Auto Insurance Glossary

The amount of money that a vehicle is worth at any given time. It is calculated by subtracting wear and tear costs from the original cost of the vehicle. Also known as a vehicle’s market value.

An individual who investigates insurance claims by interviewing the claimant and witnesses, contact the other driver, inspect your vehicle for damages or request a copy of the police report.

An individual who represents an insurance company and sells insurance policies to prospective buyers.

A process that is used to determine the fair value of a vehicle, particularly when damage has occurred.

A driver of a motor vehicle who has been denied auto insurance coverage but are required to be covered under U.S. law.

A form from an auto insurance company that provides proof of temporary insurance while the insurer verifies the applicants data. This allows the applicant to legally drive their vehicle with coverage while their insurance policy is in underwriting.

Part of an auto insurance policy that pays for the costs associated with injuries that the other person or people involved sustains.

Also known as the insurance company that provides the insurance policy.

A term that mainly refers to liability coverage of an individual or organization for negligent acts or omissions as well as property insurance. Auto insurance is a common type of casualty insurance.

The individual who makes an insurance claim.

In nearly every auto loan, the car being financed is used as collateral. Meaning, the lender holds the car title until the loan is paid off and the car changes ownership to the individual who purchased the car. Other types of collateral can be used for auto loans.

A type of auto insurance coverage that reimburses the insured or pays directly for repairs or total car replacement if the car is damaged in an accident with another vehicle or object.

A type of auto insurance coverage that covers vehicle damage caused by incidents that are not collisions. It includes coverage for damage from vandalism, theft, floods, fallen objects, etc.

Also known as CLUE, it is a consumer-reporting database that contains up to 7 years of an individual’s insurance claims history. Insurance companies use CLUE to access consumer claims information when they are underwriting an insurance policy.

A measure of the average change overtime in the prices paid by consumers for consumer goods and services.

A form used to construct an auto insurance policy which consists of the insuring agreement, coverage conditions, exclusions and policy definitions.

The amount of money that the policyholder needs to pay towards repairs to the vehicle before the insurance pays additional costs.

A reduction in the value of a vehicle with the passage of time due to wear and tear.

A discount or reduced insurance premium provided to a young student driver upon completion of a driver education course.

A document amendment or addition to an existing insurance policy in order to make a change to the policy. They are also referred to as riders and can be used to add, remove, exclude or alter insurance coverage.

A predetermined situation in which the auto insurer/insurance company will not pay out the benefits.

A specified amount of time that an insurance policyholder has to look over the policy and have the option to cancel the policy without any penalty.

An optional auto insurance add-on that can help cover the cost gap between the amount owed on the car and the car’s actual cash value in the event of an accident. Since the car’s actual cash value is determined at the time of the accident, that amount may be lower than what you owe on the auto loan and the difference is what is covered by gap insurance.

Financial protection for a driver who harms someone else or damages their property while they are operating the vehicle. It does not cover injuries or damages to the driver or driver’s property.

There are two types of liability limits: bodily injury limits and property damage limits. These are set as the maximum amount the insurance company will pay if the driver does harm or damage to another person or their property. For example, if on a policy that says 100/350, that means the policy will pay is $100,000 per person up to $350,000 per accident in the event of bodily injury. If there is an additional number such as 100/350/100 or 100PD on a separate line, this means the policy will pay up to $100,000 in property damage.

Both are types of insurance that help pay for immediate and necessary medical services following an auto accident that results in injury.

A report that contains the driving history of an individual from the Department of Motor Vehicles. Information on this report includes drivers license information, violations, convictions, license status, etc. For auto insurance, some insurance companies will request the MVR to help determine insurance eligibility and premiums.

Part of an auto insurance policy that states that one or more individuals in the policyholders household may not operate the insured vehicle and if the named person drives the car and gets into an accident, the insurance company does not have to pay for damages.

Part of an auto insurance policy that outlines a specified list of people that if they were to get into an accident in the policyholders car, the damages would be covered by insurance.

A type of auto insurance wherein the auto insurance carrier will pay some or all of the policyholders medical bills and lost earnings if they get into an accident, regardless of who was at fault for the crash. Also known as a Personal Injury Protection (PIP) claim.

An auto insurance policy that provides the policyholder with bodily injury and property damage coverage when the person is driving a vehicle do not own.

The date during which the policy is effective as defined within the insurance policy.

This type of auto insurance coverage, also known as rental car coverage, will pay for the use of a rental car or public transportation while the insured’s car is being repaired under a covered insurance claim. Rental reimbursement coverage typically has no deductible.

The amount of money the insurance company will pay to replace the car if it is severely damaged or stolen. Unlike actual cash value (ACV), replacement cost will pay for the vehicle’s original price where ACV takes depreciation into account and only pays the current market value of the car.

See Liability Limits

The legal right for an insurance carrier to legally pursue a third part that caused an insurance loss to the policyholder as a way to recoup the accident costs from the at-fault driver in an accident.

An amount that an insurance company can add to the insurance policy premium as a result of some event. For example, a surcharge can be added after you get a ticket, have a lapse in coverage, or get a bad insurance credit score.

A type of auto insurance coverage that can reimburse the driver when their car is stuck, broken down, or inoperable and will need a tow truck to take it to a repair shop.

The process of determining risk of insuring a car based on various aspects of the applicant.

Two types of auto insurance coverage that provides coverage to the policyholder in an accident where the other at-fault driver has no or limited liability insurance than necessary to cover the damages.