This page provides a glossary of insurance terms and definitions that are commonly used in the insurance business. New terms will be added to the glossary over time. The definitions in this glossary are developed by the NAIC Research and Actuarial Department staff based on various insurance references. These definitions represent a common or general use of the term. Accident Only - an insurance contract that provides coverage, singly or in combination, for death, dismemberment, disability, or hospital and medical care caused by or necessitated as a result of accident or specified kinds of accident.
In some situations, the carrier may be able to open a claim against the other insurer should they feel as though their client was not at fault. When you begin looking for automobile coverage, you will likely need to learn a bit of auto insurance vocabulary that involves the protective options you have at your disposal. While this car insurance vocabulary may be a bit more commonly used, many people may still not understand the differences between the options they have. The following is some of the more common vocabulary you may need.
If you are purchasing a liability automobile insurance policy, you will be buying a plan that does not cover your own automobile. Liability is a type of plan that will pay for the damages that you cause to other vehicles or persons while operating your vehicle. Any damages your automobile incurs will not be paid for.
These types of policies are often much cheaper than some of the other options available. A collision policy is usually purchased by individuals that are looking to protect the investment that they have made in their own automobile.
This is due to the fact that collision plans will pay out claims that involve both vehicles in an accident. While these policies provide more coverage, they also tend to come with automobile insurance quotes that are a bit pricier. Comprehensive is a final term that you should add to your vehicle insurance vocabulary.
This type of protection will pay for just about any damage that is done to your automobile. This includes both natural and human-caused damages. Comprehensive plans are very popular among people who have put a lot of time and money into their vehicles. Minimum Premium Plan - an arrangement under which an insurance carrier will, for a fee, handle the administration of claims and insure against large claims for a self-insured group.
The employer self-funds a fixed percentage e. Mobile Homes - Homeowners - homeowners insurance sold to owners occupying the described mobile home. Mobile Homes under Transport - coverage for mobile homes while under transport for personal or commercial use. Modified Guaranteed - an annuity that contains a provision that adjusts the value of withdrawn funds based on a formula in the contract.
The formula reflects market value adjustments. Member - A person who has enrolled as a subscriber or an eligible dependent of a subscriber and for whom the health organization has accepted the responsibility for the provision of health services as may be contracted for. Moral Hazard - personality characteristics that increase probability of losses.
For example not taking proper care to protect insured property because the insured knows the insurance company will replace it if it is damaged or stolen. Morale Hazard - negligence or disregard on the part of the insured which could lead to probable loss. Morbidity - the frequency or severity of disease or illness within a subset of the population. Morbidity Risk - the potential for a person to experience illness, injury, or other physical or psychological impairment, whether temporary or permanent.
Morbidity risk excludes the potential for an individual's death, but includes the potential for an illness or injury that results in death. Morbidity Table - a statistical record of the rate of illness among the defined age groups. Mortality Table - chart that shows the death rates of a particular population at each age displayed as the number of deaths per thousand. Mortgage Guaranty - insurance that indemnifies a lender for loss upon foreclosure if a borrower fails to meet required mortgage payments.
Mortgage-Backed Securities - a type of asset-backed security that is secured by a mortgage or collection of mortgages. These securities must also be grouped in one of the top two ratings as determined by an accredited credit rating agency, and usually pay periodic payments that are similar to coupon payments. Furthermore, the mortgage must have originated from a regulated and authorized financial institution. Multi-Peril Insurance - personal and business property coverage combining several types of property insurance in one policy.
Municipal Bond Guarantee Insurance - coverage sold to municipalities to guarantee the principle payment on bonds issued. Municipal obligation bond - any security, or other instrument, including a state lease but not a lease of any other governmental entity, under which a payment obligation is created, issued by or on behalf of a governmental unit to finance a project servicing a substantial public purpose, and 1 Payable from tax revenues, but not tax allocations, within the jurisdiction of such governmental unit; 2 Payable or guaranteed by the United States of America or any agency, department or instrumentality thereof, or by a state housing agency; 3 Payable from rates or charges but not tolls levied or collected in respect of a non-nuclear utility project, public transportation facility other than an airport facility or public higher education facility; or 4 With respect to lease obligations, payable from future appropriations.
