The PROSTARS Auto Insurance Glossary covers general terms that may be helpful to you in reading and understanding your Automobile Insurance policy. Keep in mind that because insurance laws vary throughout the United States and Canada, or coverages may not be available in some jurisdictions, the definitions and terms may not apply to all situations. The terms and definitions in your actual policy will govern any claims or questions of interpretation.

Last updated: 6/26/2006

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Actual Cash Value:
The current cost to replace damaged property.

Additional Insurance:
Insurance that supplements an already existing policy.

Additional Insured or Additional Interest:
A person or an organization, other than the named insured or covered person, who is protected under the named insured's auto insurance policy.

Adjuster:
A person, usually employed by the insurance company, who assess the damage to vehicles that were involved in a claim and begins the process of getting reimbursement for the insured.

Agent:
A person who is licensed by the State to sell insurance.

Anti-Theft Device:
Devices designed either to reduce the chance an auto will be vandalized or stolen, or assist in its recovery. Examples include car alarms, keyless entry, starter disablers, motion detectors, parts of the vehicle etched with the Vehicle Identification Number, and recovery systems.

Appraisal:
A survey by a Claims Representative or Claims Appraiser estimating the amount of damage to a vehicle and the cost to repair or the determination of a complete loss.

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Basic Limits of Liability:
The least amount of liability coverage that can be purchased, which is generally equivalent to the minimum amount required by state law.

Benchmark Rate(s):
The maximum rates that an insurance company may charge in the particular state that has set those rates. A benchmark rate is usually set by the State's Insurance Commissioner.

Binder:
A temporary insurance certificate that you use to prove that you have insurance until your actual policy arrives in the mail.

Bodily Injury:
Injury to another person's body. If you injure someone in an accident, and you have bodily injury coverage, they will be reimbursed for their injuries up to the maximum limit of your policy.

Bodily Injury Liability:
Legal liability for causing physical injury or death to another.

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Cancellation:
Termination of an insurance contract before its expiration date, by either the insurance company or the policyholder.

Claim:
A demand for payment under an insurance contract for the estimated or actual amount of loss.

Claimant:
Someone who makes an insurance claim.

Collision Coverage:
A type of coverage which pays for damage to your vehicle, up to the actual cash value of your car, minus your deductible, regardless of who caused the accident.

Common Exclusions:
Conditions or circumstances under which your insurance company will not pay a claims.

Comprehensive Coverage:
Insurance coverage that covers the cost of repairs to or replacement of an insured vehicle should it be stolen, vandalized, struck in a hit-and-run, or damaged by an "act of God." 

Conditions:
Provisions that set forth the rights, duties, and responsibilities of the parties to an insurance contract. Conditions may be found anywhere in the contract.

Covered Autos:
Any vehicle shown in the declarations, or in some cases, a substitute vehicle used temporarily because of breakdown or repair of the insured's own covered vehicle.

Covered Person:
The named insured, spouse, resident relatives, etc. that is insured under a policy contract.

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Damages:
A sum of money that a party is legally obligated to pay to another as compensation for injury.

Declarations:
The part of the policy that provides detailed information about the insured, the insurer, and the coverages.

Deductible:
The amount of a claim that the insured has to pay out of their pocket before the insurance company will pay the balance of a claim.

Depreciation:
A decrease in an automobile's value over time.

Effective Date:
The date the coverage begins on an insurance contract (policy).

Endorsement:
An amendment to your policy written especially to cover unique items just for you. An endorsement is also a change to your policy that is made during the policy's term. An endorsement is attached to your policy to modify the terms of the insurance contract. It may also be called a "rider."

Exclusion:
Part of an insurance contract that excludes coverage of certain perils, persons, property, or locations.

Expiration Date:
The termination date of an insurance contract (policy).

Financial Responsibility Clause:
Financial Responsibility ensures that a policy conforms to the financial responsibility laws of any state or Canadian province in which the insured's vehicle operates.

First Party Benefits:
This pays policyholders and others covered by the policy in the event of injury, no matter who caused the accident. The benefits can include medical expenses, loss of income, funeral and death benefits. This may also be called Personal Injury Protection.

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Gap Insurance:
If you are making lease or loan payments and you experience a total loss, there may be a difference (gap) between the market value of your vehicle and what you still owe on it. This optional coverage pays the difference.

Glass Insurance:
Coverage for accidental or malicious breakage to glass.

Good Driver:
The actual definition varies between insurance companies and, sometimes, states. Generally it is a driver who has not received any traffic tickets for some defined period of time, has no "points" on their license in states that issue points, and has not had more than one at-fault accident within some defined period. People who are rated as a "good driver" will generally pay less for insurance than someone who does not have that rating.

Good Student Discount:
A premium discount for students with high scholastic grades. Some statistical research has shown a relationship between good grades and safe driving.

Hit and Run:
An accident caused by someone who does not stop to assist or provide information.

Insured:
A person who is protected by the policy.

Insurer:
The company that issues a policy to a policyholder; the party in the insurance contract that promises to pay losses and render services.

Liability Insurance:
Liability insurance pays on behalf of the insured for certain types of injury to others.

Liability Insurance Limits:
The maximum amount that the insurance company will pay for a covered loss.

