Basic Insurance Definitions
Act of God
An unpreventable accident or event that is the result of natural causes; for example, floods, earthquakes, or lightning.
Actual Cash Value
An amount equivalent to the replacement cost of lost or damaged property at the time of the loss, less depreciation. With regard to buildings, there is a tendency for the actual cash value to closely parallel the market value of the property. See also Market Value.
Insurance that supplements an existing policy. It is uncommon for insurers to allow additional insurance.
Insured Another person or company who may be liable for an accident involving an insured or an insured vehicle and who has been named as an Additional Interest Insured under the policy.
An adjuster is the person who investigates and settles auto insurance claims.
An insurance company authorized and licensed to do business in a given state.
Agents and brokers both sell and manage insurance for their customers. Agents are the authorized representatives of an insurance company or companies, while brokers are the authorized representatives of people looking for insurance.
A written statement by a prospective policyholder that gives the information an insurance company needs to evaluate the applicant and issue the policy.
A person who fills out and signs a written application for insurance.
A survey by an independent claims appraiser estimating the amount of damage to property and the cost to repair or the determination of a complete loss.
A risk which is not ordinarily acceptable to insurers and which is, therefore, assigned to insurers participating in an assigned risk pool or plan. Each participating company agrees to accept its share of These risks.
The lowest coverage amount, as prescribed by law or by an insurance company, for which an insurance policy can be written. Basic Limits primarily prescribe limits of liability.
The act of effecting coverage.
A temporary contract of insurance
A licensed transactor of insurance who represents the client.
The fee charged by the producer for services, which is in addition to the premium.
The act, of either party in an insurance contract, of ending the contract prior to its expiration. Both parties are required to give written notice to the other party to effect such cancellation. The insurer is required to give at least 10-days notice prior written warning of such cancellation.
Termination of an insurance contract before its expiration date by either the insurance company or the policyholder.
A demand for payment under an insurance contract for the estimated or actual amount of loss.
Compensation to the producing agent, broker, or agency for writing and servicing the policy from the insurance carrier. Generally a percentage of the Premium.
Provisions that set forth the rights, duties, and responsibilities of the parties to an insurance contract. Conditions may be found anywhere in the contract.
Insurance coverage was in effect from an insurer or more than one insurer at all times, without a break or lapse in coverage for any reason.
A sum of money that a party is legally obligated to pay to another as compensation for injury.
The report from your insurance company listing: the types of coverage you have elected, the limit for each coverage, the cost for each coverage, the specified items covered by the policy, the types of coverage for each item covered by the policy, other information applicable to the policy.
The amount of each loss you agree to pay. Generally, choosing a higher deductible will lower your premium.
An amount of money (usually a percentage of the premium plus any fees) which the insured must pay in order for the coverage to be bound.
The portion of a premium that has been "used up" during a policy term. With a one-year policy, half of the total premium has been earned after six months.
Effective Date/Inception Date
The effective date is the date your auto insurance coverage begins. You are not covered by car insurance prior to an auto insurance policy's effective date.
A written amendment attached to a policy that modifies the terms of the insurance contract.
Part of an insurance contract that excludes coverage of certain perils, persons, property, or locations.
The date your coverage ends. There is usually a time of day associated with this date, for example, an expiration date of 12/1/2003 at 12:01am. This means your coverage ends one minute after midnight on the date listed.
Coverage that applies only after some other policy has paid its full policy Limit. This may result from policy structure, such as in the case of an Excess Liability or Umbrella policy, or as a result of two policies applying to the same loss.
Coverage Liability coverage that is written to provide higher Limits than those available in the Primary policy. This policy is only liable after the Primary policy has paid its full Limits for a covered loss. It is used where higher Limits of liability are needed, but the primary carrier is unwilling or unable to provide such Limits. The Primary policy may provide Limits of 15/30/5 and the Excess policy 85/270/45 to provide total Limits of 100/300/50.
Financial ratings reflect a rating organization's opinion on the financial strength and ability to meet ongoing obligations to policyholders. The ratings organizations most commonly identified with the insurance industry are AM Best, Standard & Poor's and Moody's.