Mutual Insurance Company - a privately held insurer owned by its policyholders, operated as a non-profit that may or may not be incorporated. Mutual Insurance Holding Company - a company organized as a mutual and owning a capital stock insurer or insurers for the benefit of pooling risk for many people, typically those in the same industry.
Named Peril Coverage - insurance for losses explicitly defined in the policy contract. Through the NAIC, state insurance regulators establish standards and best practices, conduct peer review, and coordinate their regulatory oversight. NAIC staff supports these efforts and represents the collective views of state regulators domestically and internationally. Negligence - failure to exercise reasonable consideration resulting in loss or damage to oneself or others.
Net Admitted Assets - total of assets whose values are permitted by state law to be included in the annual statement of the insurer. Net Income - total revenues from an insurer's operations less total expenses and income taxes.
Auto insurance vocabulary
Encourages participation by private insurers through a flood insurance pool. Nonadmitted Assets - assets having economic value other than those which can be used to fulfill policyholder obligations, or those assets which are unavailable due to encumbrances or other third party interests and should not be recognized on the balance sheet.
Nonadmitted Insurer - insurance company not licensed to do business within a given state. Non-controlled stock insurers - insurers in which a parent company has: Non-proportional Reinsurance - reinsurance that is not secured on individual lives for specific individual amount of reinsurance, but rather reinsurance that protects the ceding company's overall experience on its entire portfolio of business, or at least a broad segment of it.
The most common forms of non-proportional reinsurance are stop loss and catastrophe. Notional Value - the principal value upon which future payments are based in a derivative transaction as at a specific period in time the "as of" reporting date in the reporting currency.
Examples are: Moody's Investors Service, Inc. Best Company A. Nuclear Energy Liability - coverage for bodily injury and property damage liability resulting from the nuclear energy material whether or not radioactive on the insured business's premises or in transit.
Occurrence - an accidentincluding injurious exposure to conditions, which results, during the policy period in bodily injury or property damage neither expected or intended from the standpoint of the insured. Ocean Marine - coverage for ocean and inland water transportation exposures; goods or cargoes; ships or hulls; earnings; and liability. Officer - a president, vice-president, treasurer, actuary, secretary, controller and any other person who performs for the company functions corresponding to those performed by the foregoing officers.
Option - an agreement giving the buyer the right to buy or receive, sell or deliver, enter into, extend or terminate, or effect a cash settlement based on the actual or expected price, level, performance or value of one or more Underlying Interests. Other Accident and Health - accident and health coverages not otherwise properly classified as Group Accident and Health or Credit Accident and Health e. Include all Medicare Part D Prescription Drug Coverage, whether sold on a stand-alone basis or through a Medicare Advantage product and whether sold directly to an individual or through a group.
Other Considerations - Unallocated annuity considerations and other unallocated deposits that incorporate any mortality or morbidity risk and are not reported as direct premiums, direct annuity considerations or deposit-type contract funds.
Other Liability - coverage protecting the insured against legal liability resulting from negligence, carelessness, or a failure to act resulting in property damage or personal injury to others. Other Underwriting Expenses - allocable expenses other than loss adjustment expenses and investment expenses. Owner Occupied - homeowners insurance sold to owners occupying the described property.
Peril - the cause of property damage or personal injury, origin of desire for insurance. Permanent Life Insurance - policy that remains active for the life of the insured. Personal Auto Policy - coverage designed to insure private passenger automobiles and certain types of trucks owned by an individual or husband and wife. Personal Earthquake - earthquake property coverage for personal, family or household purposes.
Personal Flood - separate flood insurance policy sold for personal, family or household purposes. Personal GAP Insurance - credit insurance that insures the excess of the outstanding indebtedness over the primary property insurance benefits in the event of a total loss to a collateral asset.
