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The Schindel Agency, LLC
8015 Pendleton Pike
Suite J
Indianapolis, IN 46226
ph: (317) 405-3217

Copyright © 2008-09 The Schindel Agency, LLC.

All Rights Reserved

  
     

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Insurance Definitions

At the Schindel Agency, we use plain talk to explain your policy. But some insurance terms are hard to understand. Because of that, we have put together this page of definitions to help you better understand your policy.

Accident: An unexpected, unforeseen event not under the control of an insured and resulting in a loss.

Accident Forgiveness: In most states, customers who have not had an at-fault accident in the previous five years qualify for this program. Accident forgiveness means that some insurance carriers won't add a surcharge to your premium after your next at-fault accident.

Accident Frequency: The number of times an accident occurs. Used by actuaries to predict losses and appropriately base premiums.

Act of God: Natural occurrence beyond human control or influence. Such acts of nature include hurricanes, earthquakes, and floods.

Actual Cash Value: The fair market value of property; technically, replacement cost less depreciation.

Additional Insured or Additional Interest: A person or an organization, other than the named insured or covered person, who is protected under the named insured's auto policy. If an auto is leased, the leasing company may want to be listed as an Additional Insured as well as a lien holder or loss payee. This protects the leasing company if it's named in a lawsuit for an accident caused by a policyholder.

Assigned Risk: A driver or vehicle owner who cannot qualify for insurance in the regular market. He or she must get coverage through a state assigned risk plan which specifies that each company must accept a proportionate share of these drivers/owners.

Automobile Insurance Plans: The name for "assigned risk" plans. These are plans set up and monitored by the state to help people who are unable to secure auto insurance through standard insurance carriers. See Assigned Risk.

Binder: A temporary agreement declaring that the policy is in effect. Used in certain cases to protect a policyholder when it is not possible to issue or endorse the policy immediately.

Cancellation: Termination of an insurance contract before the end of the policy period, by the insured or insurer.

Carrier: The insurance company or insurer.

Catastrophe: A disaster affecting a specific geographic area. Catastrophes often cause injury or even death; most result in extensive property damage. Hurricanes, floods, tornadoes, and even large hailstorms are typical examples of catastrophes.

Certificate of Financial Responsibility: Depending on the state and Motor Vehicle requirement, this is a form certifying that specific coverage has been purchased to meet the state's Financial Responsibility laws. This could be an SR-22, FR-44, SR-50, or any other State Requirement certification form.

Certificate of Satisfaction: A form signed by the insured when he or she takes delivery of the car from the repairer. It certifies that he or she is satisfied with the vehicle operations, appearance, and visible quality of the repairs.

Claim: Any request or demand for payment under the terms of the insurance policy.

Claim Adjuster: A person responsible for investigating and settling a claim.

Claimant: Individual or entity presenting a claim.

Clause: A section in an insurance policy that explains, defines or clarifies the conditions of coverage.

Coverage: Protection and benefits provided in an insurance contract.

Declaration Page: That page of the insurance policy which lists the insurance company, its address, name of the policyholder, starting and ending dates of coverage, and the actual coverages given in the contract, including the covered locations and amounts.

Declarations: The part of your policy that includes your name and address; the property that is being insured, its location and description; the policy period; the amount of insurance coverage and the applicable premiums.

Deductible: Usually, a dollar amount the insured must pay on each loss to which the deductible applies. The insurance company pays the remainder of each covered loss up to the policy limits.

Depreciation: The decrease in value of any property due to wear, tear, and/or time. Generally, depreciation is not an insurable loss.

Domestic Insurance Company: An insurer domiciled in this state.

Economic Loss: Total financial loss resulting from the death or disability of a wage earner, or from the destruction of property. Includes the loss of earnings, medical expenses, funeral expenses, the cost of restoring or replacing property and legal expenses. It does not include noneconomic losses, such as pain caused by an injury.

Effective Date: The date that coverage begins on an insurance policy.

Electronic Funds Transfer (EFT): EFT is an electronic payment method that lets you pay your premiums with automatic deductions from your checking account.

Endorsement: A document, which is attached to the policy and modifies or changes the original policy in some way.

Estimate: As assessment of the cost to repair your damaged property.

Exclusion: Section of the insurance policy, which list property, perils, person, or situations which are not covered under the policy.

Experience: Can refer to many items such as driving record history or record of losses.

Experience Rating: Determination of the premium rate for an individual risk, made partially or wholly on the basis of that risk's own past claim experience.

Expiration Date: The date your coverage ends. There is usually a time of day associated with this date, for example, an expiration date of 5/1/2002 at 12:01am. This means your coverage ends one minute after midnight on the date listed.

Financial Responsibility Law: Financial responsibility laws require owners and operators of autos to maintain enough money to compensate those they injure. Liability insurance is the most common way to satisfy these requirements.

First Party Claims: A claim for damage, loss or injury made by an insured.

Flat Rate Cancellation: Termination of an insurance contract at inception. This policy is never in effect.

Forced Placed Insurance: Insurance purchased by a bank or creditor on an uninsured debtor's behalf to cover the property, so that the creditor receives payment if the property is damaged or destroyed.

