The PROSTARS Auto Insurance Glossary covers general terms that may be helpful to you in reading and understanding your Automobile Insurance policy. Keep in mind that because insurance laws vary throughout the United States and Canada, or coverages may not be available in some jurisdictions, the definitions and terms may not apply to all situations. The terms and definitions in your actual policy will govern any claims or questions of interpretation.

Last updated: 6/26/2006

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Accident:
An event that is not expected or happens by chance and results in the harm to persons, property or the loss of productivity.

Accident benefits:
Coverage that provides medical care benefits and income replacement benefits to insured persons injured in an automobile collision regardless of who caused the accident.

Actual Cash Value:
The current cost to replace damaged property with something of like kind and quality.

Adjuster:
A person usually employed by the insurance company or an independent contractor hired by the insurance company, who investigates the damage for the vehicle(s) involved in the claim and negotiates the settlement of the claim for the insured.

Agent:
A person who offers insurance products to the public for only one company.
 
All-risk policy: See Comprehensive Coverage

Anti-Theft Device:
Devices designed either to reduce the chance an auto will be vandalized or stolen, or assist in its recovery. Examples include car alarms, keyless entry, starter disablers, motion detectors, parts of the vehicle etched with the Vehicle Identification Number, and recovery systems. See Immobilizer; See also Canadian Standard for Automobile Theft Deterrent Systems (ULC S338).

Appraisal:
An estimate of the damage to the vehicle and the cost to repair or to determine a complete loss.

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Binder:
A temporary insurance certificate that you use to prove that you have insurance until your actual policy is issued.

Bodily Injury:
When used in Automobile Insurance, a physical injury to another person’s body due to an automobile collision.

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Cancellation:
Termination of an insurance contract before its expiration date, by either the insurance company or the policyholder.

Canadian Standard for Automobile Theft Deterrent Systems (ULC S338):
This is the standard recognized by the Standards Council of Canada for all immobilizer theft deterrent systems. Access to the vehicle are cut off with the starter, ignition and the fuel supply for aftermarket systems while the fuel injection system is disabled in Original Equipment Manufacturers (OEM) installed systems. The purpose is the prevention of drive-away theft.

Claim:
A demand for payment under an insurance contract for the estimated or actual amount of loss or notification of a possible loss under the insurance contract whether any payment is made under the insurance contract (policy).

Claimant:
Someone who makes an insurance claim.

Claims adjuster: See Adjuster.

Collision Coverage:
An optional type of coverage which pays for damage to your vehicle, up to the actual cash value of your car, minus your deductible, if it is damaged in a collision regardless of who caused the collision.

Comprehensive Coverage:
Insurance coverage that covers the cost of repair to or replacement of an insured’s vehicle when it is damaged by perils other than collision or turning over. Some examples are theft, glass breakage, earthquakes, fire, vandalism, flood, missiles, explosions, windstorms, collision with an animal or a bird.

Compulsory Insurance:
Insurance, such as automobile insurance, that is required by law.

Conditions:
Provisions that set forth the rights, duties, and responsibilities of the parties to an insurance contract. Conditions may be found anywhere in the contract.

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Damages:
A sum of money that a party is legally obligated to pay to another as compensation for injury.

Declarations:
The part of the policy that provides detailed information about the insured, his/her name and address, the insured property including its location and description, the insurer, the coverages, premiums and so forth.

Deductible:
The amount of a claim that the insured has to pay out of their pocket before the insurance company will pay the balance of a claim up to policy limits. The deductible amount is listed in the policy of insurance.

Depreciation:
A decrease in an automobile's value due to use, wear and tear, and time. This will modify the amount payable by the insurer for a stolen or destroyed vehicle.

Effective Date:
The date the coverage begins on an insurance contract (policy).

Endorsement: See Rider.

Exclusion:
Part of an insurance contract that excludes coverage of certain perils, persons, property, or locations. Conditions or circumstances under which your insurance company will not pay a claim.

Expiration Date:
The termination date of an insurance contract (policy).

First Party:
The person, referred to as the insured or policyholder who is insured on the insurance policy. Other persons, named or not named, may also be covered under the policy of insurance.

Form:
The insurance policy or riders attached to it.

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Government-run Auto Insurance:
In British Columbia, Manitoba, and Saskatchewan consumers must purchase their auto insurance from the provincial governments. Optional insurance coverages may be purchased from private insurance companies. For Quebec, automobile insurance coverage for bodily injury must be purchased from the government.

Hit and Run:
An accident caused by someone who does not stop to assist or provide information.