Personal Injury Liability - liability coverage for those who have been discriminated against, falsely arrested, illegally detained, libeled, maliciously prosecuted, slandered, suffered from identity theft, mental anguish or alienation of affections, or have had their right of privacy violated. Personal Property - single interest or dual interest credit insurance where collateral is not a motor vehicle, mobile home, or real estate that covers perils to goods purchased or used as collateral and that concerns a creditor's interest in the purchased goods or pledged collateral either in whole or in part; or covers perils to goods purchased in connection with an open-end credit transaction.
Pet Insurance Plans - veterinary care plan insurance policy providing care for a pet animal e.
Policy Dividend - a refund of part of the premium on a participating life insurance policy. Amount of payment is determined by subtracting the actual premium expense from the premium charged. The payment can be taken as cash, applied to a purchase an increment of paid-up insurance, left on deposit with the insurance company or applied to purchase term insurance for one year.
Policy Reserve - the amount of money allocated specifically for the fulfillment of policy obligations by a life insurance company; reserves are in place to safeguard that the company is able to pay all future claims. Policyholders Surplus - assets in excess of the liabilities of a company or net income above any monies indebted to legal obligation. Pool - an association organized for the purpose of absorbing losses through a risk-sharing mechanism thereby limiting individual exposures.
Preferred Provider Organization PPO - arrangement, insured or uninsured, where contracts are established by Health Plan Companies typically, commercial insurers, and, in some circumstances, by self-insured employers with health care providers.
The Health Plans involved will often designate these contracted providers as "preferred" and will provide an incentive, usually in the form of lower deductibles or co-payments, to encourage covered individuals to use these providers.
Members are allowed benefits for non-participating provider services on an indemnity basis with significant copayments and providers are often, but not always, paid on a discounted fee for service basis.
Preferred Risk - insured, or applicant for insurance, who presents likelihood of risk lower than that of the standard applicant. Premises and Operations - policies covering the liability of an insured to persons who have incurred bodily injury or property damage on an insured's premises during normal operations or routine maintenance, or from an insured's business operations either on or off of the insured's premises.
Premium - Money charged for the insurance coverage reflecting expectation of loss. Premiums Earned - the portion of premium for which the policy protection or coverage has already been given during the now-expired portion of the policy term. Premiums Net - is the amount calculated on the basis of the interest and mortality table used to calculate the reporting entity's statutory policy reserves. Premiums Written - total premiums generated from all policies contracts written by an insurer within a given period of time.
Primary Insurance - coverage that takes precedence when more than one policy covers the same loss. Prior Approval Law - a state regulatory requirement for pre-approval of all insurance rates and forms.
Private Passenger Auto PPA - filings that include singularly or in any combination coverage such as the following: Producer - an individual who sells, services, or negotiates insurance policies either on behalf of a company or independently.
Product Liability - insurance coverage protecting the manufacturer, distributor, seller, or lessor of a product against legal liability resulting from a defective condition causing personal injury, or damage, to any individual or entity, associated with the use of the product.
Professional Errors and Omissions Liability - coverage available to pay for liability arising out of the performance of professional or business related duties, with coverage being tailored to the needs of the specific profession. Examples include abstracters, accountants, insurance adjusters, architects, engineers, insurance agents and brokers, lawyers, real estate agents, stockbrokers.
Property - coverage protecting the insured against loss or damage to real or personal property from a variety of perils, including but not limited to fire, lightening, business interruption, loss of rents, glass breakage, tornado, windstorm, hail, water damage, explosion, riot, civil commotion, rain, or damage from aircraft or vehicles.
Pro-rata proportional Reinsurance - portion of the losses and premium reinsurer shares with the ceding entity. Protected Cell - an insurance-linked security retained within the insurance or reinsurance company and is used to insulate the proceeds of the securities offering from the general business risks of the insurer, granting an additional comfort level for investors of the securitized instrument.
Provider Sponsored Network PSN - formal affiliations of providers, sometimes called "integrated delivery systems", organized and operated to provide an integrated network of health care providers with which third parties, such as insurance companies, HMOs, or other Health Plan Companies, may contract for health care services to covered individuals.
Public Adjuster - independent claims adjuster representing policyholders instead of insurance companies.
Pure Premium - that portion of the premium equal to expected losses void of insurance company expenses, premium taxes, contingencies, or profit margin. Pure Risk - circumstance including possibility of loss or no loss but no possibility of gain.
