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car insurance glossary Accident An accident is a specific, unpredictable, unusual and unintended external action which occurs with no apparent and deliberate cause and generally implies a negative outcome. In regard to an insurance claim, this could involve bodily injury, death and/or property damage which includes the vehicles involved and anything else that is damaged due to a collision. Automobile Insurance
The primary use of automobile insurance (also known as car or vehicle insurance) is to give financial protection against physical damage to a vehicle or property, damaged due to a collision, and also pays medical expenses for any bodily injury resulting from a collision. Binder
An insurance binder is temporary proof of insurance that proves coverage until a formal policy is received. This will often be in the form of a temporary insurance card that will contain the name of the insured and will also often contain coverage limits and the name of the company issuing the insurance.
Claim
A car insurance claim is the application for benefits provided by an insurance policy. A claim must be filed before any money can be disbursed to a hospital or vehicle repair shop or any other necessary service after an accident. The claim will then be examined by an assessor. Combined Single Limit
A combined single limit (CSL) coverage plan provides one set amount of coverage for bodily injury and property damage per claim. Covered Person
Any individual covered by an insurance policy, as defined by the insurance policy, this is usually the person named as the policyholder and passengers in the vehicle. Deductible
When a claim is made, the deductible is the amount of money which the insured party has to pay before the insurance company's own coverage plan begins. This deductible discourages claims for relatively small amounts. Deductibles in the United States are typically $250, $500 or $1000. In the event of a second accident, the full amount of the claim would be paid, as the deductible amount has been met. The larger the deductible opted for, the lower the cost of the insurance premium. Earned Premium Car insurance may be canceled by either party before the end of the policy period. The earned premium is therefore the part of the premium that has been “used” by the insurance company as payment for coverage; you will receive the “unearned” portion of the premium, as a pro-rated amount on cancellation. Effective Date The effective date of a car insurance policy is the date coverage starts, normally midnight on a specific day, although in terms of rental car insurance the policy becomes effective as soon as the rental agreement is signed. Exclusion Car insurance policies may not cover every situation or type of damage to a vehicle and anyone purchasing car insurance should look carefully at their policy to avoid any huge financial surprises. For example, if you own a car and make deliveries in it, an accident that occurrs while you were doing so may negate your policy, as you are using the vehicle for business purposes and a different type of policy should have been purchased or that disclosure made. A basic car insurance policy will only cover the policyholder’s modes of transport that have an engine, such as a car, truck, SUV, and motor home. Boats, travel trailers, golf carts,or ATVs will normally require a separate policy. Large amounts of valuables may be excluded, such as computers or photographic equipment; these should be covered under a household policy. Flat Rate Cancellation Flat Rate Cancellation is the termination of an insurance contract at inception which means the policy was never in effect, perhaps for non-payment. Garage Location This is the address or location of the garage used to store the vehicle when not in use. Inception Date In terms of car insurance, this is the date that the insurance company is deemed to be at risk, i.e. the first day of the policy. Lapse in Coverage A lapse in car insurance coverage means a period when you are not insured. This is often because someone is paying monthly by check to an agent perhaps, and has forgotten to make the payment. If you have an accident during this lapse, there will be serious consequences both legally and financially. When you shop around for a new insurance company, they will ask if there have been any lapses in coverage. If there has, you will be penalized as this makes you appear to be a higher risk for the insurance company. Limits of Liability For any car accident that is your fault, you may have chosen $25,000/$50,000 liability limits. This means that each person hurt in the wreck will get up to $25,000 in damages, no more. Two people will receive up to $25,000 each but no more. Any other person in the vehicle would also receive up to $25,000. If someone’s medical bills amount to more than $25,000 - which is easily possible these days, then you are personally liable for the balance. Motor Vehicle record (MVR) Motor vehicle reports typically include all of your personal information, including physical characteristics such as height, weight, eye and hair color etc. An MVR will also include the class of license you hold, any special endorsements such as HAZMAT for a CDL driver and also certain restrictions if you are disabled, wear glasses or a hearing aid. An MVR also includes all traffic ticket information, points, and convictions for violations including dates etc. and also when your driver’s license expires. Multi-Car Discount If a number of people live at an address a multi-car discount can save money as the insurance company considers that people living under the same roof will share a vehicle. It can add up to a substantial saving and those people do not have to be related or married. No-Fault Insurance Only 12 states have opted for “no fault” insurance but each of these state’s laws differ. Basically no fault insurance describes any auto insurance system that requires drivers to carry insurance for their own protection, as well as placing limitations on their ability to sue other drivers for damages. Per Person Limit In the case of $25000/$50000 liability, $25000 is the maximum per person limit that the insurance company will pay for medical expenses. Physical Damage Physical damage insurance can be purchased in addition to a liability-only insurance policy. A personal car insurance policy that includes both physical damage coverage and liability coverage is called full coverage. Physical damage coverage covers damages on the policy holder’s car caused by an accident which could be caused by the car colliding with another car, hitting an object or other reasons which do not fall under collision. Policy A car insurance policy is the legal agreement between a car insurance company and the person paying for the insurance coverage. Policyholder The policyholder is the person who holds an insurance policy - the client in whose name an insurance policy is written. Premium Renewal At the expiration, or the end of the term of a car insurance policy to avoid a lapse in coverage there will be a premium/policy renewal. SR-22 An SR-22 is a notification that your insurance company provides to the state in which you are licensed to drive, proving that you are maintaining continuous liability insurance. Some states require it for high-risk drivers - those who have a history of drunk driving or have been in accidents and not had liability insurance. The requirements for carrying an SR-22 vary greatly from state to state. Unearned Premium Car insurance may be canceled by either party before the end of the policy period. Unearned premium is simply the portion of the policy premium that has not been “earned” by the insurance company, i.e. the balance owed to the policy holder, which will be returned as a pro rated amount. Usage A normal family or personal vehicle’s usage is for pleasure and driving to and from work. A commercial vehicle’s usage is for the purpose of business. Vehicle Identification Number A vehicle identification number (or VIN number) is a string of numbers and letters attached to a vehicle which is recorded on the vehicle’s registration document. The number includes the date of manufacture, the maker and other encoded information. This number is etched into various parts of the vehicle for the purposes of identification and proof of ownership. Waiver of Collision Deductible In certain states you are required to buy a collision deductible waiver in conjunction with your collision coverage. The collision deductible waiver pays your collision deductible if your insured vehicle is involved in an accident for which an uninsured motorist is held legally responsible. |
