In Plain English
Posted on: Jun 02, 2015
The headache-free, In Plain English Guide to Insurance Terms
Accident: An incident where your vehicle is damaged by a another vehicle, a fixed object or structure, or leaving the roadway with no other vehicles involved.
Actual Cash Value (ACV): This is the cost to replace your vehicle minus depreciation. Mileage, age, and vehicle condition are the 3 biggest drivers of depreciation and cause the ACV of your car to diminish over time. Insurance companies use this valuation process to determine how much should be paid for your vehicle at the time of a loss. Just like you wouldn't pay the brand new price on a car that is 5 years old, an insurance company will not give you the brand new value of your vehicle because it's no longer brand new.
Agent: A licensed person who helps you find the absolute best rate on your car insurance. Agents can be self-employed, work directly for one insurance company, or, as in the case of The Zebra, be licensed to sell the policies of hundreds of different insurance companies, ensuring you save the most on your coverage.
At fault: You crashed into someone or something and there’s no one else to blame but your sorry self. (Don’t worry, this is why you have insurance!)
Automobile Insurance: A deal between you and a company. You pay them a set monthly amount. In return, the company promises to pay for possible future damage, injury, or loss. In other words, because you know that statistics say you will have an accident (or two or four) at some point, you pay a small chunk each month to cover them, instead of paying for the whole thing after the fact.
Binder: This is another term for Declarations Page normally used by a car dealer. This is what your salesperson will need to see to verify that you have the right insurance before you drive off the lot.
Bodily Injury: Any physical injury suffered by a person, whether that’s you or the other driver. So this isn’t about your auto’s ‘body’ but your own body—you know, the one that craves a nap and ice cream at twenty-minute intervals.
Carrier: Contrary to instinct, this has nothing to do with transporting or lifting anything. A carrier is just another word for your insurance company, pure and simple.
Claim: This is what you file with the insurance company after an accident or incident. It’s your way of saying, can you help me handle this and pay this money you promised to in the event of something bad happening, please?
CLUE Report: An official document containing claims information from any of your past insurance providers. CLUE is short for Comprehensive Loss Underwriting Exchange and is generally used in conjunction with your MVR to verify the accuracy of the driving history information that you provided. These two reports are normally run prior to the company taking payment to start your policy.
Collision Insurance: Collision insurance covers damage to your vehicle in the event of an accident, aka you colliding with another inanimate object, whether that’s a fender-bender or a losing fight with an icy road. (It’s the sister-insurance to comprehensive coverage (see below); they’re almost always sold together.)
Comprehensive Insurance (Other than Collision coverage): Comprehensive insurance covers damage to your vehicle in the event of all kinds of unexpected, non-accident-with-another-car types of blunders, including (but not limited to!) weather damage, theft, and fire. You may also see this written as "Other than Collision" coverage. (It’s the sister insurance to collision coverage (see above); they’re almost always sold together.)
Covered loss: This means that the damage caused to your vehicle is covered and will get repaired. (Also called covered peril.)
Declarations Page: Often referred to as a "Dec Page" or "Binder" this document will break down the coverage on your policy, how much each individual line of coverage costs, and total premium. This will also include your policy term length, vehicles covered on the policy, drivers covered on the policy, and a lien holder (Bank) if you are financing your vehicle. If you are buying a vehicle, this is the document that your salesperson will need to have faxed or emailed to the dealership before you can drive the car off the lot.
Deductible: The amount you have to pay before your insurance benefits start kicking in. You’ll agree on this amount when you first buy your policy. For example, a $500 deductible means that that hefty door ding that will cost $350 to repair at the shop is all on your dime, but anything above $500 is covered by the insurance company.
Endorsement: No, this isn’t about celebs hawking Nikes or Wheaties: In insurance, endorsements are just additions or changes to your insurance policy.