Qualified Actuary - a person who meets the basic education, experience and continuing education requirements these differ by line of business of the Specific Qualification Standard for Statements of Actuarial Opinion, NAIC Property and Casualty Annual Statement, as set forth in the Qualification Standards for Actuaries Issuing Statements of Actuarial Opinion in the United States, promulgated by the American Academy of Actuaries, and is in good standing of the American Academy of Actuaries who has been approved as qualified for signing casualty loss reserve opinions by the Casualty Practice Council of the American Academy of Actuaries.
Calculated by dividing the company's capital by the minimum amount of capital regulatory authorities have deemed necessary to support the insurance operations.
The assumption is in exchange for a premium. Indemnification is on a proportional or non-proportional basis. Renewable Term Insurance - insurance that is renewable for a limited number of successive terms by the policyholder and is not contingent upon medical examination. Renters Insurance - liability coverage for contents within a renter's residence. Coverage does not include the structure but does include any affixed items provided or changed by the renter. Replacement Cost - the cost of replacing property without a reduction for depreciation due to normal wear and tear.
Reported Losses - Includes both expected payments for losses relating to insured events that have occurred and have been reported to the insurance company, but not yet paid. Reserve Credit - reduction of reserve amounts for reinsurance ceded. Residence - the domicile location of a member as shown by his or her determination as a resident. Residual Market Plan - method devised for coverage of greater than average risk individuals who cannot obtain insurance through normal market channels.
Retention - a mechanism of internal fund allocation for loss exposure used in place of or as a supplement to risk transfer to an insurance company.
Retention Limit - maximum amount of medical and hospital expense an insurer will carry on its own. Retrocession - the portion of risk that a reinsurance company cedes or amount of insurance the company chooses not to retain. Retrospective Rating - the process of determining the cost of an insurance policy based on the actual loss experience determined as an adjustment to the initial premium payment.
Risk - Uncertainty concerning the possibility of loss by a peril for which insurance is pursued. Risk Retention Group - group-owned insurer organized for the purpose of assuming and spreading the liability risks to its members.
Statutory Accounting Principles SAP - a set of accounting principles set forth by the National Association of Insurance Commissioners used to prepare statutory financial statements for insurance companies. Securitization of Insurance Risk - a method for insurance companies to access capital and hedge risks by converting policies into securities that can be sold in financial markets. Security - a share, participation, or other interest in property or in an enterprise of the issuer or an obligation of the issuer.
Self-Insurance - type of insurance often used for high frequency low severity risks where risk is not transferred to an insurance company but retained and accounted for internally. Separate Account - segregated funds held and invested independently of other assets by an insurer for the purpose of a group retirement fund.
Short-term Disability - a company standard defining a period of time employees are eligible for short-term disability coverage, typically for 2 years or less.
Short-Term Medical - policies that provide major medical coverage for a short period of time, typically 30 to days. These policies may be renewable for multiple periods. Situs of Contract - the jurisdiction in which the contract is issued or delivered as stated in the contract.
Social Insurance - compulsory insurance plan administered by a federal or state government agency with the primary emphasis on social adequacy.
Do you know what an SR Form is? What about PIP or No-Fault? Find out the definition of important insurance terms. Absolute liability*. The liability of a wrongdoer's automobile insurance company to pay someone harmed by the wrongdoer, even if the wrongdoer has violated. Our Car Insurance glossary is an online guide to help you understand everything you need to know about getting a great policy plan that suits you. Call us on
Soft Market - a buyer's market characterized by abundant supply of insurance driving premiums down. Special revenue bond - any security, or other instrument under which a payment obligation is created, issued by or on behalf of a governmental unit to finance a project serving a substantial public purpose and not payable from the sources in connection with the payment of municipal obligation bonds.
Benefits can be paid as expense incurred, per diem or as a principal sum. Standard Risk - a person who, according to a company's underwriting standards, is considered a normal risk and insurable at standard rates. High or low risk candidates may qualify for extra or discounted rates based on their deviation from the standard.