Situation or condition that increases the possibility or extent of a loss.
A fee paid with your bill payment if your policy is not paid in full.
A state's department that has responsibility for the enforcement of the state's insurance code. It is charged with the supervision and licensing of insurance companies and agents and the general administration of insurance laws of the state.
The person who is protected by the insurance policy.
The company that issues a policy to a policyholder; the party in the insurance contract that promises to pay losses and render services.
Promise made by the insurance company, which outlines its duties. Exclusions, Conditions and definitions that appear later in the policy modify this promise.
Lapse in Coverage/Policy Lapse
A point in time when a policy has been canceled or terminated for failure to pay the premium, or when the policy contract is void for other reasons.
Liability insurance pays on behalf of the insured for certain types of injury to others.
Limit of Liability
The maximum amount that an insurer agrees to pay in the case of loss under policy contract.
The maximum amount paid for a specific insurance coverage. You may choose the limit which meets your needs. Most states have laws that specify the minimum limits you must purchase.
A value reduction in an insured's property caused by an insured peril, the amount sought in a claim, or the amount paid on behalf of an insured under an insurance contract.
Typically the finance company holding title to the owned auto.
Mutual Insurance Company
A company with no capital stock that is owned and controlled by policyholders.
The first person in whose name the insurance policy is issued.
Natural and Probable Consequences
Consequences of a given act that a reasonable person could foresee.
A policy that the insurer does not continue after its expiration date.
An accident or loss, including continuous or repeated exposure to substantially the same general harmful conditions, that result in bodily injury or property damage.
A loss that does not completely destroy the insured property that is covered by an insurance policy.
The policyholder authorizes his or her employer to deduct amounts from the employee's earnings to cover the premium.
The cause of a possible accident, loss, or claim.
A legal Contract which contains the agreement between the Insurer and the Named Insured. A Policy is made up of five (5) parts: The Declarations, The Insuring Agreement(s), The Exclusions, The Conditions, The Definitions.
Date on which an insurance policy must be reinstated to remain in force.
Policy Expiration Date
The date when your current insurance policy expires. This date can be found on your current Declaration (or "DEC") page, insurance identification card, or recent cancellation notice. This date is not to be confused with the date of your next payment or the date when your renewal payment is due.
The party to whom a policy is issued who agrees to pay a premium to an insurer in consideration of the latter's promise to provide insurance protection.
A preprinted brochure which contains all policy language except that contained in the Declarations Page and Endorsements. In the Policy Jacket you will find the Insuring Agreement(s), Exclusions, Conditions and Definitions.
The length of time that the policy is in force. Many companies offer annual and semiannual policies.
The amount that a policyholder agrees to pay to the insurance company for an insurance policy.
The place where you will reside for the majority of your policy term. If you are a homeowner who does not reside in the home you own, please choose the "rent" or "other" option.
Your prior address provides an additional piece if information to match the consumer report correctly with the customer.
Pro Rata Cancellation
Termination of an insurance contract before the policy expiration date on which the premium returned to the insured person is adjusted in proportion to the amount of time the policy was in effect.
Coverage afforded by an insurance contract.
The cost of insurance per unit; used as a base for the determination of premiums.
Reinstate with Lapse
The act of reactivating a policy which has ceased to be valid due to expiration or cancellation. There is a period between the cessation of coverage and its reinstatement during which the carrier provided no coverage.
Returning a lapsed policy to its full value after its termination as if it was never terminated.
The process of keeping an active policy in force through the issuance of a renewal policy.
Second Named Insured
The named insured or listed agent on a policy may request to designate any other person listed on the policy as a "second named insured." The second named insured has the same coverage under the policy as the named insured.
Social Security Number
Most auto insurers order consumer reports to determine the correct rate for you.
Loss to the insured of the entire value of goods or other property insured, or a loss entailing the payment of the full face amount of an insurance contract.
A process that evaluates an applicant and their property against pre-established criteria for insurability to determine whether the applicant will be rejected or accepted and whether they will pay standard or modified rates.