Helping you understand the language of your car insurance policy is just one of the ways Austin Insurance aids you in making better decisions about the auto coverage that is right for you and your vehicle.
Editor’s Note: This blog was originally published in December 2019 and has been updated with additional car insurance terms.
Trying to make heads or tails of the language in a typical car insurance policy can be a mind-bending experience. In fact, without the help of an educated insurance professional, you might not get much farther than the insurance declaration page, which summarizes the essential information found in your policy like coverage limits, deductibles, discounts, special forms, endorsements, and more.
If your head is spinning from this onslaught of insurance terms, the Austin Insurance team is here to help clear things up. We put together the following list of the most important car insurance terms. Think of them as a handy cheat sheet as you look through the pages of your auto coverage.
A
- Accident Forgiveness
A car insurance endorsement that may prevent your insurance rates from increasing as a result of an at-fault accident.
- Act of God
An unpreventable accident or event that is the result of natural causes, such as a thunder and lightning storm, a tornado, hail, or flooding.
- Actual Cash Value
This term refers to the fair market value of an item, such as your car, at the time it is damaged, stolen, or destroyed. It is the standard that insurance companies prefer when reimbursing policyholders for their losses.
- Adjuster
An insurance company employee or an outside firm who is assigned to settle your car insurance claim. This person will evaluate your claim and then make a recommendation for payout based on the coverage in your car insurance policy contract.
- Agent
An authorized representative of an insurance company who sells and services insurance contracts.
- Appraisal
A professional, formal, written estimation of the costs of parts and labor required to repair your car’s damages. This appraisal may be completed by an insurance adjuster or vehicle repair specialist.
- At Fault
When you are found to be at fault in a car accident, it means that the insurance company has determined you are the person responsible for the accident and you should be held liable for anyone’s injuries.
B
- Binder
A temporary insurance form that is issued at the time of the application providing proof of coverage. It expires at the end of a specific time period or when the permanent policy is issued by the company.
- Bodily Injury Liability
Coverage that can help pay for the medical expenses of anybody you injure in an at-fault car accident, as well as your legal fees if you are taken to court over the accident.
- Bodily Injury to Others
An optional car insurance coverage that allows you to extend the limits of liability protection in your policy.
- Bundle and Save
A popular discount for which you may be eligible if you bundle your car and home, condo, or renters insurance policy with the same insurance company.
C
- Cancellation
Termination of policy during the policy term.
- Carrier
The insurance company that underwrites and issues your auto policy. The term refers to the fact that the company carries (or assumes) certain risks for you, the policyholder.
- Claim
A policyholder’s request for their insurance company to cover a loss related to their vehicle.
- Claimant
The person who submits a claim for a loss.
- Collision
Optional car insurance coverage that typically pays for repairs if your car is damaged in an accident, regardless of who’s at fault.
- Collision Deductible Waiver
An endorsement you can add on to your standard car insurance policy that may waive your collision deductible in the event of a claim. It only applies if you’re found to be less than 50% at fault for an accident and if you can identify the at-fault person. Also called Waiver of Deductible.
- Combined Single Limit
A type of car insurance policy that includes a single amount for liability payment limits for both property damage and bodily injury as opposed to a split limit policy, which has separate limits for bodily injury per person, bodily injury per accident, and property damage per accident.
- Comprehensive
Optional car insurance coverage for your losses if your vehicle is stolen, vandalized, or damaged by fire, weather, striking an animal, and other similar events that are not covered under Collision.
- Conditional Receipt
Given to policy owners when they pay a premium at time of application. Such receipts bind the insurance company if the risk is approved as applied for, subject to any other conditions stated on the receipt.
- Coverage
A term used by insurance companies to mean either the dollar amounts of insurance purchased, e.g., $250/$500K of bodily injury liability coverage, or the type of loss covered, e.g., coverage for theft.
- Covered Accident
Any accident that falls within the bounds of your policy.
D
- Declaration Page
The form attached to the front of your car insurance policy, that identifies the policy’s terms, coverage limits, endorsements, premium, and more. Often referred to as Dec Page for short.
- Deductible
An amount that an individual must pay for covered services before the insurance company will begin to make payments.
- Depreciation
A decrease in the value of a vehicle due to wear and tear or obsolescence.
- Disappearing Deductible
Optional coverage that rewards drivers who are accident-free and ticket-free. When you have this coverage and a clean driving record every year, your auto deductible decreases over time.
- Discounts
A term that refers to the many ways you might be able to save money on your car insurance. Car insurance discounts vary by insurance company, and you might not be eligible for all savings opportunities.
E
- Endorsement
Addition to the insurance policy that changes or adds to the provisions or coverage of the insurance policy.
- Exclusions
Certain causes and conditions listed in the policy that are not covered.
F
- File a Claim
A request you make to your insurance company for payment of a sum of money, according to the terms of an insurance policy, when your vehicle is damaged or involved in an accident.
- Form
Any insurance document prepared in a prescribed arrangement of words and layout. Riders, policies, endorsements, and applications are all forms.
