A useful list of Car Insurance Terms and Definitions (A-K)
The following list of car insurance terms & definitions has been provided to
help consumers purchasing auto insurance select coverage and understand the terms
and conditions of the policy.
A | B | C | D
| E | F | G | H
| I | J | K
Abandonment – As used in property insurance, prohibits
the insured from abandoning damaged property to the insurance company for repair
or disposal.
Accounts Receivable Coverage – Covers
loss of sums owed to the insured by its customers that are uncollectible due to
damage by an insured peril to accounts receivable records.
Actual Cash Value (ACV) – Cost to repair or
replace damaged property with materials of like kind and quality, less depreciation.
Additional Insured – A person or organization for
whom insured status is arranged by endorsement.
Advertising Injury – General liability coverage
that insures against libel, slander, invasion of privacy, copyright infringement
and misappropriation of advertising in connection with the insured's advertising
of its goods or services.
Aggregate – The maximum amount an insurance company will
pay during the policy.
All Risk Coverage – Property insurance covering
loss arising from all causes except those specifically excluded.
Application – A form with the information needed for an
insurance company to underwrite and rate a specific policy.
Audit – A verification of the financial records, usually payroll
or receipts, of an organization to determine exposures and premiums.
Automobile – A land motor vehicle, trailer or semi-trailer
designed for travel on public roads, not including 'mobile equipment'.
B
Bailee Coverage – Coverage on property left in the
care of the insured for storage, repair or servicing.
Basic Cause of Loss Form – Property coverage
for named perils: fire, lightning, explosion, smoke, windstorm, hail, riot, civil
commotion, aircraft, vehicles, vandalism, sprinkler leakage, sinkhole collapse and
volcanic activity.
Basic Limits – The minimum limits of liability that can
be carried by an insured.
Best's Rating – A rating system by A.M. Best Company
giving the financial condition of insurance companies.
Binder – A legal agreement issued on behalf of insurance companies
to provide temporary evidence of insurance until a policy can be issued.
Bodily Injury by Accident Limit –
The most an insurer will pay under Part Two of a Workers' Compensation Policy for
claims arising out of any one accident, regardless of how many employee claims arise
out of the accident.
Bodily Injury by Disease, Each Employee
– The most an insurer will pay under Part Two of a Workers' Compensation Policy
for damages due to bodily injury by disease to any one employee.
Bodily Injury by Disease-Policy Limit
– The most an insurer will pay under Part Two of a Workers' Compensation Policy
employee bodily injury by disease claims during the policy period regardless of
the number of employees who make such claims.
Bodily Injury Liability Limit – The
insured is legally liable for damages due to bodily injury, sickness, or disease,
including resulting death.
Boiler & Machinery Insurance
– Coverage for loss caused by mechanical or electrical equipment breakdown, including
damage to the equipment.
Bond – A written agreement in which one party, the surety, guarantees
the performance or honesty of a second party, the principal (obligor), to the third
party (obligee) to whom the performance or debt is owed.
Brands and Labels Endorsement – Property
insurance coverage that allows the insured to remove labels from damaged goods or
mark the items as 'salvage,' provided the goods are not damaged in the process.
Broad Causes of Loss Form – Property coverage
for the named perils: fire, lightning, explosion, smoke, windstorm, hail, riot,
civil commotion, aircraft, vehicles, vandalism, sprinkler leakage, sinkhole collapse,
volcanic action, breakage of building glass, falling objects, weight of snow, ice
or sleet, water damage (in the form of leakage from appliances) and collapse from
specified causes.
Building Ordinance Coverage – Covers against
loss caused by enforcement or ordinances or laws regulating construction and repair
of damaged buildings.
Burglary – Theft of property by forcible entry evidenced
by visible signs of entry, in a premise, by a person.
Business Auto Policy – Auto Policy for businesses
that includes auto liability and auto physical damage coverages.
Business Income Coverage – See Business Income
Coverage
Business Owners Policy – A policy that combines
property and liability coverages for special types of small businesses.
C
Cancellation – The termination of an insurance policy
usually before its expiration.
Care, Custody or Control – An exclusion of
liability insurance which eliminates coverage for damage to property in the insured's
care, custody or control.
Carrier – The insurance company which provides coverage.
Casualty Insurance – Insurance that covers loss
caused by injuries to persons and the legal liability imposed on the insured for
injury or for damage to property of others.
Catastrophe – A severe calamity or disaster causing considerable
financial loss.
Causes of Loss Forms – The commercial property
forms that define the covered causes of loss for which coverage is provided. Commonly,
there are three (3) Cause of Loss Forms: Basic, Broad and Special.
Certificate of Insurance – A document providing
evidence that insurance has been purchased.
Claim – A request by a policyholder or a claimant for payment
under a policy of insurance.
Claim Expense – Expenses of settling or investigating
a claim.