Exclusions: Things the policy will not cover, which will always be listed directly and explicitly. For example, if you live somewhere that rarely experiences earthquakes, earthquakes might be excluded from your policy.
FR44: Often referred to as a financial responsibility filing, this is essentially a piece of paper that gets attached to your insurance policy and filed with the state. Much like an SR22, an FR44 can be required if you had a major driving infraction like a DUI/DWI and/or vehicular homicide. There are usually stipulations that require higher limits of liability coverage for an FR44 where an SR22 can be on a basic state minimum policy. You would be notified by the courts if you were required to have one filed with the state.
Full Coverage: There is no such thing as "full coverage" plain and simple. This term is used by auto loan lenders and dealerships to refer to Comprehensive and Collision coverage on your auto policy when you are financing a vehicle as a requirement to take a car off the lot. Since the bank owns your car until you have paid off the balance of your loan, they want to make sure they are "fully covered" if something happens to your car. This doesn't mean that you are fully covered as a driver, just that the actual cash value of the car will be paid if it is totaled due to a covered loss. This has absolutely nothing to do with any other optional coverage like medical, roadside, or rental car reimbursement.
GAP Insurance: GAP Insurance pays any additional amount that you owe on a car loan if the vehicle is totaled and the payout from the insurance company is less than what you still owe the bank. If your vehicle is valued at $20K but your auto loan totals $25K then you have a $5K gap that would be owed to your finance company if the car were to be totaled. This type of coverage normally doesn't have a cap so it offers more protection than Loan/Lease Payoff coverage offered through your insurance company but it's normally also quite a bit more expensive. Check Loan/Lease Payoff Coverage below to see the difference.
ID Card: This is your proof of insurance and is usually printed on a piece of paper (or more likely a document saved to your smart phone which is perfectly legal in lots of states) to show proof that you have at least the minimum legally required coverage for your particular state. It will normally include the name of the insurance company, the name of the primary driver, the Vehicle Identification Number (VIN), and the start and expiration date of your policy.
Independent Agent: A person on a mission to help you find the best car insurance policy and price, no matter which company is offering it. (The Zebra agents are independent agents whose only interest is getting you the best rate and coverage for your needs.)
Insured: This term refers to someone covered on an auto insurance policy as a driver so that means you! Once you visit thezebra.com, that is.
Insurer: Again, that’s your insurance company, aka the company backing you up so you don’t have to pay for a car accident or blunder out-of-pocket.
Lapse: This is the term used when your insurance policy cancels or expires. This should be avoided at all costs because even one single days worth of a lapse in coverage will cause your rates to be more expensive across the board. For more on why you don't want to have a lapse, check out the term for Prior Insurance.
Letter of Experience: This is a document that states the length of time you were with a particular insurance company and is issued by said company. Most insurance companies offer a discount for being previously insured before starting a new policy and they will request a letter of experience from your old company to verify how long you were actually insured as a condition of keeping the discount.
Lien Holder: This is a fancy word for the name of the bank or dealership who you will be making monthly payments to for your vehicle. Your lien holder will be listed on your Declarations Page so that way the insurance company knows to pay your bank first to cover your loan balance. If your vehicle is totaled, you will receive payment after the bank has been paid if your car is worth more than what you still owed.
Loan/Lease Payoff Coverage: Lots of people get this coverage confused with GAP Insurance and even though it shares some similarities, they ARE NOT the same thing. Loan/Lease Payoff coverage is normally available through your auto insurance company and they will require that you first have comprehensive and collision coverage before you can add it. This coverage varies by company but it normally only covers an additional 25% of your vehicles value if your car is totaled and you owe more on your loan that what your car is worth . Gap insurance will generally cover any remaining amount so that offers much more coverage than what you get through your insurance company with Loan/Lease Payoff. Check the term for GAP Insurance above to understand the difference.
