amount results in lower insurance premiums.
Defensive Driver Discount: A discount on monthly insurance premiums after a driver has taken an approved defensive driving course.
Exclusion: Limits on coverage due to geographic location or other circumstances.
Insurance Fraud: Staging a false claim or falsifying the conditions of an incident in order to receive financial compensation.
Insurance Score: A number which takes into account credit and accident history in order to determine insurance coverage or premiums.
Negligence: To act in a manner that is considered dangerous or irresponsible under normal circumstances. The failure to use reasonable care.
No Fault Insurance: Insurance coverage that will pay damages and expenses, up to the amount stated in the policy, regardless of who is at fault for the incident.
Policy Term: The length of an insurance policy, from inception to termination.
Premium: The monthly payment due for insurance coverage.
Principal Driver: The first person listed as the insured on an auto insurance policy. The primary driver of the insured vehicle.
Property Damage Liability Coverage: Additional insurance coverage which compensates the injured party in the result of damage to personal property.
Roadside Assistance Coverage: Additional insurance coverage which reimburses the insured for towing and other expenses in the event of a roadside breakdown.
SR-22: A certification required by law in most states to inform them that a specific person is covered by insurance. Usually required for persons who have been convicted of serious traffic offences.
A
Accident Forgiveness: A discount or reduction in the insured’s premium given as a bonus for remaining accident-free for a specified period of time.Actual Cash Value: The market value of a vehicle or other property after deducting depreciation.
Amendment: A change to a clause or stipulation to a contract after the original contract has been negotiated.
Appraisal: The assessed value of property or a dollar amount of estimated damages.
Assigned Risk: An insurance plan administered through the state of residence for a driver who does not qualify for traditional auto insurance coverage.
B
Bodily Injury Liability Coverage: The amount, up to a certain limit, that a policy will pay for injury or death caused by the insured.C
Claim: A filing requesting a pay-out after a covered incident.Claimant: A person or other entity filing a requested payout after a covered incident.
Collision Coverage: The amount paid by a claim, up to a certain amount, when an insured vehicle, or a vehicle driven by the insured is involved in a collision.
Comprehensive Coverage: Insurance coverage to a vehicle that pays in the event of vandalism, theft, natural disaster, or other covered incidents.
Contributory Negligence: A law, which varies from state to state, that could prevent a claimant from collecting damages if they are partially or fully at fault for an accident, or if they are found negligent.
Coverage: The amount of benefits and coverage one will receive, pursuant to the terms of their insurance contract.
D
Damages: A dollar amount owed to the injured party after an accident.Deductible: Amount paid by the insured after each covered incident. The deducible amount is agreed upon at the inception of the insurance coverage and, generally, a higher deductible amount results in lower insurance premiums.
Defensive Driver Discount: A discount on monthly insurance premiums after a driver has taken an approved defensive driving course.
E
Endorsement: An addition to a contract after the original contract has been negotiated.Exclusion: Limits on coverage due to geographic location or other circumstances.
F
First Party Claims: An insurance claim made by the holder of the policy.G
Gap Insurance: An optional coverage in an insurance policy which pays the difference between the claim amount and any amount still owed on a vehicle in the case of theft or total loss.H
Hazard: Any condition or circumstance which could be considered dangerous.I
Indemnification: To compensate a financially injured party in order to recover them to their previous financial condition.Insurance Fraud: Staging a false claim or falsifying the conditions of an incident in order to receive financial compensation.
Insurance Score: A number which takes into account credit and accident history in order to determine insurance coverage or premiums.
L
Limits: The amount of insurance coverage provided by one’s policy.N
Named Insured: The primary policy holder listed on an auto insurance policy. This can also be a business enterprise in the case of a corporate insurance policy.Negligence: To act in a manner that is considered dangerous or irresponsible under normal circumstances. The failure to use reasonable care.
No Fault Insurance: Insurance coverage that will pay damages and expenses, up to the amount stated in the policy, regardless of who is at fault for the incident.
O
Occasional Driver: A secondary driver who may be covered under the insured’s policy.P
Personal Injury Protection Coverage: Additional coverage that reimburses a physically injured party for medical and other expenses as the result of an accident.Policy Term: The length of an insurance policy, from inception to termination.
Premium: The monthly payment due for insurance coverage.
Principal Driver: The first person listed as the insured on an auto insurance policy. The primary driver of the insured vehicle.
Property Damage Liability Coverage: Additional insurance coverage which compensates the injured party in the result of damage to personal property.
R
Rental Reimbursement Coverage: The amount of reimbursement, up to a certain limit, that a car insurance policy will pay for a rental vehicle in the event that the insured’s car is damaged or totalled.Roadside Assistance Coverage: Additional insurance coverage which reimburses the insured for towing and other expenses in the event of a roadside breakdown.
S
Second Named Insured: The secondary driver listed on an auto insurance policy.SR-22: A certification required by law in most states to inform them that a specific person is covered by insurance. Usually required for persons who have been convicted of serious traffic offences.