Foreign Insurance Company: An insurer domiciled in another state.

 

  
 
Insurance Definitions

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ID Card: A card issued by your insurer containing basic information about your insurance policy. Some states require you to keep an ID card in your vehicle.

Insurance Fraud: The act of falsifying or exaggerating the facts of an accident to an insurance company to obtain payment that would not otherwise be made. Common types of insurance fraud are staged accidents, exaggerated injuries, and inflated medical bills.

Insurance Score: Confidential ratings used for underwriting in some states as a rating tool. It may include information about the consumer's payment history, the number of open accounts and if bankruptcy has been filed. It is a measure of how financial affairs are managed and does not include assets, income information or race information.

Lapse in Coverage: 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.

Lien holder: A person or organization with a financial interest in property up to the amount of money borrowed or still owed on the property.

Motor Vehicle Record (MVR): A report from the agency that issues your driver's license, listing accidents and violations that appear on your driving record. This report is used to verify information provided by insurance applicants and policyholders.

Negligence: The failure to exercise the care that is expected of a reasonable person in similar circumstances.

No-Fault Insurance: May pay for your medical treatment, lost wages, or other accident-related expenses regardless of who caused the accident. This coverage is subject to the terms, limits and conditions of your policy contract and is not available in all states.

Non-Renewal: When an insurer decides not to renew a policy at the end of its policy period.

Passive Restraint System: A passenger safety system, such as an air-bag, that activates automatically in the event of an accident.

Physical Damage: Damage to your covered vehicle from perils including (but not limited to) collision or upset with another vehicle object, fire, vandalism and theft. See our coverage definitions page for more information.

Physical Damage Coverage: Pays for damage to your car this could be through Collision Coverage or Comprehensive Coverage (Also referred to as Other Than Collision)

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

Policy Change: Any change made to your insurance policy during the period that the policy is in force.

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.

Policy Limit: The maximum amount a policy will pay, either overall or under a particular coverage.

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

Policy Term: The length of time that the policy is in force. Most companies offer annual and semi-annual policies.

Policyholder: One who maintains ownership in an insurance policy. This may refer to the policy owner or those covered under the policy. See also Named Insured.

Preferred Risk: Any risk considered to be better than the standard risk on which the premium rate was calculated.

Premium: The price of insurance an insured person pays for a specified risk for a specified period of time.

Premium Financing: When a policyholder contracts with a lender to pay the insurance premium on his/her behalf. The policyholder agrees to repay the lender for the cost of the premium, plus interest and fees.

Primary Use: What your vehicle is mainly used for (pleasure, to and from work, business, commercial, or farm).

Principal Driver: The person who drives the car most often.

Private Passenger Automobile: A four-wheeled motor vehicle that is subject to motor vehicle registration and used for private personal use.

Private Passenger Autos: Ordinary cars, station wagons and jeeps, utility autos (pick-ups, panel trucks and delivery vans of 1,500 lbs. or less, not used commercially) and utility trailers designed to be pulled by a private passenger auto.

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.

Rate: Often used as a synonym for premium but actually refers to the base rating units that are used to determine the final premium.

Reinstatement: The restoring of a cancelled policy to full force and effect. The reinstatement may be effective after the cancellation date, creating a lapse of coverage. Some companies require evidence of insurability and payment of past due premiums plus interest. They may also require a signed no-loss form.

Term: The length of time for which a policy or bond is in force.

Theft: The unlawful taking of another's property with the intent to permanently deprive the owner of its use or possession.

Third Party: Person or entity not party to an agreement but with an interest in the agreement.

Third Party Claim: Claims for injury or damage to property of a third party alleged to have been caused by the insured.

Threshold Level: Under some no-fault insurance laws, the threshold level represents the degree of injury a claimant must establish before being allowed to sue the negligent party. The threshold may be verbal (regarding the severity of the injuries) or a dollar amount ($10,000), or both. For example, with a threshold of $5,000, an injured person may sue if his/her injuries and other economic damages (rehabilitation expenses, loss of income, etc.) exceed $5,000.

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). Automobile liability insurance is purchased to protect one from suits arising from unintentional torts.

Tort Feasor: One who commits a tort (see the definition of tort).

Total Loss: The condition of an automobile or other property when damage is so extensive that repair costs would exceed the value of the vehicle or property.

Towing and Labor Costs: This endorsement, which is added to the physical damage coverage, provides reimbursement up to a specified limit to tow your vehicle or pay for on-site labor costs.

Transportation Expenses: Subject to a daily and maximum dollar limit, this coverage (under the physical damage portion of an automobile policy) pays for transportation expenses incurred by the named insured only in the event of theft of an entire covered auto. Coverage generally begins after a stated minimum waiting period.

 

Vehicle Identification Number (VIN): A 17-digit number assigned to each vehicle manufactured in the United States after 1980. This number is used for identification purposes and is visible on the dashboard when viewed from the outside of the car. It indicates many identifiers including make, model, options, and year in official records (like a Social Security number for your car).