Insurance Glossary: A-D

Auto “Pleasure Use”

An auto can be for “pleasure use” if it is not used for business. At the option of the insurance company, pleasure use can include driving to or from work or school, if that location is less than a specified [...]

Driver Experience

Your past experience in the insurance company’s eyes is all about how many automobile losses and violations you have since you began driving. This is variously referred to as the “loss record of the insured,” or “loss experience”, or “loss [...]

DWI

These initials stand for “Driving While Intoxicated” due to use of alcohol or drugs. A person is considered DWI when he or she is driving a motor vehicle and has a blood alcohol or drug level that exceeds the state [...]

Dune Buggy

A dune buggy is a motor vehicle designed or modified for use principally off road on rugged terrain.

DUI

A person is considered DUI or DWI when he/she is driving a motor vehicle and has a blood alcohol level that exceeds the state limit or when he/she operates a motor vehicle after having used drugs.

Dual Air Bags

This refers to the installation of an air bag system for both the driver and front seat passenger of a vehicle.

Driving Record

Any moving violations you have been issued, and any reported accidents in which you have been involved are filed with the department of motor vehicles in your state and become part of your driving record.

Driver Training

Some insurance companies offer a discount for having taken a driver training course from a certified instructor. You will need a certificate verifying that the course was completed.

Driver Exclusion Endorsement

This is a change or amendment to your policy to specifically exclude certain drivers from coverage under your auto insurance.

Driver Education

This is a class that new drivers take in order to learn how to drive and get their license. It is available to anyone and must be taught by a “Certified Instructor.”

Driver Discounts

Many insurers offer savings to consumers who meet certain standards. Available discounts vary with each insurance company. Percentages will differ as well depending on the company that insures you. An example of some discounts are Good Driver, Accident Prevention Course, Driver Training, Good Driver [...]

Drive-other-car Coverage

This provision in an auto policy is designed to protect the policyholder/drivers when driving cars other than the one/s described in the policy.

Drive-in Claim Service

Auto insurance companies operate these facilities, where the extent of damages to a claimant’s automobile can be determined and, in many cases, settled on the spot.

Domestic Insurer

An insurance company formed under the laws of the state in which the insurance is written.

DMV

This is the state run regulatory office found in most cities where you can get your drivers license, register your vehicle, and do other things regulated by the state that are connected to your vehicle.

Diversification

This involves spreading one’s savings over a wide range of investment alternatives, such as savings account, common stocks, CDs, deferred annuities or real estate. At various times in a market cycle, some asset classes may do well while others do [...]

Distribution System

This consists of the various methods used by an insurer to provide life insurance policies to its customers. Companies and rating agencies want the sale of policies to be widely disbursed through a large number of agents or distribution outlets, [...]

Distant Students

Discounts for students who attend school more than 100 miles from home and do not take the car along.

Discount

Many insurers offer savings to consumers who meet certain standards. Available discounts vary with each insurance company. Percentages will differ as well depending on the company that insures you.

Disclosure Authorization Form

This is a form used in the nonstandard auto market, for people who do not qualify for automobile insurance from the usual sources because of their bad driving record. Such drivers are required to sign a disclosure authorization form before coverage [...]

Direct Writer

Some insurance companies, such as State Farm, Allstate, and Farmers, sell policies through salaried employees who only sell their policies. Direct writers generally do not sell their insurance through independent agents.

Defendant

This is someone who is being sued in a court action.

Deposit Premium

This is an initial payment needed in order to put the policy in force. It is usually a percentage of the total cost of an insurance policy.

Deductible

This is the amount you will pay out of your own pocket before the insurance company pays for a claim. For instance, if you have a $1,200 covered loss and $500 deductible, the insurance carrier pays $700. You pay the [...]

Declination

This is when the insurance company rejects a request for coverage for insurance.

Declared Value

You can request that a specified amount be allocated for the replacement of a covered vehicle. This declared value figure is stated in the coverage agreement. It’s more costly, but a popular option for owners of antique or collectible cars, [...]