G
- Gap Insurance
Optional car insurance that is only available to original loan or leaseholders on a new vehicle. If you get in an accident that badly damages or totals your car, having gap coverage can help you cover the difference between the market value of your vehicle at the time of the loss and the amount you still owe to your loan or leaseholder. Also called Loan/Lease Gap Coverage.
- Group Marketing Programs
Special insurance savings programs that an insurance company might offer to members of a group, such as a civic organization, motor club, credit union, or an employer. As a member of an approved group, you may be eligible for reduced policy rates.
H
- Hazard
A factor or activity that may cause or make a loss worse, such as a failure to have your car brakes checked regularly. Before deciding to provide you with coverage, an insurer will consider the particular hazards that may make you a better or worse risk than other insureds to insure.
I
- In Force
Insurance on which the premiums are being paid or have been fully paid. The policy has not expired.
- Independent Agent
An agent who represents more than one insurer.
- Insurance
A formal social device for reducing risk by transferring the risks of several individual entities to an insurer. The insurer agrees, for a consideration, to pay for the loss in the amount specified in the contract.
- Insurance Policy
The printed form which serves as the contract between an insurer and an insured.
- Insured
The person(s) who is(are) covered by the car insurance policy.
- Insurer
Party that provides insurance coverage, typically through a contract of insurance.
J
- Judgment
An official designation entered on a court’s docket signifying that an injured driver has prevailed in a case against you, the defendant, if you are sued as a result of an at-fault car accident. A judgment typically means you are legally required to compensate the claimant with a monetary award.
K
- Kit Car
A type of automobile that is typically sold and made up of separate components that are assembled by the buyer. Kit cars usually require specialized car insurance.
L
- Lapse
Termination of a policy upon the policy owner’s failure to pay the premium and the date that the policy is re-written. The time frame in the middle is the lapse of coverage. No coverage provided during a lapse.
- Lease
A contract granting use or occupation of a vehicle during a specified period, in exchange for a specified dollar amount.
- Leaseholder/Lessee
The person who possesses or has use of a vehicle through a lease.
- Limits
Each coverage on your car insurance policy has a limit, which is the amount your insurance company agrees to pay up to for damages.
- Loss
Direct and accidental damage to an insured vehicle, which is the basis for filing a claim.
- Loss History
A history of a person’s automobile losses.
M
- Market Value
A term that describes what your vehicle could be sold for in the open market. Also called Actual Cash Value.
- Medical Expenses
Reasonable charges for medical, surgical, x-ray, dental, ambulance, hospital, professional nursing, prosthetic devices, and funeral expenses. (The insurance company defines what is reasonable.)
- Medical Payments
Optional car insurance coverage that can limit your out-of-pocket medical, surgical, and other health care expenses should you or your passengers be injured in a car accident.
- Motor Vehicle Report (MVR)
The record of your driving history, including details of any accidents or violations, as reported to your state’s department of motor vehicles.
N
- Named Insured
The person(s) who is(are) covered by the car insurance policy. Also called the Insured or Policyholder.
- Named Non-owner Coverage/Policy (NNO)
A policy that is written for someone who does not own a private passenger or commercial vehicle but might use an employer-furnished vehicle, borrow cars from friends or relatives, or frequently use rental cars.
- Named Perils
This type of car insurance policy only provides coverage for your vehicle if a loss is the result of an event specifically listed in your policy.
- Non-renew
A decision by your insurance company to not extend your coverage beyond the current policy term. This typically happens if you default on your policy payments or have too many claims against your policy in a short amount of time. Companies can only non-renew coverage after appropriately notifying the policyholder.
- Non-standard Carrier
A car insurance provider that accepts high-risk drivers.
O
- Occasional Driver
A driver who is not the usual or most frequent driver of the vehicle listed on a car insurance policy.
- Offer and Acceptance
When applying for car insurance, the first thing you do is get a proposal form from the insurance company. You fill in the requested details and send the form to the company, sometimes with a premium check. This is your “offer.” If the insurance company agrees to insure you, this is called “acceptance.”
- Original Equipment Manufacturer (OEM)
A car insurance endorsement that you have the option to purchase. With this coverage, if you need to have your car repaired, this ensures that only OEM parts will be used, as opposed to aftermarket or salvage parts.
P
- Personal Injury Protection
If you’re injured in a car accident, regardless of who is at fault, the personal injury protection coverage in your auto insurance policy is designed to fill in some of the coverage gaps that may be left by your health insurance plan.
- Physical Damage
Any visual damage to your vehicle.
- Policy
The printed document that is issued to you by your insurance company stating the terms of your car insurance contract.
- Policyholder
The person(s) who is(are) covered by the car insurance policy. Also called the Insured or Named Insured.
- Policy Term
The period for which your car insurance policy will remain active. Most auto policy terms are six months to a year.
- Port of Repair
Location of repair facilities, such as an auto body shop or garage.
- Premium
The amount of money an insurance company charges, based on a given rate, to provide the coverage described in the policy for a specified period of time, generally one year.
- Primary Policy
The insurance policy that pays first when you have a loss that’s covered by more than one policy.