State Page - Exhibit of Premiums and Losses for each state a company is licensed. The state of domicile receives a schedule for each jurisdiction the company wrote direct business, or has amounts paid, incurred or unpaid. Statement Type - refers to the primary business type under which the company files its annual and quarterly statement, such as Life, Property, Health, Fraternal, Title. Statement Value - the Statutory Accounting Principle book value reduced by any valuation allowance and non-admitted adjustment applied to an individual investment or a similar group of investments, e.
Statutory Accounting - method of accounting standards and principles used by state regulatory authorities to measure the financial condition of regulated companies and other insurance enterprises.
Glossary of auto insurance terms
This method tends to be more conservative than the Generally Accepted Accounting Principles used by most businesses. Compliance with solvency and other standards is determined using financial documents prepared in accordance with Statutory Accounting Principles. Structured Settlements - periodic fixed payments to a claimant for a determinable period, or for life, for the settlement of a claim.
Subrogation - situation where an insurer, on behalf of the insured, has a legal right to bring a liability suit against a third party who caused losses to the insured.
Insurer maintains the right to seek reimbursement for losses incurred by insurer at the fault of a third party. Subrogation Clause - section of insurance policies giving an insurer the right to take legal action against a third party responsible for a loss to an insured for which a claim has been paid.
Subsequent Event - events or transactions that occur subsequent to the balance sheet date, but before the issuance of the statutory financial statements and before the date the audited financial statements are issued, or available to be issued. Substandard Risk - impaired risk risks deemed undesirable due to medical condition or hazardous occupation requiring the use of a waiver, a special policy form, or a higher premium charge.
Superfund - federal act mandating retroactive liability for environmental pollution where responsible party maintains accountability for environmental clean-up regardless of length of time since polluting event occurred. Surety Bond - a three-party agreement whereby a guarantor insurer assumes an obligation or responsibility to pay a second party obligee should the principal debtor obligor become in default. Surplus Line - specialized property or liability coverage available via nonadmitted insurers where coverage is not available through an admitted insurer, licensed to sell that particular coverage in the state.
Swap - an agreement to exchange or net payments as the buyer of an Option, Cap or Floor and to make payments as the seller of a different Option, Cap or Floor. Tenants - homeowners insurance sold to tenants occupying the described property. Term Insurance - life insurance payable only if death of insured occurs within a specified time, such as 5 or 10 years, or before a specified age.
Third Party - person other than the insured or insurer who has incurred losses or is entitled to receive payment due to acts or omissions of the insured. Title Insurance - coverage that guarantees the validity of a title to real and personal property. Buyers of real and personal property and mortgage lenders rely upon the coverage to protect them against losses from undiscovered defects in existence when the policy is issued.
Total Liabilities - total money owed or expected to be owed by the insurance company.
Total Revenue - premiums, revenue, investment income, and income from other sources. Umbrella and Excess Commercial - coverage for the liability of a commercial venture above a specific amount set forth in a basic policy issued by the primary insurer; or a self-insurer for losses over a stated amount; or an insured or self-insurer for known or unknown gaps in basic coverages or self-insured retentions.
Umbrella and Excess Personal - non-business liability protection for individuals above a specific amount set forth in a basic policy issued by the primary insurer; or a self-insurer for losses over a stated amount; or an insured or self-insurer for known or unknown gaps in basic coverages or self-insured retentions. Unauthorized Reinsurance - reinsurance placed with a company not authorized in the reporting company's state of domicile.
Underinsured Motorist Coverage - policy option for bodily injury or property losses caused by a motorist with coverage insufficient to cover total dollar amount of losses. Compensation for the injured party is equal to the difference between the losses incurred and the liability covered by the motorist at fault. Underlying Interest - the asset sliability ies or other interest s underlying a derivative instrument, including, but not limited to, any one or more securities, currencies, rates indices, commodities, derivative instruments, or other financial market instruments.
Underwriter - person who identifies, examines and classifies the degree of risk represented by a proposed insured in order to determine whether or not coverage should be provided and, if so, at what rate. Underwriting - the process by which an insurance company examines risk and determines whether the insurer will accept the risk or not, classifies those accepted and determines the appropriate rate for coverage provided. Underwriting Risk - section of the risk-based capital formula calculating requirements for reserves and premiums.
