Glossary Of Car Insurance Terms

A

Actual Cash Value: The value of property based on the cost of repairing or replacing it with property of the same kind and quality. Typically, actual cash value equals the current replacement cost minus depreciation (age, condition, length of time in use, and obsolescence).

Adjuster: A person who investigates and settles losses for an insurance carrier.

Annual Out-of-Pocket Maximum: A dollar amount set by the plan which puts a cap on the amount of money the insured must pay out of his or her own pocket for covered expenses over the course of a calendar year.

Assigned Risk: A risk insured through a pool of insurers and assigned to a specific insurer. These risks are generally considered undesirable by underwriters, but due to state law or otherwise, they must be insured.

Auto Collision Coverage: Optional auto insurance which pays for damage to your car caused by collision with another car or object, or by rolling the car over. Frequently required if you have a car loan.

Auto Comprehensive Physical Damage Coverage: Optional auto insurance which pays for damage to your auto caused by things other than collision or rolling the car over, such as fire, theft, vandalism, flood or hail. Frequently required if you have a car loan.

C

Cancellation: The discontinuance of an insurance policy before its normal expiration date, either by the insured or the company.

Claim: A person’s request for payment from an insurer for a loss covered by the insurance policy.

Coinsurance Provision: A specified percentage of the cost of treatment the insured is required to pay for all covered medical expenses remaining after the policy’s deductible has been met.

Collision Insurance: Protection against loss resulting from any damage to the policyholder’s car caused by collision with another vehicle or object, or by upset of the insured car, whether it was the insured’s fault or not.

Comprehensive Auto Insurance: Protection against loss resulting from damage to the insured auto, other than loss by collision or upset.

Compulsory Auto Liability Insurance: Insurance laws in some states required motorists to carry at least certain minimum auto coverages. This is called “compulsory” insurance.

Conditions: The part of your insurance policy that states the obligations of the person insured and those of the insurance company.

Contract: A legally enforceable agreement between two or more parties.

D

Deductibles: The portion of the loss that the policyholder agrees to pay out of pocket, before the insurance company pays the amount they are obligated to cover. For example, if the covered claim is $1000 and your deductible is $250, you pay $250 and yOur Agency will pay $750. Deductibles help to keep insurance rates reasonable. Raising the amount of the deductible lowers the cost of insurance.

Depreciation: Reduction in the value of property due to age and use.

E

Emergency Room Visit: A visit to a hospital for treatment of an accidental injury or for emergency medical care. To qualify as an emergency, the symptoms must be sudden, severe and require immediate medical attention. Some states judge emergencies by the “prudent layperson” law, meaning that the health plan must cover a trip to the emergency room “if a prudent layperson, acting reasonably, would have believed that an emergency medical condition existed.” Keep in mind that some plans won’t cover a trip to the emergency room if the symptoms appeared more than 24 hours earlier.

Endorsement: Attachment or addendum to an insurance policy; an endorsement changes the contract’s original terms.

I

Indemnification: Compensation to the victim of a loss, in whole or in part, by payment, repair, or replacement. Indemnity. Legal principle that specifies an insured should not collect more than the actual cash value of a loss but should be restored to approximately the same financial position as existed before the loss.

Insolvent: Having insufficient financial resources (assets) to meet financial obligations (liabilities).

Insurable Interest: Any interest a person has in property that is the subject of insurance, so that damage to this property would cause the insured a financial loss.

Insurance Company: An organization that has been chartered by a governmental entity to transact the business of insurance.

Insured: A person or organization covered by an insurance policy, including the “named insured” and any other parties for whom protection is provided under the policy terms.

Insurer: The party to the insurance contract who promises to pay losses or benefits. Also, any corporation engaged primarily in the business of furnishing insurance to the public.

L

Lapse: Termination of a policy due to nonpayment of premiums.

Liability: A legal obligation to compensate a person harmed by one’s acts or omissions.

Liabiagelity Cover: Insurance that provides compensation for a harm or wrong to a third party for which an insured is legally obligated to pay.

Loss: The happening of the event for which insurance pays.

Loss Expense – Allocated: Handling expenses, such as legal or independent adjuster fees, paid by an insurance company in settling a claim which can be definitely charged to that particular claim.

Loss Expense – Unallocated: Salaries and other expenses incurred in connection with the operation of a claim department of an insurance carrier which cannot be charged to individual claims.

M

Medical Payments Coverage: Medical and funeral expense coverage for bodily injuries sustained from or while occupying an insured vehicle, regardless of the insured’s negligence.