Motor Vehicle Report (MVR): An official document that has tons of info about your driving record—crashes, moving and non-moving violations, and your license history from the DMV. This is normally used in addition to your CLUE Report to verify whether you provided accurate information about your driving history. These two reports are normally run prior to the company taking payment to start your policy.
No Fault: This term refers to an insurance policy where you (the insured) are covered for any losses by your own insurance company regardless of who is at fault in an accident. So if you are in a "No Fault" state, that means even if the other driver is at fault and you suffer injury, your insurance company pays for your injuries instead of the other driver's insurance.
Non-Owners Insurance: This is a type of policy that offers minimum state required auto insurance coverage for people who do not own a vehicle but still need to be insured. If you drive on occasion or your state is requiring that you have an SR22 and you don't own a vehicle then a non owner policy is right for you.
Personal Injury Protection (PIP) coverage: PIP insurance covers the cost of medical bills for you and your passengers in the event of an accident and normally covers work loss of varying percentages or amounts also.
Physical Damage Coverage: This is another term for the combination of Comprehensive and Collision coverage and is more accurate than using "Full Coverage".
Policy: This is what you purchase from an insurance company—the specific agreement you and the company come to, including how much you’ll pay, what is covered, and the length of your policy term.
Policy Term: The length of coverage provided on a policy. Policy terms are generally annual (12 month) or bi-annual (6 month) and at the expiration of the of the term the insured has the option to renew the policy, switch to a different company, or let the insurance Lapse (the last one is not recommended if you like your rates to be as low as possible).
Premium: What you pay to the insurance company each month, aka your bill.
Prior Insurance: If you have at least 6 months of prior insurance coverage without any Lapse then you will qualify for a hefty discount with the majority of insurance companies. The longer you have prior insurance then the better the discount will be when you shop for a new policy. And to prove your length of prior insurance, your new provider will ask for a Letter of Experience to keep the discount applied.
Quote: The insurance company’s estimate of what they can offer you, and at what cost to your pocketbook.
Renewal: This term refers to the period of time when your current policy is expiring and your new policy term is set to begin normally every six or twelve months. This is generally when your insurance company will reevaluate your policy risk so you may see your rate increase, decrease, or stay the same.
SR22: Also called a financial responsibility filing, an SR22 is not insurance but a document that is attached to your auto insurance policy that gets filed with your state's DMV. An SR22 is normally required by your state to reinstate your license but may not be required in every suspension situation. You would be notified at court or via snail mail if you were required to carry this filing on your insurance.
SR50: Only applies to the state of Indiana. This is basically a form that your insurance provider fills out and sends to the state to verify your insurance start and end date. It's simple, if you are being told you need one then just call your insurance company and they can normally file it within a few minutes.
State Minimum: This describes the minimum insurance coverage required to keep your vehicle legal on the road in your particular state. Some states require only liability insurance as their minimum and some states require that you carry additional coverage like Uninsured Motorist or PIP coverage, so saying that you "just want liability" may not be accurate. Using state minimum should avoid any confusion between you and your agent.
Umbrella Insurance: This is additional liability coverage that applies when you have exceeded the liability portion of your home insurance or auto insurance coverage. This coverage helps to protect you in the event of a lawsuit or a major insurance claim filed against you.
Underwriting: The process of evaluating the potential risk of offering insurance to a driver: Picture black-sunglass-wearing insurance companies calculating the spread before heading out to gamble in Vegas.
Uninsured/Underinsured Motorist Coverage: These two protect you from the damage done to yourself or your car by people who do not have insurance (uninsured), or have insurance that sucks, or do a hit-and-run (underinsured).
Vehicle Identification Number (VIN): This is your car’s serial number. The number can usually be found where the dashboard meets the front window, on the inside of the driver’s side door, or on your previous insurance policy documents.
(The) Zebra: A licensed insurance agency on a mission to bring transparency to the auto insurance world. Like a Kayak for car insurance, The Zebra brings you real-time quotes from more than 200 carriers—no spam. Easy, right?