Car insurance is a contract between an individual and an insurance company that provides financial protection against theft, accidents, and other damages to the insured vehicle. The insurance company agrees to pay for any losses or damages (up to the policy limits) incurred by the policyholder’s car in exchange for monthly or yearly premiums.
A
Actual Cash Value (ACV)
Actual Cash Value refers to the current market value of a vehicle, including any depreciation.
Actuary
An actuary is a professional who uses mathematical and statistical techniques to analyze data, assess probabilities, and make informed predictions about future events related to finance and insurance.
Adjuster
An adjuster is an insurance professional responsible for investigating and evaluating claims to determine the amount of compensation that should be paid to the policyholders.
Assigned risk plan
An assigned risk plan is a mechanism insurance companies use to provide coverage to high-risk individuals who would otherwise be denied insurance.
Aftermarket parts
Aftermarket parts are components or accessories that are not manufactured by the original vehicle manufacturer.
Anti-theft device
An anti-theft device is a security feature installed in a vehicle to reduce the risk of theft or unauthorized access.
B
Bodily injury liability coverage
Bodily injury liability coverage is a type of insurance that provides financial protection in case the policyholder causes injuries to other individuals in an accident.
C
Claimant
A claimant is an individual who files a claim with an insurance company seeking compensation for damage or loss.
Collision coverage
Collision coverage covers the cost of repairing or replacing the policyholder’s vehicle if it is damaged in a collision, regardless of fault.
Comprehensive coverage
Comprehensive coverage is insurance that provides protection for damages to the policyholder’s vehicle caused by non-collision events such as theft, vandalism, or natural disasters.
Continuously insured
Continuously insured refers to the state of having car insurance coverage without any breaks or lapses.
Classic car insurance
Classic car insurance is a specialized type of coverage designed for vintage or collectible vehicles.
Cancellation
Cancellation is the termination of an insurance policy before its expiration date, either initiated by the insured or the insurance company.
Casualty
It refers to any loss or liability arising from an accident or injury.
Combined single limit
Combined Single Limit is a type of liability coverage with a single amount for liability payment limits for property damage and bodily injury.
Comprehensive Loss Underwriting Exchange (CLUE)
The Comprehensive Loss Underwriting Exchange (CLUE) is a database that collects and provides information about insurance claims made by individuals.
Consumer price index (CPI)
The Consumer Price Index (CPI) is a measure of the average change in prices of goods and services purchased over time.
Coverage forms
Coverage forms are documents that outline the specific terms, conditions, and limits of an insurance policy.
D
Depreciation
Depreciation refers to the decrease in the value of a vehicle over time due to factors such as age, wear and tear, and market conditions.
Declination
Declination is the refusal of an insurance company to provide coverage to an individual after careful evaluation of the application and any other relevant factors.
Driver improvement course
A driver improvement course is a training program designed to improve driving skills and knowledge, often taken voluntarily to qualify for insurance discounts.
Dollar threshold
In states with no-fault car insurance, individuals cannot file a claim for pain and suffering unless their medical costs exceed a specific dollar amount, known as the threshold.
Deposit premium
Deposit premium is an initial payment made by the policyholder to secure car insurance coverage.
E
Extended coverage
Extended coverage refers to additional protection or benefits added to an insurance policy beyond the standard coverage.
Exclusion
Certain individuals or circumstances mentioned in a policy as not covered by an insurance policy.
Endorsement
A document added to a car insurance policy that changes the original coverage offered in the policy.
F
Full coverage
Full coverage is a term commonly used to describe a combination of liability, collision, and comprehensive coverage in an insurance policy.
Fair market value
Fair market value is the price at which a vehicle would be exchanged between a willing buyer and seller, both having reasonable knowledge of the relevant facts, without any external pressure.
Free look period
The free look period is a specific period after purchasing an insurance policy during which an insurer can cancel the policy for any reason, which is usually 30 days. The exact time varies by state.
G
Garaging location
Garaging location refers to the primary location where a vehicle is stored or kept when you are not using it.
Group policy
A group policy is an insurance policy that provides coverage to a group of individuals, such as employees of a company or members of an organization.