Declarations Page

This is the first page of your policy and contains basic information such as the names of people covered, the dates the policy is in effect, covered cars, the types and dollars limits of your coverage and short-hand references to [...]

Credit Report

This is a confidential report made by an independent organization that has investigated the credit history of a someone requesting coverage. Credit history generally reflects the subject’s credit obligations and history of meeting those obligations.

Covered Vehicles

These are the cars listed on your policy.

Covered Person

This is the person protected under the contract/policy of insurance.

Covered Loss

This is an injury, death, property loss or legal liability, for which an insurance company will pay benefits under the terms of the policy.

Coverage

This is the total amount of protection provided to you by your insurance policy. It can include bodily injury, property damage, medical payments, uninsured motorist, uninsured motorist property damage, comprehensive and collision, rental reimbursement, towing and labor.

Conviction

This is an accident or moving violation.

Contract

The insurance company agrees, for a premium, to provide benefits, reimburse losses or provide services for you as the insured/policyholder. This agreement is called a contract, which is a legally binding agreement between two or more parties enforceable in a [...]

Conditions

These are certain provisions of an insurance policy that spell out the rights and duties of the insured and the insurance company in the event of a loss, cancellation procedures and inspection of property.

Compulsory State Laws

These laws spell out the coverages required by the laws written by your state legislature, for auto insurance. Included are rules, regulations and minimum limits of liability for auto policies by which the insurance companies’ policies must comply. These laws [...]

Comprehensive Coverage

This coverage pays for repairs to your insured vehicle when it’s damaged in a non-collision type mishap such as theft, fire, vandalism, hitting an animal and natural disasters. It also includes the theft of factory-installed equipment that is permanently attached [...]

Comparative Negligence

These are damages that are modified in proportion to the driver’s degree of negligence or fault in an accident. For instance, if you were found to be only half at fault, you would be responsible for half the damages. Courts [...]

Commute

This is the distance you travel to your place of employment or school. When the insurance company asks how far you commute, they want the one-way rather than round-trip mileage.

Combination Policy

This is a single policy that includes coverage for Auto and Homeowners (usually written as separate policies), and sometimes, umbrella (which extends the liability coverage on your Auto and Homeowners policies). It is sometimes referred to as a package policy. [...]

Collision Deductible Waiver

This coverage is available in certain states and only if you have Uninsured Motorist Coverage. With this coverage, if an accident with an uninsured motorist causes damage to your auto, and if you have the correct documentation that the other party [...]

Collision

This covers the repair or replacement of your car as the result of an accident, regardless of who was at fault. It is usually required if your car is financed or leased. Typically, it costs about one-third of the total [...]

Clause

Also known as a form, attachment or endorsement, these are sentences and paragraphs that describe various coverages, exclusions, duties of the insured, locations covered and conditions that suspend or terminate coverage.

Classic Auto

A classic auto is an automobile which is 10 or more years of age, is of significantly higher value than the average value of other autos of the same make and model year, and is not driven more than 2,500 [...]

Claims Payments

This compensates the insured or claimant for a covered loss and should usually be paid within 90 days of filing, depending on the claim.

Claims Occurrence

If a claim arises out of an event during the period when a policy is in force, the insurance company is responsible for its payment, up to the limits of the policy, regardless of when the insured submits the claim.

Claims Made

If a claim is made during the time period when a liability policy is in effect, an insurance company is responsible for its payment, up to the limits of the policy, regardless of when the event causing the claim occurred.

Claimant

This is the person who is requesting payment for a loss.

Claim Report

This report gives the facts of a claim to the insurance company for payment of a covered loss. Sometimes called First Report.

Claim

This is a demand for payment from the insurance company by the policyholder, under the terms of an insurance policy. Claim payments are usually paid within 90 days of filing, depending on the claim. A claim report gives the facts [...]

Certificate of Insurance

This short-form documentation provides the proof of insurance often required for loan transactions or other legal documents. In many states, it can also be requested by a police officer.

Carrier

A carrier is the insurance company, also known as the provider or insurer.

