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In order to help
you better understand your auto policy, we’ve put together a
glossary of basic auto insurance terms.
Aftermarket
Part - After-market parts are made by a company other than the
manufacturer of the vehicle.
Actual Cash
Value- An amount equivalent to the fair market value of the
stolen or damaged property immediately preceding the loss. For real
property, this amount can be based on a determination of the fair
market value of the property before and after the loss. For
vehicles, this amount can be determined by local area private party
sales and dealer quotations for comparable vehicles.
Admitted
Company - An insurance company authorized to do business in
California.
Agent - A
licensed person or organization authorized to sell insurance by or
on behalf of an insurance company.
Auto
Insurance - Coverage on the risks associated with driving or
owning an automobile. It can include collision, liability,
comprehensive, medical, and uninsured motorist coverages.
Binder -
A temporary or preliminary agreement which provides coverage
until a policy can be written or delivered.
Bodily
Injury - Bodily harm, sickness or disease, including death. This
does not include communicable diseases such as HIV/AIDS.
Broker -
A licensed person or organization paid by you to look for
insurance on your behalf.
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Cancellation - The termination of insurance coverage
during the policy period. Flat cancellation is the cancellation of a
policy as of its effective date, without any premium charge.
Claim -
Notice to an insurer that under the terms of a policy, a loss
maybe covered.
Claimant -
The first or third party. That is any person who asserts right
of recovery.
Collision
Coverage - Coverage that insures against damage to your vehicle
as a result of hitting another vehicle or object (i.e. a tree).
Comprehensive
Coverage - Coverage that insures against damage to your vehicle
as a result of a loss caused by something other than collision. Some
examples are theft, fire, vandalism or falling objects. This
coverage is sometimes referred to as "Other-than-Collision".
Coverage
- The scope of the protection provided in your insurance contract,
as well as any of several risks covered by a policy.
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Declaration - The part of your written policy
(contract) 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.
Decline -
The company refuses to accept the request for insurance
coverage.
Deductible - The portion of a claim you pay out of
pocket before the insurance company pays. A higher deductible will
lower your premium and you do not have to carry the same deductible
for comprehensive and collision coverages.
Depreciation - A decrease in value due to age, wear
and tear, etc.
Endorsement - Any change made to a policy.
Exclusion
- A restriction in your insurance policy that denies coverage for
certain perils, persons, property or locations.
Expiration
Date - The date on which the policy ends.
Grace Period
- A period (usually 31 days) after the premium due date, during
which an overdue premium may be paid without penalty. The policy
remains in force throughout this period.
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Insured - The person or organization covered by an
insurance policy.
Insurer -
The insurance company.
Liability
Coverage - Coverage that insures against damages (to
other party) for bodily injury or property damage when you are
legally responsible for an auto accident.
Limits of
Liability - The specified amount up to which the insurance
company will protect you as set forth in the policy.
Loss
experience - The types and amounts of claims that you have
previously had.
Material
Misrepresentation - The policyholder / applicant makes a false
statement of any material (important) fact on his/her application.
For instance, the policyholder provides false information regarding
the location where the vehicle is garaged.
Medical
Payment Coverage - Coverage that pays for minor medical expenses
(to you or your passengers) resulting from an accident, regardless
of fault.
No-fault
Insurance - An insurance system where your insurance coverage
pays for your injuries regardless of who caused the
accident.
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Policy - A contract between you and the insurance
company.
Premium -
The price of the insurance policy.
Premium
Financing - 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.
Property
Damage - Physical injury to, destruction of or loss of use of
tangible property (of other party).
Quote - A
cost estimate for insurance coverages based on specific information,
including drivers, vehicles and driving record.
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Rate - The amount you pay as premium.
Replacement
Cost - The cost to repair or replace an insured item. Some
insurance only pays the actual cash or market value of the item at
the time of the loss, not what it would cost to fix or replace it.
If you have personal property replacement cost coverage, your
insurance will pay the full cost to repair an item or buy a new one
once the repairs or purchases have been made.
Replacement
Value - The full cost to repair or replace the damaged property
with no deduction for depreciation, subject to policy limits and
contract provisions.
Rider -
Usually known as an endorsement, a rider is an amendment to the
policy used to add or delete coverage.
Risk -
The chance of loss.
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Subrogation - The process of payment recovery
whereby your insurance company settles the claim for damage to your
car and seeks payment recovery (including your deductible) from the
other party if your car is damaged because of that party's
negligence.
Surcharge -
An extra charge applied by the insurer. For automobile
insurance, a surcharge is usually for accidents or moving
violations.
Underwriting - The process of determining risk and in
what amounts and on what terms the insurance company will accept the
risk.
Uninsured/Underinsured Motorist Coverage - Coverage
that insures against damages (to you or your passengers) for bodily
injury when the responsible party has no insurance or insufficient
insurance to pay for damages. This coverage includes hit-and-run
accidents.
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