Grace period
The grace period is the additional period provided after the due date of premium payment, during which the policy remains in force.
I
Independent agent
An independent agent is a licensed insurance professional who represents multiple insurance companies and can provide policies from different carriers.
Individual policy
An individual policy is an insurance policy that covers a single individual and their vehicle(s).
Insurance
Insurance is a contractual agreement in which an individual or entity pays premiums to an insurance company in exchange for financial protection against potential risks or losses.
Indemnification
Indemnification is the process of compensating an individual for losses or damages covered by an insurance policy to restore the individual to the approximate financial position before the loss.
L
Lapse
Lapse refers to the termination of an insurance policy due to non-payment of premiums, resulting in a loss of coverage.
Loan/Lease
Loan/lease payoff coverage, also known as gap insurance, is an optional coverage that pays the difference between the actual cash value of a vehicle and the amount still owed on a loan or lease in the event of a total loss.
M
Medical payments coverage
Medical Payments Coverage, also known as MedPay, covers medical expenses for injuries sustained by you or your passengers in a covered accident.
Motor Vehicle Report (MVR)
A Motor Vehicle Report (MVR) is a record that provides information about an individual’s driving history, including traffic violations, accidents, and license status.
N
Named insured
The named insured is the individual or entity listed on the insurance policy as the primary policyholder and the one covered by the insurance.
No-fault insurance
No-fault insurance is a system where an insurance company pays for the insured’s injuries or damages regardless of who is at fault in an accident.
P
Peril
Peril refers to a specific event or circumstance that can cause damage or loss and is covered by an insurance policy.
Personal injury protection
Personal Injury Protection (PIP) is a type of coverage that pays for medical expenses, hospital bills, and other related costs resulting from injuries sustained in a car accident, regardless of fault.
Policy period
The policy period is the specific duration for which an insurance policy provides coverage.
Property damage liability coverage
Property damage liability coverage is a type of insurance that provides protection up to the policy limits if you cause damage to another person’s property in an accident.
Principal driver
The principal driver is the individual who primarily operates the insured vehicle and is listed as the main driver on the insurance policy.
Primary use
Primary use refers to the main purpose or activity for which a vehicle is primarily used, such as commuting, business or pleasure.
R
Rental reimbursement coverage
Rental reimbursement coverage is an optional coverage that provides reimbursement for the cost of renting a vehicle while the insured vehicle is being repaired due to a covered loss.
Roadside assistance coverage
Roadside assistance coverage is an optional coverage that provides assistance for common vehicle-related emergencies, such as towing, flat tire changes, or battery jump-starts.
S
SR-22
SR-22 is a form that some states require to demonstrate proof of liability insurance for individuals convicted of certain driving offenses.
Salvage title
A salvage title is given to a vehicle that has been declared a total loss by an insurance company due to significant damage, after which it may be repaired and put back on the road.
Second named insured
The second named insured is an additional individual listed on an insurance policy, often a spouse or co-owner, who is also covered by the insurance.
Split limit
A split limit is a type of liability coverage that sets separate limits for bodily injury and property damage in an insurance policy.
Surcharge
A surcharge is an additional charge or fee added to an insurance premium, often applied for at-fault accidents or traffic violations.
Subrogation
Subrogation is a process in which an insurance company has the legal authority to recover the amount of loss from a liable third party.
U
Underinsured motorist coverage (UIM)
Underinsured motorist coverage (UIM) is a type of insurance that provides protection if the policyholder is involved in an accident with a driver who has insufficient insurance coverage to fully compensate for damages.
Underwriting
Underwriting is the process by which an insurance company evaluates the risk factors associated with an applicant and determines whether to provide coverage and at what premium rate.
Uninsured motorist coverage (UM)
Uninsured motorist coverage (UM) is a type of insurance that provides protection if the policyholder is involved in an accident with a driver who does not have insurance coverage.
V
Vehicle identification number (VIN)
The Vehicle Identification Number (VIN) is a unique alphanumeric code assigned to each vehicle, used for identification and tracking purposes by insurance companies, law enforcement, and other entities.
