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Definitions for Car Insurance

Basics

Accident– An event where a vehicle is struck by another object or strikes an object. This event can cause physical damage to the vehicle or object and to the occupants in the vehicle.

Car Insurance– A contract that is made between an insurance company and the purchaser of the contract (insurance policy). In this contract the insurance company agrees to pay certain monetary amounts in the case of an accident in exchange for money (premiums) being paid for this protection.

Cancelling– The process of stopping your insurance policy by contacting your agent or insurance company and requesting that they no longer offer you insurance protection as of a certain date. This action can be taken because you no longer have anything to protect or you are moving your insurance protection to a different company.
Claims Process – The steps that are taken from the time that an accident happens and a claim for compensation is filed with an insurance company to the final payment being made and the claim being settled (or closed). This process includes getting estimates for damages to vehicles, medical bills being collected and paid, rental cars being provided and settlements for possible pain and suffering claims.

Deductible– The amount that the person who purchases the insurance policy agrees to pay on the damages to their vehicle in the case that the insurance company has to pay damages to their car from an accident.  For example, if someone chooses a $500 deductible, they will be responsible for paying the first $500 of damages to their vehicle before the insurance company will start to pay.

Declarations Page– Usually the first page of the insurance contract and generally the only page that is sent at renewal time for a policy. This page includes the coverages (and their limits) that are on your insurance policy and the amount of premium that you are paying for each coverage. This page will also include the vehicles and drivers that are listed on the policy.

Indemnification – The concept that insurance should replace or otherwise pay for exactly what you lost. There should neither be profit nor loss in an insurance claim.

Insurability – If an insurance company deems a certain risk to be acceptable to its business, it is considered insurable.

Insurance Company – A company that offers insurance policies to either individuals or through a group (ex. an employer). A company is usually comprised of multiple agents and often sells more than one type of insurance (auto, life, business, fire).

Policy– The physical form of the contract that is made for insurance coverage. It includes your declarations page and all of the legal language of what is covered and what is not covered under your insurance coverage.

Premium– The amount of money you pay to the insurance company in exchange for insurance coverage.

Renewals– The start of a new policy coverage term (usually 6 months for auto insurance) after the previous term has ended.

Surcharges – An additional charge assessed on your auto policy after the assigned driver has an accident. Also called ‘accident surcharges’, they often last 3 years.

Subrogation– The act of an insurance company demanding reimbursement of the amount they had to pay out for their insured’s claim for damages from the person or entity that was responsible for the damages.

Coverages

Bodily Injury– Liability coverage on an insurance policy that covers damages caused to the “body” of another person. Bodily Injury coverage is only for people not in the policy owner’s vehicle at the time of the accident and is one of two required coverages that you have to have to be able to drive.

Comprehensive Coverage– Coverage for damages to a vehicle that are not caused from a collision. These include: hitting an animal, windshield and other glass claims.

Emergency Road Service– Defined different by each insurance company, but generally assistance provided by the insurance company if your vehicle breaks down on the side of the road. Assistance can be in the form of towing coverage, coverage for a shop to come out and replace a bad tire or also for someone to bring you gasoline.

Full Coverage– When a vehicle has both the required liability insurance and also coverage for damages to the vehicle itself (comprehensive and collision coverages) in place.

Liability Coverage– Coverage that pays for medical bills and damages to another person’s property that are caused by you. It is a requirement to have at least the minimum limit of liability coverage on your vehicle to drive legally.

Medical Payments– Coverage on your insurance policy that pays for the medical bills that may incur for your family or passengers in your vehicle in the event of an accident.  This coverage is available no matter who is at fault for the accident and can also extend to accidents that your family members are in even if they are not in one of your own vehicles.  This coverage is also available if a member of your family is hit as a pedestrian by a vehicle.

Personal Injury Protection (PIP)– Provides the same protection as the Medical Payment Coverages, but also covers loss of income and other financial hardships that you may face. This coverage is not available in every state.

Property Damage– One of two required liability coverages needed to be able to drive legally. This coverage pays for the damages to another person’s vehicle or property that is caused by you.

Rental Reimbursement– Coverage that pays for the use of a rental car, regardless of who is at fault for an accident. This coverage can have both a daily limit of how much your insurance company will pay per day and also a maximum amount that the insurance company will pay out for you to rent a vehicle.

Uninsured/Underinsured– Optional coverage offered on your insurance policy that covers your damages or injuries caused by another party that has no insurance or does not have enough insurance coverage for the accident costs.

Jobs

Actuary– A person that analyzes statistics and loss data to determine the appropriate insurance premium that should be paid to the insurance company.

Adjuster– The person that assesses the amount of damage caused by an accident and determines the payment to be made. Adjusters work on both the physical damages caused to property and also on claims of injuries received as a result of an accident.

Agent– An insurance professional that sells insurance either as an independent agent that sells insurance for a number of different insurance companies or as an exclusive agent that only sells one company’s insurance products. Agents are paid a percentage (commission) of the amount of premiums that they sell.

Fraud Investigators – Work for insurance companies or the state department of insurance investigating questionable insurance activity. This activity can be anything ranging from the most common fraud of fake insurance claims to premium being stolen.