Claimant – The person presenting a claim.
Claims Reserve – An amount of money set aside to meet
claims reported but not paid.
Class – A group of businesses who have common or similar exposures
and are grouped together for rating purposes.
Classification – The arranging or establishing of business
groups or categories for rating purposes.
Coinsurance Provision – An insurance provision
for property coverages in which the policyholder must carry an amount of insurance
that is at least equal to a set percentage of the value of the property in order
to receive full payment of a loss.
Collapse – Collapse of a building and collapse of personal
property within a building due to specified causes (such as weight of snow, ice
or rain). Does not include collapse due to design error or due to faulty workmanship
or materials if the collapse occurs after construction is complete.
Collision Insurance – Provides for payment to
a covered automobile resulting from the striking of another object by a moving vehicle.
Commercial General Liability Policy
– A coverage which protects business organizations against liability claims
for bodily injury and property damage. Those claims may be the result of events
at your place of business, from your business operations, the products or services
you make or do, communications or advertisements your business broadcasts.
Competitive State Funds – State-owned and
operated facilities that write Workers' Compensation Insurance solely for that state.
Completed Operations – A General Liability coverage
for the work of the insured that has been completed away from the business premises.
Comprehensive Auto Coverage – Covers an
automobile for loss or damage for all causes except for those specifically excluded.
Compulsory Insurance – Insurance that is required
by law.
Concealment – Failure to disclose facts which may void
an insurance policy
Conditions – Things agreed upon in an insurance policy
that state the rights and the requirements of the insured and the insurer
Consequential Loss – An indirect loss such as the
reduction in value of property that is the result of a direct damage loss
Constructive Total Loss – Term used when damage
to property is more than the value of the property
Contract – An agreement between two or more parties with
characteristics of mutual assent, competent parties, a valid consideration and legal
subject
Countersignature – The signature of a licensed agent
or representative on a policy that is required to validate the policy
Cumulative Injury – A type of injury which occurs
from the repetition of tasks over an extended length of time
D
Data Processing or EDP Coverage –
All risk property insurance for electronic data processing equipment (computers),
computer programs and data including mechanical breakdown, electrical injury and
changes in temperature and humidity.
Debris Removal – The cost of removal of debris from
covered property damaged by an insured peril.
Deductible – The amount of loss which is paid or absorbed
by the insured prior to determining the insurance company's liability.
Deposit Premium – The amount of premium required at
the beginning of a policy prior to the actual premium being determined.
Depreciation – The reduction in value of property over
a period of time. Usually as a result of age, wear and tear, or economic obsolescence.
Direct Damage – Causes of loss that produce direct and
straightforward property damage (without interruption in time or deviation in space)
from the cause of the event to the damaged property.
Driver Other Car Endorsement – An endorsement
that can be added to an automobile policy that gives protection while the insured
designated in the endorsement is driving a car other than the one named in the policy.
Drop Down Provision – A clause used in Umbrella
policies providing that the Umbrella will 'drop-down' over underlying policy aggregate
limits when they have been reduced or exhausted.
E
Earned Premium – The amount of premium that has been
used for certain periods of time.
Earth Movement or Earthquake Exclusion
– An exclusion found in most property insurance policies eliminating coverage
for earth movement or earthquake, except ensuing fire.
Effective Date – The date on which an insurance binder
or policy goes into effect.
Electrical Damage or Injury Exclusion
– An exclusion usually contained in property insurance policies eliminating
coverage for damage to electrical appliances caused by artificially generated currents,
except for ensuing fire or explosion.
Employee Dishonesty Coverage – Coverage
for theft of money, securities or property by an employee.
Employee Leasing – A staffing method which an employee
leasing company provides all or most of its client's employees.
Employers Excess Indemnity Insurance
– Insurance coverage purchased by employers that do not subscribe to the Texas
Workers' Compensation law .
Employers Excess Indemnity Insurance
– Insurance coverage purchased by employers that do not subscribe to the Texas
Workers' Compensation law.
Employers Liability Coverage – Part 2
of the Workers' Compensation policy which pays on behalf of the employer all sums
that the employer becomes legally obligated to pay because of bodily injury by accident
or disease sustained by any employee of the insured arising out of and in the course
of his employment by the insured.
Employment Practices Liability Insurance
– A form of liability insurance covering wrongful acts arising from employment
practices such as wrongful termination, discrimination and sexual harassment.
Endorsement – A document attached to an insurance policy
that changes the original policy provisions.
Equipment Floater – A property insurance coverage
for equipment that is often moved from place to place.
Estimated Premium – A preliminary premium amount
that could be adjusted based on a variance in exposures.
Excess and Surplus Lines Insurance
– Coverage that is provided by insurers not licensed in the states where the
risk is located.
Excess Liability Policy – A policy that provides
additional limits in excess of an underlying liability policy.