Unearned Premium - amount of premium for which payment has been made by the policyholder but coverage has not yet been provided. Unearned Premium Reserve - all premiums fees received for coverage extending beyond the statement date; appears as a liability on the balance sheet.
Universal Life Insurance - adjustable life insurance under which premiums and coverage are adjustable, company expenses are not specifically disclosed to the insured but a financial report is provided to policyholder's annually. Unpaid Losses - claims that are in the course of settlement. The term may also include claims that have been incurred but not reported.
Valued Policy - an insurance contract for which the value is agreed upon in advance and is not related to the amount of the insured loss. Valued Policy Law - state legislation which specifies that the insured shall receive the face amount of the policy in the event of a total loss to a dwelling rather than the actual cash value regardless of the principle of indemnity. Variable Annuity - an annuity contract under which the premium payments are used to purchase stock and the value of each unit is relative to the value of the investment portfolio.
Variable Universal Life - combines the flexible premium features of universal life with the component of variable life in which excess credited to the cash value of the account depends on investment results of separate accounts.
The policyholder selects the accounts into which the premium payments are to be made. Viatical Settlements - contracts or agreements in which a buyer agrees to purchase all or a part of a life insurance policy. Vision - limited benefit expense policies.
Provides benefits for eye care and eye care accessories. Generally provides a stated dollar amount per annual eye examination. Benefits often include a stated dollar amount for glasses and contacts.
May include surgical benefits for injury or sickness associated with the eye. Warrant - an agreement that gives the holder the right to purchase an underlying financial instrument at a given price and time or at a series of prices and times according to a schedule or warrant agreement. Warranty - coverage that protects against manufacturer's defects past the normal warranty period and for repair after breakdown to return a product to its originally intended use.
Warranty insurance generally protects consumers from financial loss caused by the seller's failure to rectify or compensate for defective or incomplete work and cost of parts and labor necessary to restore a product's usefulness. Includes but is not limited to coverage for all obligations and liabilities incurred by a service contract provider, mechanical breakdown insurance and service contracts written by insurers.
Whole Life - life insurance that may be kept in force for a person's entire life and that pays a benefit upon the person's death, whenever that may be.
Whole Life Insurance - life insurance that may be kept in force for the duration of a person's life and pays a benefit upon the person's death. Premiums are made for same time period. Workers' Compensation - insurance that covers an employer's liability for injuries, disability or death to persons in their employment, without regard to fault, as prescribed by state or federal workers' compensation laws and other statutes.
Written Premium - the contractually determined amount charged by the reporting entity to the policyholder for the effective period of the contract based on the expectation of risk, policy benefits, and expenses associated with the coverage provided by the terms of the insurance contract. Glossary of Insurance Terms This page provides a glossary of insurance terms and definitions that are commonly used in the insurance business.
Click on the letter to view terms beginning with that alphabet. Accident Insurance - insurance for unforeseen bodily injury. Accidental Bodily Injury - unexpected injury to a person. Actual Cash Value - repayment value for indemnification due to loss or damage of property; in most cases it is replacement cost minus depreciation Actuarial Report - PC Insurance a document or other presentation, prepared as a formal means of conveying to the state regulatory authority and the Board of Directors, or its equivalent, the actuary's professional conclusions and recommendations, of recording and communicating the methods and procedures, of assuring that the parties addressed are aware of the significance of the actuary's opinion or findings and that documents the analysis underlying the opinion.
Admission - hospital inpatient care for any medical condition. Appraisal - an estimate of value. Assessed Value - estimated value for real or personal property established by a taxing entity Asset - probable future economic benefits obtained or controlled by a particular entity as a result of past transactions or events. Bodily Injury - physical injury including sickness or disease to a person.
Capital and Surplus - a company's assets minus its liabilities. Cash - a medium of exchange. Catastrophe Loss - a large magnitude loss with little ability to forecast.