Misrepresentation: Act of making, issuing, circulating or causing to be issued or circulated an estimate, an illustration, a circular or a statement of any kind that does not represent the correct policy terms, dividends or share of surplus or the name or title for any policy or class of policies that does not in fact reflect its true nature.

O

Offer and Acceptance: The offer may be made by the applicant by signing the application, paying the first premium and, if necessary, submitting to physical examination. Policy issuance, as applied for, constitutes acceptance by the company. Or the offer may be made by the company when no premium payment is submitted with the application. Premium payment on the offered policy then constitutes acceptance by the applicant.

Out-of-Pocket Expense: Any medical care costs not covered by insurance, which must be paid by the insured.

P

Peril: The cause of loss or damage.

Personal Injury Protection: First-party no-fault coverage in which an insurer pays, within the specified limits, the wage loss, medical, hospital and funeral expenses of the insured.

Physical Damage: Damage to or loss of the automobile resulting from collision, fire, theft or other perils.

Personal Property Insurance: Protects against the loss of, or damage to property other than real property (real estate) caused by specific perils.

Policy: The written forms that make up the insurance contract between an insured and insurer. A policy includes the terms and conditions of the coverage, the perils insured or excluded, etc.

Policy Declarations: The part of the insurance contract that lists basic underwriting information, including the insured’s name, address and description of insured locations as well as policy limits.

Policy Limits: The maximum amount an insured may collect or for which an insured is protected, under the terms of the policy.

Policyholder: The person who buys insurance.

Policyowner: An individual with an ownership interest in an insurance policy.

Policy Period: The amount of time an insurance contract or policy lasts.

Premium: The price for insurance coverage as described in the insurance policy for a specific period of time.

Proof of Loss: A sworn statement that usually must be furnished by the insured to an insurer before any loss under a policy may be paid.

Property Damage Coverage: An agreement by an insurance carrier to protect an insured against legal liability for damage by an insured automobile to the property of another.

R

Rate: The pricing factor upon which the insurance buyer’s premium is based.

Rated Policy: Sometimes called an “extra-risk” policy, an insurance policy issued at a higher-than-standard premium rate to cover the extra risk where, for example, an insured has had a DUI (Driving Under the Influence) or other traffic violations.

Rebating: Giving any valuable consideration, usually all or part of the commission, to the prospect or insured as an inducement to buy or renew. Insurance rebating is prohibited by law.

Reimbursement: The payment of an amount of money by an insurance policy for a covered loss.

S

Settlement: An agreement between a claimant or beneficiary to an insurance policy and the insurance company regarding the amount and method of a claim or benefit payment.

Standard Risk Rate: The risk category that is composed of proposed insureds who have a likelihood of loss that is not significantly greater than average.

Subrogation: Subrogation refers to an insurance company seeking reimbursement from the person or entity legally responsible for an accident after the insurer has paid out money on behalf of its insured. The general rule is that, after paying your claim, your insurer is “subrogated” to the rights of your policy and can “step into your shoes” to go after or sue the negligent party on your behalf.

Substandard Risk: A risk that cannot meet the normal requirements of an auto insurance policy. Protection is provided in consideration of a waiver, a special policy form, or a higher premium charge. Substandard risks may include those persons who are rated because of poor driving habits.

T

Full tort and limited tort automobile insurance: Full tort and limited tort automobile insurance options were instituted by the state of Pennsylvania in an attempt to decrease the number of pain and suffering lawsuits in Pennsylvania courts.

U

Underwriter: (a) A company that receives the premiums and accepts responsibility for the fulfillment of the policy contract; (b) the company employee who decides whether or not the company should assume a particular risk; (c) the agent who sells the policy.

Underwriting: The process of reviewing applications for coverage. Applications that are accepted are then classified by the underwriter according to the type and degree of risk.

Uninsured (Underinsured) Motorist Coverage: A form of insurance that pays the policyholder and passengers in his/her car for bodily injury caused by the owner or operator of an uninsured or inadequately insured automobile.

Uninsurable Risk: One not acceptable for insurance due to excessive risk.

W

Waiver: An agreement attached to a policy which exempts from coverage certain disabilities or injuries that otherwise would be covered by the policy.

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Bob Sopcak

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My name's Bob Sopcak. I'm a licensed insurance expert and I take great pride in helping people with their car insurance needs. I've been a liscensed agent for the last 7 years. I specialize in car insurance.

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