Commissioner or Director– The head of a state’s Department of Insurance.

Customer Service Representative (CSR)– An employee of an insurance agency or company that assists you directly with most of your insurance needs. In most cases they are the first one that you will speak to when you call your agent or insurance company and they will then get you to another person higher in the organization if they cannot assist you.

Underwriter– An employee of the insurance company that decides if a person or company is an acceptable risk for the insurance company to provide insurance to. They take into consideration how likely the person or company is to file a claim that the insurance company will have to pay out, the higher this chance the less money the insurance company will be able to make on the policy and the less likely the underwriter will agree to provide insurance coverage.

Special Situations

Assigned Risk– This insurance pool is for people that insurance companies will not voluntarily insure, usually due to very bad driving records, and are forced to insure them by the government. Each insurance company is required to carry a certain percentage of “assigned risk” drivers depending on their size and because they are forced to insure these bad drivers, they place a very high premium on these types of policies.

DUI/DWI Insurance– There is no specific insurance policy that falls under this name, it is more of an alteration to a normal insurance policy. If you have had a DUI/DWI your new insurance policy will be required to have an SR-22 filing on it and will also list this major infraction, leading to much higher insurance rates.

High Risk– An insurance category for people that have bad driving records or no driving records. As they have a higher risk of having a claim, an insurance company labels them as “high risk” and charges them a higher premium for insurance coverage.

Learner Driver– A new driver that is learning to drive and has a driving permit, but not a driver’s license yet.

No-Fault– Insurance coverage on your own policy that will pay regardless for who is at fault for an accident.  In states that have “no-fault” laws, your insurance company pays for all costs incurred by you for the accident no matter who was at fault.

Non-Owned– Liability insurance coverage offered to a driver that drives other vehicles regularly, but has no vehicle of their own.

Provisional– Insurance coverage that is available for drivers who hold a provisional driver’s license. This is license that is similar to a regular driver’s license, but with restrictions in place on the holder’s driving activity.

Temporary– Insurance coverage that is only needed on a driver for a short period of time. Most commonly needed when renting a car.

SR-22– An insurance liability certificate that your insurance company files with the state that you live in to verify that you do have insurance. You are required to have this provision on your insurance policy if you are caught driving without insurance or have had a major infraction like a DUI/DWI. An SR-22 will place you in the high risk pool of insurance and will also increase your premiums.

Types

Bike Insurance– Insurance coverage for motorcycles, scooters and other similar vehicles.

Business Car Insurance– Insurance coverage for vehicles that are used for business purposes. These policies usually have the same coverages as a personal auto insurance policy (unless you are transporting people), the only difference is how the use of the vehicle is classified.

Collector Car Insurance– Specialty car insurance provided for antiques, street rods, imports and any other older vehicles that are not typically seen on the road today that have been restored back to original or pristine condition. These vehicles are not used regularly and the policy value is based on a stated or agreed upon value.

Fleet Insurance– Same coverages and provisions as business car insurance, the only difference is that it is designed for multiple business vehicles.

Gap Insurance– A coverage on an insurance policy that pays for the difference between what you owe on a vehicle (balance of your car loan) and the amount that the insurance company agrees to pay you for the value of your vehicle in the case that it is a total loss.

Inland Marine Insurance– Separate insurance coverage for items that are in, but not attached to your vehicle or were not originally attached to your vehicle when it was manufactured. This coverage is needed as a regular auto insurance policy does not cover these items in the event of a loss.

Kit Car Insurance– A specialty insurance policy that covers a vehicle that is being built from scratch by an individual, not a company.

Motorcycle Insurance– An insurance policy specially designed to cover motorcycles or other similar vehicles.  It covers all of the liability issues and special parts and equipment that are specific to motorcycle use.

Motorhome Insurance– An insurance policy that covers both the motor vehicle issues that may arise from driving a motorhome, just as with a regular auto insurance policy and also provides coverage for the items that are kept inside of a motorhome that are not covered on a regular auto insurance policy.

Performance Car Insurance– Insurance policies for cars that have high performance engines. These policies are more expensive due to the high value of performance cars and also the statistical increase in the likelihood of an accident in this type of vehicle.

RV Insurance– Insurance policies for recreational vehicles that are not limited to motorhomes. These policies cover the damage to the recreational vehicle as well as the property inside and liability coverage for the area that the RV may be parked at.

Sports Car Insurance– Depending on the sports car you own you can insure your sports car under a regular insurance policy, a high performance vehicle policy or a classic car/exotic car policy. Coverage for sports car insurance is recommended to be at higher than liability minimums and also at a stated value to make sure that you have adequate coverage on this more expensive vehicle in the case of an accident.

Scooter Insurance– Insurance coverage for a scooter that is usually listed under a motorcycle policy. Has all of the same coverages and limits that are available on a motorcycle or personal auto policy.

Trailer Insurance– Insurance coverage for physical damages only that may happen to a trailer.  Liability coverage is not offered for trailers as the liability coverage that is on the vehicle that is pulling the trailer extends back to the trailer itself.

Vehicle Insurance– Protection that a person pays an insurance company for in exchange for the insurance company to pay for damages caused to or caused by their vehicle.

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