Car Insurance Glossary
Accident Frequency: Car insurance companies evaluate how many times a driver has been involved in accidents or collisions. One accident is typically forgiven, but multiple collisions will impact how much a motorist pays for car insurance.
Act of God: Otherwise known as an act of nature, things like hurricanes, floods, tornadoes, earthquakes, and other unpreventable events that cause damage to a vehicle are filed under this category. Comprehensive or Non-Collision insurance policies are used to reimburse drivers for damages done by acts of nature.
Anti-Theft Device: Any device that is built into or added onto a vehicle to make it more difficult to steal. This includes things like built-in GPS tracking systems like Lo-Jack and On-Star as well as add-ons like the club.
Claim: A demand by an insured party to be reimbursed for damages or medical expenses that occurred under the provisions made by the insurance policy.
Competitive Estimate: Generally, three estimates made by competing automotive repair shops requested by an insurance claims adjuster. The least expensive estimate will be used to reimburse the driver for the repairs that need to be made to his or her vehicle.
Driver Training: A state-accredited course that places drivers behind the wheel with a professional driving teacher for a total of at least six hours. Successfully completing driver's training or driver's ed can reduce insurance costs for teen and student drivers.
Deductible: The amount that an insured party must pay toward repairs, replacement, or medical expenses in the event of an accident or act of nature. The insurance policy typically covers the rest.
Driving Record (or Motor Vehicle Record) : Kept on file in all states, a driving record is a log of the motorists' past offenses, including speeding tickets, moving violations, DWIs, and other incidents related to his or her driving career.
Endorsement: An addition to an automotive insurance policy.
Gap Insurance: Insurance that is designed to "fill the gap" between the value of collision or comprehensive coverage and the actual cost to replace a new or leased vehicle, to reimburse drivers for damages that occur before the car or truck has significantly depreciated. Gap insurance may be required for cars that are leased or subject to a lien.
Liability Insurance: Required in all states, liability insurance is primarily used to reimburse other parties involved if the insured driver damages another person or vehicle. In no-fault states, however, one's own liability policy is used to cover his or her own losses, while the other motorists involved are covered by their own policies. Regardless, each state specifies a minimum amount of liability insurance that each motorist must carry.
Limits of Liability: The upper limit of funds that an insurance company will spend for an individual event or a number of events that occur during a specified time period.
Material Misrepresentation: A fraudulent lack of reporting on the policy-holder's part, leaving out important information about the number of drivers in the household, where the insured vehicle is stored, and other details that would typically impact the cost of the automotive insurance policy.
Minimum Limits of Liability: The smallest amount of liability coverage a driver is legally allowed to carry in his or her state.
Policy Term: The time during which the car insurance policy is in effect. Usually, drivers are insured for six months or a year.
Quote: A detailed description of the costs of an automotive insurance policy, what will be covered, the limits of liability, the deductible, and other add-ons and information so that a potential buyer can determine whether or not the policy is a good fit for his or her needs.
Surcharge: A penalty charge, usually given if a driver has an accident or receives a speeding ticket or other serious moving violation while insured.
Third Party: An individual or company who was not involved in an automobile accident but who has an interest in the resolution of the claim.
Total Loss: Commonly referred to as "totaled," total loss is the professional term for a vehicle that is too far damaged to be repaired and must instead be replaced.
Underinsured: A driver who is not carrying a sufficient amount of liability insurance to reimburse another motorist for damages he or she caused.
Usage: The primary way an insured vehicle will be used. Commuting, pleasure, and business are three of the most common classifications.