Limit of Liability:
The maximum amount that an insurer agrees to pay in the case of loss under policy contract.

Loss:
damage to your car that is covered by insurance and for which you are seeking payment from your insurance company.

Loss of Use Insurance:
Compensation when the policyholder has lost the use of his or her vehicle; for example, an automobile rented to replace one that is stolen.

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Medical Payments Coverage:
If present on your policy, this rider requires the insurance company to pay medical, surgical, hospital, and funeral expenses, up to the stated limit, regardless of who caused the accident.

Motor Vehicle Record:
A motor vehicle record, also referred to as DL printout, or MVR, contains information obtained from an individual's driver license application, abstracts of convictions and accidents.

No-Fault Insurance:
Many states have enacted auto accident compensation laws permitting auto accident victims to collect directly from their own insurance companies for medical and hospital expenses regardless of who was at fault in the accident.

Non-renewal:
A decision by an insurance company that they no longer wish to cover you and will not renew your insurance when the current policy expires.

Occurrence:
An accident or loss, including continuous or repeated exposure to substantially the same general harmful conditions, that result in bodily injury or property damage.

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Partial Loss:
A loss that does not completely destroy the insured automobile that is covered by an insurance policy.

Per Occurrence Limit:
This refers to the cap amount an insurance company will pay for all claims arising from a single incident. In an automobile accident, it comprises bodily injuries sustained by all parties.

Per Person Limit:
This refers to the cap amount an insurance company will pay for any one person's injuries arising from a single incident. In an automobile accident, it comprises bodily injuries sustained by each person.

Physical Damage:
Damage to your covered vehicle from perils including (but not limited to) collision or upset with another vehicle object, fire, vandalism and theft.

Policy Anniversary:
Date on which an insurance policy must be reinstated to remain in force.

Policy Expiration Date:
The date when your current insurance policy expires.

Policy Period:
The period of time in which a policy is in effect. For example, six months or one year, are standard policy periods.

Policy:
The written documents of a contract for insurance between the insurance company and the insured. Such documents include forms, endorsements, riders and attachments.

Policyholder:
One who maintains ownership in an insurance policy. This may refer to the policy owner or those covered under the policy.

Premium:
The amount that a policyholder agrees to pay to the insurance company for an insurance policy.

Primary Use:
What purpose the vehicle is normally used for. Typical primary uses are: Commute, Pleasure, commercial use, etc.

Principal Driver:
The person who drives the car most often.

Property Damage:
Damage to tangible property. In insurance, people often refer to Property Damage as the coverage afforded for financial protection against damage to another’s property resulting from an accident.

Property Damage Liability:
Damage to someone else's tangible property that was caused by you.

Property Damage Liability Insurance:
Protection against liability for damage to another's tangible property, including loss of use. Although this coverage is different than liability for bodily injury to another person, Bodily Injury and Property Damage Liability protection are generally written together.

Provisions:
The statements in an insurance policy that explain the benefits, conditions, and other features of the insurance contract.

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Recovery:
Money or other valuables that the insurance company obtains through subrogation, salvage, or reinsurance.

Reinstatement:
Returning a lapsed policy to its full value after its termination as if it was never terminated.

Renewal:
The process of keeping an active policy in force through the issuance of a renewal policy.

Second Named Insured:
An additional driver who will be covered under your policy.

Subrogation:
When your insurance company pays for a loss caused by another driver, your company may have the right by law or policy provision to recover an amount of the loss from the other person or their insurer.

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Term:
The length of time for which a policy or bond is in force.

Tort:
A private wrong or harm (other than a breach of contract) committed against another, resulting in legal liability. A tort is either intentional or accidental (negligent). Automobile liability insurance is purchased to protect one from suits arising from unintentional torts.

Tort Feasor:
One who commits a tort.

Underinsured Motorist Coverage:
Pays for injuries and property damage that is caused by either a hit-and-run driver or a motorist without liability insurance. It will also pay, up to stated limits, when your medical and car repair bills are higher than the other driver’s liability coverage.

Underinsured Motorist’s Bodily Injury:
Underinsured motorists bodily injury coverage (which must be offered in most states) pays for a covered person's bodily injuries of which a person with not enough insurance is legally liable.

Underwriter:
The insurance company employee who reviews your application for insurance and decides if you will be covered and how much your premium will be.

Underwriting:
A process that evaluates an applicant and their automobile(s) against pre-established criteria for insurability to determine whether the applicant will be rejected or accepted for coverage and whether at standard or modified rates.

Uninsured Motorist’s Bodily Injury:
Uninsured motorist’s bodily injury coverage (which must be offered in most states) pays for a covered person's bodily injuries of which an uninsured or hit-and-run motorist is legally liable, but unable to pay.

Uninsured Motorists Property Damage:
Uninsured Motorist Property Damage Liability coverage pays for property damages caused by uninsured drivers.

Uninsured Motorists Insurance:
Uninsured or Underinsured Motorists insurance provides protection in the event that damage is caused by a motorist who has no insurance or not enough insurance to cover the loss.

Waiver of Collision Deductible:
This option pays your collision deductible when you carry collision coverage on a vehicle that is damaged by an uninsured or hit-and-run motorist who is at fault. Coverage applies only when there is actual physical contact and when you can identify the uninsured driver or vehicle.

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