Carpool

A carpool is a group of people who drive together to their place of employment. Members of a carpool are often eligible for a discount.

Capitalization

Companies raise money, or capital, by selling stock (common or preferred shares) or by borrowing money (short- or long-term debt, issuing bonds). Capitalization refers to how a company raised its capital.

Capital Structure

Companies raise money, or capital, by selling stock (common or preferred shares) or by borrowing money (short-or long-term debt, issuing bonds). Capital structure refers to how a company raised its capital.

Cancellation

This is when either the policyholder or the insurance company terminates a policy. Your rights to cancel as a policyholder vary from state to state and are limited by state laws. However, here are some of the ways in which [...]

Buyers Guide

This consumer guide for persons contemplating purchasing or applying for an insurance policy includes important policy information needed to compare insurance policies from different insurance companies. A buyer’s guide is generally only available to buyers who live in a state [...]

Business Use

The potential insurer will want to know if your auto is for “business use.” An example of business use would be a realtor who uses her automobile to show properties or a contractor who uses his personal truck to bring [...]

Broker of Record

This licensed broker/agent has a contractual agreement to represent you to the insurance company.

Bodily Injury Liability

This coverage pays up to a specific amount for injuries caused to other people when you are considered at fault in an accident. It pays for the medical treatments, ambulance service, loss of income, prosthetic devices, rehabilitation, or funeral costs [...]

Binder

In auto insurance, this is a receipt issued-by either the insurance company or an insurance agent on behalf of an insurance company-that ensures insurance coverage becomes effective immediately. Each insurance company has different rules on whether coverage is bound and the length [...]

Basic Limits

Minimum requirements on how much liability must be provided by an auto policy are referred to as basic limits. These limits often depend on state requirements.

Backdate

This is the process of making the effective date of an insurance policy earlier than the date the application is signed by the insured.

Automobile Coverage

Beyond covering you for damage to others (liability and property damage), your policy can cover your car against accidents (collision) with other cars or objects. It can cover your cars against damage from theft, vandalism, and other mishaps (comprehensive). It can [...]

Authorized Insurer

This is an insurance company/insurer authorized by the state to transact business in that state for specific types of insurance.

Assigned Risk Plan

Drivers unable to get insurance in the voluntary market because of their driving history are assigned to a specific insurance company who must provide coverage for the assigned driver for a specific period of time. The number of drivers assigned [...]

Assigned Risk

When a driver cannot obtain insurance from the voluntary insurance market (preferred,standard and nonstandard insurance companies), because of an unsatisfactory driving history, he or she will be assigned to a specific insurance company under an assigned risk plan. That insurance company [...]

Asset / Liability Management

Insurance companies carry out asset-liability management by matching the maturity of their investments with their expected liabilities, benefit payments and debts (obligations). Analysts review how the investments are set up to see when they mature or pay off. The concern [...]

Asset Quality and Concentration

Analysts look at the company’s investment portfolio in terms of type and quality, security and how well investments are spread out or diversified. This is an important measure, as the company needs to assess its investment income and eventually sell [...]

Artisan Use

A craftsman or skilled worker, such as a carpenter. A few insurance companies consider special rates for the miles an artisan drives to and from a job site.

Arbitration Clause

When disputes arise concerning the amount of recovery that would be paid to the insured under his or her uninsured motorist coverage, the arbitration clause would be used in settling the claim.

Auto Appreciation

A car can increase in value due to special added features or its popularity earned among collectors.

Appraisal of Loss

When the insurance company and car owner disagree about the actual cash value of their loss, each party can call in an appraiser. If the appraisers cannot agree, they call in an arbitrator.

Appraisal Clause

This is similar to an arbitration clause. However, an appraisal clause is used for disagreements on value of property or the amount of loss under physical damage coverage.

Apportionment

When more than one insurance contract covers a loss, the amount to be paid is divided amongst them. The way it is divided is called an apportionment.

Appointment

This authorization from an insurance company gives the insurance agent the authority to act in its behalf as an agent. Generally, agents must be appointed by at least one insurer in addition to being licensed by the state.

