Auto Insurance Glossary

---

Actual Cash Value - In many auto insurance policies, the amount awarded for a total loss. This amount usually equals the cost to replace the damaged vehicle with a vehicle of the same make, model, body type, model year, and equipment with substantially similar mileage and physical condition.

Auto Insurance - A method of pooling the risks of many drivers, so no one individual has to bear the entire cost of an accident.

Bodily Injury (BI) Liability - Pays up to the coverage limits, for damages due to injury or death of others in a vehicle accident for which you or the operator of your vehicle are legally responsible.

Claim - A policyholder’s formal demand to recover, from an insurer, losses covered by the insurance policy.

Collision Coverage - Pays for damage to your vehicle or a vehicle you are operating caused by a collision or rollover.

Comprehensive Insurance - Pays for loss when your vehicle is stolen or damaged by vandalism, fire, hail, flooding, collision with a bird or animal, or several other causes.

Coverage - A synonym for insurance indicating how much protection it provides. This may mean either the dollar amount purchased or the type of loss covered.

Deductible - The amount you pay before the insurance company begins paying on a loss.

Depreciation - The decrease in value of a vehicle or its parts due to wear, tear and age.

Endorsement - An amendment attached to a standard policy to change the terms of the policy contract.

Exclusion - A provision in a policy that describes an event or loss that your insurance policy does not cover.

Exclusive Agent: - An individual who represents only one company, usually on a commission basis.

First-Party Coverage - IInsurance coverage under which you are compensated for your losses by your own insurance company rather than by the insurer of another person who caused an accident.

Hazards - An act or condition that will increase the likelihood or severity of a loss.

Independent Agent - An independent agent is an individual who usually represents two or more insurance companies by selling and servicing their policies and who is paid by commissions on each policy sold.

Insured - An individual or organization covered by an insurance policy.

Insurer - The insurance company providing the coverage.

Liability - Any legally enforceable obligation.

Liability Coverage - Protects you from third-party claims made against you, when you are responsible for an accident that results in serious injury or death to others or damage to their property.

Limits - The maximum amount of insurance your policy will pay for a covered loss.

Loss - The basis for an insurance claim.

Medical Payments Coverage - Pays, up to the coverage limits, for reasonable and necessary doctor, hospital and funeral expenses for you and your passengers injured or killed in an accident, regardless of who is at fault.

No-Fault Coverage - An insurance concept designed to speed payment to accident victims and lower the cost of insurance by reducing the number of lawsuits for minor claims.

Personal Injury Protection (PIP) - Implements the no-fault concept. PIP offers protection for expenses actually incurred, up to a specific, per-individual dollar amount. States that have no-fault laws require drivers to buy PIP. Similar coverage may be offered as an option in some states without no-fault laws. This coverage varies from state to state but usually includes medical expenses, lost wages, essential services and a death benefit.

Policy - A legal contract that sets forth the rights and obligations of both the policyholder and the insurance company.

Policyholder - An individual, named insured, who pays a premium to an insurance company in exchange for insurance protection detailed in an insurance policy.

Premium - The amount of money paid for an insurance policy.

Property Damage (PD) Liability - Pays, up to the coverage limits, for another individual’s vehicle or property that has been damaged in an accident for which you or the operator of your vehicle is legally responsible.

Risk - The chance of injury, damage or loss. Also used by insurance companies to refer to the insured or to property covered by a policy.

Shared Market - A program in which all automobile insurers in a state participate to make coverage available to vehicle owners who are unable to obtain auto insurance in the regular marketplace. Usually called assigned risk plans, auto insurance plans, joint underwriting associations or reinsurance facilities.

Umbrella Liability Insurance - Insurance that covers losses in excess of amounts covered by primary auto and homeowners liability insurance policies and protects the insured in many situations not covered by the primary automobile or homeowners liability policies.