Immobilizer:
An electronic anti-theft device that prevents the unauthorized starting of the vehicle. See Anti-theft devices; See also Canadian Standard for Automobile Theft Deterrent Systems.

Indemnify:
To compensate an insured person for a loss, in whole or in part by payment, repair or replacement.

Insurance (Property & Casualty or General):
The undertaking by one person (the insurer) to indemnify another person (the insured) against loss or liability for specific risks or perils to which the insured may be exposed.

Insured:
A person whose risk of financial loss is protected under the insurance contract (policy).

Insurer:
The insurance company that issues the insurance contract (policy) to a policyholder.

Liability:
This is a legal obligation.

Liability Insurance:
Liability insurance would pay for damages or losses suffered by others which the insured was legally responsible.

Liability Insurance Limits:
The maximum amount that an insurer protects an insured for liability coverage.

Loss:
Damage to your car that is covered by insurance and for which you are seeking payment from your insurance company.

Loss of Use Insurance:
Optional insurance coverage that is purchased to compensate the insured when the use of his or her vehicle is lost; for example, an automobile rented to replace one that was stolen or while it is being repaired.

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Named insured:
The person in whose name the policy is issued by the insurer. The policyholder or insured is the first party and the insurer is the second party to the contract of insurance. See Insured or Policyholder.

No-Fault Insurance:
Payments are made for personal injury and death regardless of who was at fault for the automobile accident.

Occurrence:
An accident or loss, including continuous or repeated exposure to substantially the same general harmful conditions, that results in bodily injury or property damage that was not intended or expected.

Optional Coverage:
This is insurance that is not required by law. For automobile insurance this would include collision coverage or comprehensive coverage.

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Partial Loss:
A loss that does not completely destroy the insured automobile that is covered by an insurance policy.

Personal Lines of Insurance:
This would include auto or home for individuals. Commercial lines would apply to businesses.

Physical Damage Coverage for Vehicle:
Damage to your covered vehicle from perils including (but not limited to) collision or upset with another vehicle object, fire, vandalism and theft.

Policy Expiration Date:
The date when your current insurance policy expires.

Policy Period:
The period of time in which a policy is in effect. For example, six months or one year, are standard policy periods.

Policy:
The written documents of a contract for insurance between the insurance company and the insured. Such documents include forms, (endorsements), riders and attachments.

Policyholder:
See insured.

Premium:
The amount that a policyholder pays to the insurance company for an insurance policy to cover specific risks for specific time periods.

Property & Casualty or General Insurance:
This includes home, automobile and business/commercial insurance. It would not include life or health insurance.

Property Damage:
Damage to tangible property. In insurance, people often refer to Property Damage as the coverage afforded for financial protection against damage to another’s property resulting from an accident.

Property Damage Liability:
Damage to someone else's tangible property that was caused by you.

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Quote:
A estimate for the cost of insurance based upon the information given to the insurer and the coverages requested or required.

Rate:
The amount of the premium to be charged for automobile insurance established or reviewed by the government.

Recovery:
Money or other valuables that the insurance company obtains through subrogation, salvage, or reinsurance.

Renewal:
The process of keeping an active policy in force through the issuance of a renewal policy.

Rider:
An amendment to your policy written especially to cover unique items just for you. A rider is also a change to your policy that is made during the policy's term and attached to your policy to modify the terms of the insurance contract. (also called an endorsement)

Second Party:
The insurer that issues the policy is considered the second party of the two parties required to form a legal contract. The first party is the insured or policyholder.

Subrogation:
When your insurance company pays for a loss caused by another driver, your insurance company may try to recover some or all of the settlement costs by suing those who caused the loss.

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Third party:
A person who is not a party to the insurance contract. In an automobile collision claim the “third party” is someone other than the policyholder (the first party), who was injured or whose property was damaged by the insured’s automobile.

Tort:
A wrongful or harmful action, other than a breach of contract, committed against another that results in legal liability.

Tort Feasor:
One who commits a tort.

Underinsured Motorist Coverage:
Insurance coverage that will pay for injuries and property damage that is caused by an owner or operator of an inadequately insured automobile.

Underwriter:
The insurance company employee who reviews your application for insurance and decides if you can or will be covered.

Underwriting rules:
The rules individually determined by each insurance company to assess the risk for providing insurance coverage for the insured.

Uninsured motorist coverage:
Automobile insurance that pays for injuries and property damage caused by the driver or owner of the other vehicle that did not have automobile insurance coverage.

Vehicle Identification number (VIN):
This number is usually found on the dashboard visible from the windshield and usually found on the registration and title. It is usually seventeen numbers and letters that can be used to identify the make, model, and year of the automobile.

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