Application for Auto Insurance

This represents one or more forms completed by an individual seeking to buy insurance. The purpose of the forms is to provide the insurance company with information needed to know what type of policy to issue and whether or not [...]

Applicant

The person applying for an insurance policy is an applicant. The applicant is usually the intended policyowner after a policy is issued. In automobile insurance, typically the applicant is the registered owner of the vehicle to be insured.

Anti-theft Devices

Specific devices to discourage car thieves–such as car alarms, ignition cut-offs, wheel locks and hood locks–often will earn discounts from insurance companies on comprehensive coverage. These discounts vary from company to company and are based on the type of alarm [...]

Antique Auto

An antique auto is a private passenger automobile twenty-five or more years of age, maintained solely for use in exhibitions, club activities and other occasions of public interest, used occasionally for other purposes, and is not driven more than 2500 [...]

Anti-lock braking system

This is a computer-controlled anti-lock braking system which, upon the driver’s application of the brake pedal, detects when a wheel is about to lock up and create a skid. The system prevents the skid and provides a smoother stop by [...]

All Terrain Vehicle

An all-terrain vehicle is a three, four or six wheel motor vehicle equipped with a motorcycle engine, balloon tires or crawler treads, and designed for off road use on rugged terrain, or rugged terrain and water.

Alien Company

This is an insurance company whose main office is located in a foreign country.

Alarm Only

Alarm only means that you have an alarm that can be heard from approximately 300 feet away and lasts for at least three minutes.

Age of Majority

The age at which you are granted full civil rights (e.g., able to vote, able to legally sign a contract on your own, etc.)

Adverse Underwriting Decision

Based on their insurance guidelines, an insurance company might cancel an existing policy or decline a request for coverage. This is called an adverse underwriting decision.

Admitted Company

This is an insurance company that has been licensed by the insurance department of a state to do business in that state.

Adjustment

The process of determining the amount of a loss and settling the claim is know in insurance circles as an adjustment.

Adjuster

This employee of the insurance company or independent agent assesses the damage to your person or property and makes recommendations to the insurance company as to the settlement of your claim.

Adequacy of Surplus

This is a measure of whether a company’s assets, in excess of liabilities, are sufficient to pay your benefits even if an unexpected catastrophe occurs. For this reason, the Insurance Answer Center only offers products from companies rated B+ (very [...]

Add-On Benefits

Add-on Benefits refers to add-on plans that pay certain benefits to person injured as a result of an automobile accident, regardless of fault. However, the injured person reserves the right to sue the negligent person who has been identified as [...]

Additional Insured

These are persons other than the policy owner, who are also protected by the terms of the policy.

Actual Cash Value

Actual cash value is usually defined as the fair market value of your vehicle, taking into account the mileage, age, options and condition of your vehicle.

Acts of God

Unlike accidents, these events are the result of natural causes, without human intervention, and could not have been prevented by reasonable care. Examples are floods, lightening, earthquakes, hurricanes, and tornadoes.

Active Disabling

Active Disabling alarms are those in which you can manually set a turn-off feature that disconnects the ignition or battery should someone try to steal your car.

Accidental Death Benefit

In some states, you can purchase Accidental Death Benefit coverage. It provides for payment if you or anyone covered by your insurance dies as a result of an accident within one year of the accident. This coverage will vary by [...]

Accident Prevention Course

Some insurance companies offer a discount for having taken an accident prevention course approved by your motor vehicle department. You may need a certificate of completion as proof.

Accident Frequency

When an insurance company asks about your accident frequency, they are asking about the number of accidents you have experienced over a period of time. Insurance Companies consider your accident frequency when it comes time to writing or renewing your [...]

Accident

An accident is an unintended, unforeseen casualty or mishap. It occurs suddenly and at a definite place.

A.M. Best

A.M. Best is the oldest insurance rating agency in the world and has been reporting on the financial condition of virtually all life and health insurance companies since 1899. It evaluates a company’s relative financial strength and overall performance in [...]