- Property Damage Liability
The portion of your car insurance that typically covers the cost of repairing what you’ve ruined if you are determined to be at fault in a car accident that results in damage to someone else’s property.
- Provisions
Statements contained in an insurance policy that explain the benefits, conditions, and other features of the insurance contract.
Q
- Quote
An estimate of the premium you’ll pay for your car insurance policy. A quote is based on information you provide to an insurance agent, such as your age, the car you drive, your driving history, where you live, and other factors. A quote is not an offer for insurance or an insurance contract.
R
- Reinstatement
Putting a lapsed policy back in force by producing satisfactory evidence of insurability and paying any past-due premiums required.
- Rental Reimbursement
Coverage that helps pay for alternative transportation, such as bus, subway, or another car, if your car cannot be driven due to a covered loss. Sometimes referred to as “loss of use,” “transportation expense,” or “rental car expense.”
- Replacement Policy
A new policy written to take the place of one currently in force.
- Representation
Statements made by applicants on their applications for insurance that they represent as being substantially true to the best of their knowledge and belief but that are not warranted as exact in every detail.
- Rider
An attachment to a policy that modifies its conditions by expanding or restricting benefits or excluding certain conditions from coverage. Sometimes referred to as an Endorsement.
- Risk
The chance of injury, damage, or loss.
- Roadside Assistance
Optional car insurance coverage designed to help you if your vehicle breaks down. The most common roadside assistance services include jumpstarts, battery replacements, tows, tire changes, emergency fuel, and key recovery.
S
- Standard Risk
Person who, according to a company’s underwriting standards, is entitled to insurance protection without extra rating or special restrictions.
- Subrogation
The right of the company to step into the shoes of the insured, following payment of a claim, to recover the payment from a third party responsible for the loss. Subrogation is limited to the amount paid on the policy.
- Substandard Risk
Person, property, or automobile that is considered a hazard because of condition, location, or some other factor that makes the risk higher than the standard or norm.
- Surcharge
A temporary increase in your car insurance premium that is assessed as a penalty, typically for something within your control such as an at-fault accident or a moving violation. These extra charges usually stay on your insurance for three to five years.
T
- Term
Period for which your policy runs. Car insurance policy terms are typically six or 12 months.
- Third Party
A person other than you or your insurance company who has incurred losses or is entitled to receive payment due to your actions.
- Title
A legal document or certificate showing you are the owner of your vehicle.
- Towing and Labor
An add-on car insurance option, also sometimes referred to as roadside assistance, that helps cover the costs associated with a car breakdown, such as jumpstarts, battery replacements, tows, tire changes, emergency fuel, and key recovery.
U
- Umbrella Policy
A separate policy from your car insurance coverage that can extend liability coverage over and above what is provided in your auto policy, starting at $1 million in excess liability. You must meet the required underlying limits on your car insurance policy to qualify for an umbrella.
- Underwriter
Company receiving premiums and accepting responsibility for fulfilling the policy contract. Also, company employee who decides whether the company should assume a particular risk; or the agent who sells the policy.
- Underwriting
The process of examining, accepting, or rejecting insurance risks, and classifying those selected, in order to charge the proper premium for each.
- Uninsurable Risk
A person who is not acceptable for insurance due to excessive risk.
- Uninsured/Underinsured Motorist
If you or your passengers are injured in a car accident that is caused by an uninsured driver, or a driver without adequate insurance, uninsured/underinsured motorist coverage typically replaces the insurance that the at-fault driver should have had.
V
- Vehicle Identification Number (VIN)
A unique serial number for your vehicle that is 17 characters long. It acts as your car’s fingerprint, as no two vehicles in operation have the same VIN. It can be found on your car’s dashboard and driver’s-side door jamb and is also included on your vehicle’s registration form and insurance card.
W
- Waiver of Deductible
An endorsement that you can add on to your standard car insurance policy that may waive your collision deductible in the event of a claim. It only applies if you’re found to be less than 50% at fault for an accident and you can identify the at-fault person. Also called Collision Deductible Waiver.
- Without Prejudice
Occasionally claims may be paid which the underwriter feels are not actually covered by the policy. Such payments are “without prejudice” and are not to be treated as a precedent for future similar claims.
X
- X-date
The expiration date of your car insurance policy.
Y
- Youth Operator
Also called junior operator, this is a driver between the ages of 16 ½ and 18. A junior operator is subject to all driver’s license suspensions. In addition, there is a Junior Operator Law in Massachusetts that includes restrictions specifically designed for young drivers and aimed at reducing their probability of distracted driving accidents.
Z
- Zero-Emissions Vehicle (ZEV)
A carbon negative vehicle or a car that emits less pollutants than other vehicles, such as hybrid electrics. Many insurance companies now offer a credit to car owners who buy or lease an energy-saving hybrid or electric vehicle.
While we believe the best way to review the details of your car insurance policy and help you understand your coverage is to do so in person or over the phone, Austin Insurance also knows this isn’t always possible for our busy clients, which is why we have provided this helpful directory.
To experience our personalized approach to insurance, please call the Austin Insurance team today at 781-447-5561.