Exclusion – A circumstance or peril that is not covered
by the policy.
Expected or Intended – An exclusion for injury
or damage that is expected or intended.
Expediting Expense Coverage – Coverage
providing reimbursement of expenses for temporary repairs and costs incurred to
speed up the permanent repair or replacement of covered property or equipment.
Expense Constant – A small flat expense charged to
Workers' Compensation policies.
Experience Modifier – A debit or credit factor
developed by measuring the difference between the insured's actual past experience
and the expected or actual experience of the class of business.
Expiration – The ending date of an insurance policy.
Exposure Base – The basis of rates that are applied
to determine premium. Some exposures may be measured by payroll, receipts, sales,
square footage, area, man-hours or per unit.
Extra Expense Coverage – Coverage for reimbursement
of expenses in excess of normal operating expenses that are incurred to continue
operations after a direct damage loss.
Extraterritorial Coverage – The coverage
for extending workers' compensation law to provide benefits for workers hired in
one state but injured while working in another state.
F
Fiduciary Liability – The liability placed on
trustees, employers, fiduciaries and professional administrators with respect to
errors and omissions in the administration of employee benefit programs.
Fire Department Service Charge Coverage
– Coverage in a property insurance policy for charges incurred by the insured
from a fire department for their services in fighting a fire.
Fire Legal Liability Coverage – Liability
coverage for the insured's legal liability for fire damage to premises rented by
the insured.
Fire Wall – A wall designed to prevent the spread of fire
from one part of a building to another.
Firewall – A computer that protects a company's private network
from outside internet users.
Flat Cancellation – The full cancellation of a policy
as of the effective date of coverage which requires the return of paid premium in
full.
Flood Coverage – Coverage for damage to property caused
by flood.
Flood Exclusion – A provision in most all property
insurance policies eliminating coverage for damage by flood and possibly other types
of water damage, such as seepage and sewer backup.
Follow Form – An umbrella policy provision that follows
the underlying policy for coverages and policy provisions.
Forgery or Alteration Coverage – An
event that is subject to chance without the implication of suddenness.
Fortuitous Event – An umbrella policy provision that
follows the underlying policy for coverage and policy provisions.
Frequency – The number of times that a loss will occur within
any given period of time.
Full Coverage – Any form of insurance that provides
payment in full of all losses caused by the perils insured against without applying
a deductible or depreciation.
G
Garage Liability Insurance – Insurance
coverage for the legal liability of automobile dealers, garages, repair shops and
service stations for bodily injury and property damage arising out of their business
operations.
Garagekeepers Coverage – Provides coverage
to owners of storage garages, parking lots and body and repair shops for their liability
of damage to automobiles left in their custody for safekeeping or repair.
General Aggregate Limit – The maximum amount
of insurance payable during the policy period for losses (other than those arising
from the products - completed operations hazards as covered under the standard commercial
general liability policy).
General Liability Insurance – Insurance
protecting businesses from most liability exposures other than automobile and professional
liability.
Glass Insurance – A property insurance policy covering
breakage of building glass regardless of cause.
Governing Classification – In Workers' Compensation
Insurance, the classification that best describes the workers' compensation exposure
of an employer's business.
Gross Negligence – Willful and wanton misconduct.
Gross Vehicle Weight (GVW) – The weight
specified by a manufacturer for the maximum total loaded weight of a single vehicle.
H
Hired Automobile – An automobile whose exclusive
use has been temporarily given to another for a monetary sum or other consideration.
The business auto definition of 'hired autos,' however, includes autos borrowed
except those borrowed from employees or partners.
Hold Harmless Agreement – A contractual agreement
that requires one contracting party to assume certain legal liabilities of the other
party.
Host Liquor Liability – Liability coverage for
hosts of business or social functions arising out of the serving or distribution
of alcoholic beverages by a party not engaged in this activity as a business enterprise.
I
Improvements and Betterments – Additions
or changes made by a lessee at his own expense to property that may not legally
be removed. Usually covered under the tenants property coverage.
Incurred Losses – The amount of paid claims and loss
reserves within a particular period of time, usually a policy year. Customarily
computed as losses incurred during the period, plus outstanding losses at the end
of the period, less outstanding losses at the beginning of the period.
Independent Adjuster – A claims adjuster who
provides adjustment services to insurance companies but is not employed by them.
Independent Contractor – An individual or company
who has agreed, in writing, with another party to perform a job or function on behalf
of that party.
Inflation Guard Provision – A provision
that increases the limit of insurance by a specified percentage over a specified
period of time to offset inflation costs.
Insurance to Value – Insurance written in an amount
equal to the value of the property or which meets coinsurance requirements.
Insurer – An insurance company that provides insurance coverage
and other insurance-related services.
J
Joint Venture – A business relationship when two or
more persons join their labor or property for a business undertaking and share profits.