Ceded Premium - amount of premium fees used to purchase reinsurance. Dollar Threshold In certain states with no-fault auto insurance, the dollar threshold prevents individuals from suing to recover for pain and suffering unless their medical expenses exceed a specified dollar amount, called the threshold.
The definitions in this glossary are developed by the NAIC Research and Actuarial . Auto Physical Damage - motor vehicle insurance coverage ( including. Automobile Insurance Vocabulary - Don't shop for auto insurance on your own. Receive guidance from reputable car insurance providers in order to be. C. Insurance designed to pay for the repair or replacement of the policy policyowner's car in the event of damage not resulting from an accident. D. Protection.
Driver Education Credit Discount on auto insurance premiums for which young drivers become eligible upon completion of a driver education course. Available in certain states.
Back to Top E Endorsement A written agreement attached to an insurance policy to add or subtract coverage.CAR INSURANCE IN CANADA (For Immigrants)
Once attached, the endorsement takes precedence over the original terms of the policy. Exclusions Items that are specifically denied coverage under the terms of an insurance policy. Extended Coverage An endorsement added to an insurance policy, or a clause included in the policy, to provide additional coverage for risks other than those covered under the basic policy provisions. Back to Top F Fair Market Value The price at which property would change hands between a willing buyer and a willing seller, where both parties have reasonable knowledge of the relevant facts and neither party is under any compulsion to buy or sell.
In most states, proof of insurance takes the form of a minimum amount of automobile liability insurance, but some states permit self-insurance or a financial responsibility bond. Free Look Period An insurer may cancel an auto insurance policy for any reason during the Free Look Period, which is usually the first 30 days of the policy.
The exact number of days varies by state. Back to Top G Grace Period Some auto insurance policies have a grace period that allows customers to make a payment after the due date. But, many companies will not accept a payment after the date shown on a cancellation notice. According to this principle, the objective of insurance is to restore the insured to the same financial position after a loss that he or she was in prior to the loss. Back to Top L Lapse The expiration of a right or privilege when one party does not live up to its obligations during the time allowed.
A lapse in auto insurance coverage may result in paying higher premiums for a new policy, because insurers have determined that drivers who maintain continuous coverage are less likely to make an insurance claim that those who let a policy lapse. Liability insurance Coverage for sums that an insured becomes legally obligated to pay because of bodily injuries or property damage, or financial losses caused to other people.
Back to Top M Medical Payments Coverage Part of a standard auto insurance policy that provides coverage of medical expenses and funeral bills incurred by you and your passengers in the event of an accident, regardless of who is at fault.
Personal Injury Protection is the basic coverage that pays for your own medical, hospital and funeral expenses, as well as those of your passengers and any pedestrians.
Start studying Automobile Insurance Vocabulary. Learn vocabulary, terms, and more with flashcards, games, and other study tools. Glossary of Common Auto Insurance Terms. NOTICE: This document is for informational purposes only and is not intended to alter or replace. 10 common car insurance terms every consumer should know because they appear on your premiums and explain your insurance rates.
Lost wages and other accident-related expenses may also be covered. Back to Top P Payee An insured individual or a beneficiary who receives a loss payment from an insurer. In the event of a total loss, the insurance company makes payment to the Loss Payee first. Personal Injury Protection Personal injury protection PIP is a coverage in which your own insurance company pays you for medical, hospital and funeral expenses resulting from a car accident, regardless of who's at fault.
Policy Period Time period during which an insurance policy is in force.
Premium The payment required for an insurance policy to remain in force. Auto insurance premiums are quoted for either 6 month or annual policy periods. Property Damage Liability Coverage Part of a standard auto insurance policy that covers you, up to the policy limit, for losses that result when you damage or destroy someone else's personal property. This is required coverage in most states. Back to Top R Replacement Cost The cost of replacing or repairing lost or damaged property without allowing for depreciation in value or considering the market value.
Some auto insurance companies offer Guaranteed Replacement Cost coverage on new cars, if the loss occurs within the first 12 months of ownership or 12, miles driven. Residual Value The expected value of an asset at the end of a specified period, such as the value of a car at the end of the lease.
Back to Top S Split Limit Split limit policies have three separate amounts for liability payment limits: