Car Insurance Terms - Part 2
Continuous Coverage or Continuous Liability Insurance
The length of time you have had your vehicle insured without a break in coverage
(some insurers require at least six months.)
Covered Person
The person(s) insured under a policy contract.
Deductible
The minimum amount you will have to pay before your own insurance policy begins
to reimburse you for your loss. Normally, policies with a higher deductible will
have lower premiums (they'll be cheaper.)
Defensive Driver Course
Courses offered by your own state's DMV or by an approved entity that promote
safe driving. Upon completion of such a course, you may become eligible for
lower insurance rates. A good deal if you can get it.
Discount Auto Insurance
A policy is eligible for premium discounts if something about the driver or car
that makes the policy a better-than-average risk.
Drive-Other-Car Endorsement
A part of your policy that extends coverage to any other car you might be
driving (for example, a rental car.)
Driver Education
A course accredited by your state's DMV, consisting of at least 30 hours of
professional classroom instruction. Often required for teen car insurance.
Driver Training
A course accredited by your state's DMV, consisting of at least 6 hours of
behind-the-wheel training.
Earned Premium
The part of your premium used up by any given point in the life of your policy.
After six of coverage on a twelve-month policy, one half of your premium will
have been "earned".
Effective Date/Inception Date
The actually date on which your policy begins to cover you against losses (not
necessarily the day you pay, or sign, etc.)
Expiration Date
The date your coverage ends. There is also usually a time involved, for example
Midnight of such and such day.
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Car Insurance Terms - Part 3
Financial Ratings
Ratings, similar to credit ratings, of insurance providers meant to accurately
represent a carrier's ability to meet claims. Often mentioned ratings are by
agencies such as Standard and Poor's and AM Best.
Financial Responsibility Filing (SR22)
A requirement by a state regulatory entity (usually the state Motor Vehicle
Department) for an insurance company to certify on a driver's behalf that the
driver has the ability to pay future claims up to the state required limit. The
certification is done by means of a form called an SR-22.
Financial Responsibility Laws
State laws requiring drivers to maintain enough insurance to cover accidental
losses to others. Law and limits vary state-by-state.
First Party Benefits
Often also know as Personal Injury Protection (PIP) or Medical Coverage, this
policy pays for physical injuries sustained by the occupants of your car in the
event of any accident, regardless of who was at fault. This is generally not a
good deal, as a good health insurance policy would cover these injuries anyway.
Gap Auto Insurance
A gap car insurance policy insures you for the difference between what you owe
on your car and what your insurance company says it's worth. Often required when
buying or leasing a new car.
Garage Address
Where you park your car at night.
Good Driver Discount
Better insurance companies offer discounts to customers with good driving
records. If you have a good driving record, get a quick quote from Electric
Insurance or find the car insurance providers in your state.
Good Student Discount
A discount which sometimes applies to teen car insurance when the driver
maintains at least a "B" average at school.
ID (Identification) Card
A document identifying you as having liability coverage for the vehicle that you
are driving. Liability insurance is required in most states.
Installment Fee
A fee often required if you prefer to spread your payments over time.
Insured Person
The person(s) insured under a policy contract. (Same as a covered person.)
Lapse in Coverage
Also known as policy lapse. The point in time when a policy is canceled for any
reason, including failure to pay, change of provider, etc.
Lender
The lender is the entity (usually a bank) which lends you the money to purchase
a car. They are usually the loss payees, until you pay off the balance of the
loan.
Lessor
Similar to the lender, the lessor is the entity which leases your vehicle to
you. This is quite often the financial arm of the car company itself.
Note: both lenders and lessors may require that you purchase gap auto insurance
to fully protect the value of your car.
Liability Insurance
Insurance coverage to protect against claims alleging that one's negligence or
inappropriate action resulted in bodily injury or property damage.
Loss Payee/Lien holder
Usually your lender or lessor, this is the person or entity to whom loss
payments are made, in addition to you. Liability Coverage
Insurance that provides compensation for a harm or wrong to a third party for
which an insured is legally obligated to pay.
Longevity
Insurance companies often reward their long-time customers with premium
discounts. An insurer may provide a discount after an insured has been with the
company for a specified amount of time.
Medical Payments Coverage
Medical payments coverage, also called personal injury protection, or PIP,
covers the cost of injuries to you, your family, and your passengers.
Minimum Liability Limits
These vary locally, they are the lowest amounts of liability coverage that you
can legally buy in your state.
Multi-car discount
Discount often given when insuring multiple vehicles under the same policy. By
choosing this option, you will almost always save over having separate policies
for each car.
Named Driver Exclusion
An individual specifically identified on the policy as an excluded driver. This
often applies to teen-aged family members, whose inclusion in a policy would
raise the premium considerably.
Named Insured
Entities or individuals named on the policy as insured by that policy. Most
commonly this refers to spouses and other relatives living in the household.
No Fault Insurance
An auto insurance policy that insures the holder for injury-related benefits
caused by an auto accident, regardless of fault in the accident. Covered
benefits may include medical costs, loss of wages, loss of services, and funeral
expenses. In return for these guaranteed benefits, the right to sue for damages
caused by an auto accident is limited. Thirteen states currently use some form
of no fault insurance.
Number of Drivers
Somewhat self-explanatory: the number of drivers who covered under your policy.
This usually includes you, your spouse, and any relatives living in your
household (unless otherwise excluded.)
Number of Vehicles
The number of cars covered under your policy. If you want to insure more than
four vehicles, you may have to purchase an additional policy.
Occupation
Insurance companies often use your occupation, and the distance that you drive
to work every day, to calculate risk. Certain professions incur higher premiums,
though this is not common.
Odometer Reading
The total number of miles that a car has been driven in its "lifetime". Certain
insurers will not even offer a quote for vehicles with more than a set amount of
miles on its odometer.
Per Occurrence Limit
This refers to the cap amount an insurance company will pay for all claims
arising from a single incident. In an automobile accident, it comprises bodily
injuries sustained by all parties. When Bodily Injury coverage is purchased in
split limits, the second limit is the "per occurrence" limit: e.g. $100,000(per
person)/$300,000(per occurrence.)
Per Person Limit
This refers to the cap amount an insurance company will pay for any one person's
injuries arising from a single incident. In an automobile accident, it comprises
bodily injuries sustained by each person. When Bodily Injury is purchased in
split limits, the first limit is the "per person" limit: e.g. $100,000(per
person)/$300,000(per occurrence.)
Personal Auto Policy
Also known as "PAP", personal auto policies are the most common type of auto
insurance policies sold. They include coverage for liability, medical payments,
uninsured/underinsured motorist coverage, and physical damage protection.
Personal Injury Protection
Also known as "PIP", this is the name given to no fault benefits in those states
that have some sort of no fault auto insurance laws. This type of coverage
usually includes benefits for medical expenses, loss of income, essential
services, accidental death, funeral expenses, and survivor benefits.
Physical Damage
The physical damage to the covered vehicle caused by (though often not limited
to) collision with another vehicle, vandalism, theft, etc.
Policy
The actual contract between you and the insurance company which spells out your
coverage levels, rights, and obligations. Learn more about the contents of
insurance policy documents.
Policy Period
The period of time during which you are covered by your policy.
Premium
The cost of your insurance policy and all the included coverage.
Pro Rata Cancellation
What happens when you cancel your policy before it expires. Pro Rata refers to
the amount of money that may be refunded to you based on the amount of time left
on your policy that you have already paid for.
Property Damage Liability
Coverage for physical damage caused to property when the insured person is
liable.
Rated Annual Mileage
This is the annual mileage that is used to determine the mileage rating
classification that is applied to a vehicle.
Rental Reimbursement
This optional coverage will pay for the use of a rental car while damage to your
car is being fixed or while the claim for a totaled vehicle is processed.
Safety Equipment
Enhancements in your car, such as automatic seat belts and driver-side and
passenger-side airbags, which reduce your risk of being injured in a collision.
Vehicles with safety equipment often qualify for discount car insurance.
Split Limit
Limits set on the types of coverages that are part of one group of benefits.
Most often applied to liability insurance.
SR-22 (Financial Responsibility Filing)
A requirement by a state regulatory entity (usually the state Motor Vehicle
Department) for an insurance company to certify on a driver's behalf that the
driver has the ability to pay future claims up to the state required limit. The
certification is done by means of a form called an SR-22.
Suspended or Revoked License
Drivers with a license suspension on their driving record face higher premiums,
and are often barred from getting insurance coverage from mainstream companies.
Term
The period of time during which the policy is in effect.
Threshold Level
In the case of some no fault insurance laws, the point at which the insured may
bring tort action for non-economic (pain and suffering) damages under a No Fault
Auto Plan. Many of these plans prohibit tort action for pain and suffering
unless medical bills exceed a set figure, or disfigurement or death occur.
Tort
A private wrong or harm (other than a breach of contract) committed against
another, resulting in legal liability. A tort is either intentional or
accidental (negligent). Auto liability insurance is purchased to protect one
from suits arising from unintentional torts.
Towing and Labor Costs
An endorsement, which pays for the costs associated with certain repairs and
towing in the event of an accident. You're better off with an auto club.
Uninsured Motorists Bodily Injury
Uninsured motorists bodily injury coverage (which must be offered in most
states) pays for a covered person's bodily injuries for which an uninsured or
hit-and-run motorist is legally liable, but unable to pay.
Underinsured Motorists Bodily Injury
Underinsured motorists bodily injury coverage (which must be offered in most
states) pays for a covered person's bodily injuries for which a person with not
enough insurance is legally liable.
Uninsured/Underinsured Motorists Coverage
This coverage provides protection for the insured, resident relatives, and
occupants of a covered vehicle in an accident in which the owner or operator of
a motor vehicle who is legally liable and either does not have sufficient
coverage or does not have any insurance to cover the loss.
Unearned Premium
The part of your policy term remaining before expiration. If your six-month
policy is in effect a months, the unearned premium is 5/6.
Usage
The primary function of your vehicle, can be categorized as either "business",
"commute", or "pleasure".
VIN (Vehicle Identification Number)
The Vehicle Identification Number is a 17 digit number (which includes both
numbers and letters) unique to your car. The VIN tells the company the make,
model, body type and year of the insured vehicle. You can find your VIN in
several places including the title to your vehicle, your vehicle registration,
your insurance card, your insurance policy, the dashboard of your vehicle, the
driver side door or engine of your vehicle.
Waiver of Collision Deductible
If you have collision coverage on your car, this option pays your deductible for
damage caused by an uninsured or hit-and-run driver, if you can identify the
driver and car that caused the damage.
Whole Dollar Premium
Simply stated, premiums are rounded to nearest dollar, up for amounts over 51
cents, and down for fifty cents and lower.