Common Insurance Terms & Definitions

Actual Cash Value - The fair market value of one's property; technically, the replacement cost less the depreitation.

Actuary - A statistician who computes risks. Actuaries keep GEICO profitable and financially stable by setting prices, assessing trends, and determining how much to hold in reserve to pay claims.

Adverse Carrier - Term used to refer to the other party’s insurance company.

Agent - An individual who acts as the representative for a insurance company. The agent sells insurance, usually on a commission basis. This individual can be an "exclusive" where he only markets forone insurance carrier or "non-exclusive agent" where he may market for a number of insurance carriers.

Amendment - A change to the basic insurance policy contract. An amendment alters the policy; an endorsement adds to a policy.

Appraisal - Process that determines the value of one's property before or after a loss or the extent of damage after a loss.

Arbitration - A process of settling a dispute through an impartial party. It is used as an alternative to litigation.

Assigned Risk (AIP) - 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.

Assured - Means the same as an insured or the policyholder or someone who has an insurance policy.

At-Fault - The party that is legally liable for the damages in an accident.

Auto Damage or Property Damage Division - A division of the claims department that handles auto or property damage claims.

Auto Damage Adjuster - The auto damage adjuster is responsible for writing the repair estimate for a damaged vehicle.

Auto Insurance - Auto Insurance provides protection from losses resulting from owning and/or operating an auto. The insurance covers losses to the insured’s property and losses for which the insured is liable as a result of owning or operating the auto.

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

Bodily Injury - A personal injury sustained by a person.

Bodily Injury Liability Coverage - This portion of the policy pays damages for bodily injury or death resulting from an accident for which the covered person is at fault and provides the insured with a legal defense. This coverage is subject to the terms, monetary limits and other conditions stated in the policy contract.

Cancellation - Termination of an insurance contract before the end of the set policy period, by the insured or the insurance company.

Carrier - The insurance company or insurer.

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

Claimant - This term describes the individual or entity presenting a claim.

Claim Adjuster - A person responsible for investigating, processing and settling a claim.

Collision Coverage - Pays for damage to an insured vehicle when it hits or is hit by another car or object or if the car overturns.

Comparative Negligence - A doctrine of Law that, may enable claimants to recover a portion of their damages even when they are partially at fault, or negligent. Texas is a Comparative Law State.

Contributory Negligence - A doctrine of law that may prevent a claimant from recovering any portion of their damages if they are even partially at fault, or negligent. Texas is not a Contributory State.

Coverage - Protection and benefits provided in an insurance contract.

Damage - Loss or harm to a person or property.

Damages - Money that one party becomes legally obligated to pay to another party.

Declarations - The part of an insurance policy that includes the insured's name and address; the property that is being insured, its location and description; the policy period; the amount of insurance coverage for a loss and the terms of the premiums.

Deductible - The portion of a claim the insured must pay out of pocket. Choosing a higher deductible will lower one' insurance premium, but may be a costly decision if a loss occurs. Depreciation - The decrease in value of any property due to wear, tear, and/or time. Generally, depreciation is not an insurable loss.

Endorsement - An addition to the basic policy contract. An endorsement adds to the policy contract; an amendment alters it.

Estimate - An assessment of the cost to repair your damaged property.

Exclusion - Restriction in your insurance policy that limits and may exclude coverage for certain perils, persons, property, or locations.

Expiration Date - This date, found on one's declarations page, indicates when your policy coverage runs out or expires.

Field Adjuster - An insurance adjuster who works primarily outside of an office and often meets claimants in the public.

First Party - Term used to refer to an insured.

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

Hazard - Anything that increases the chance of an accident occurring.

Indemnity - Compensation for a loss intended to restore an individual or entity to the approximate financial position prior to the loss.

Indemnification - The act of providing compensation for a loss with the intent to restore an individual or entity to the approximate financial position prior to the loss.

Independent Adjuster - An individual who estimates losses on behalf of an insurance company, but is not an employee of that company.

Inspection - Verification of a vehicle's physical condition.

Insurable Interest - Exists when an individual would suffer an economic loss as the result of damage to property or body.

Insurance - Insurance is a system in which groups of people who have similar chances of suffering a loss transfer their risk of loss to an insurer who pools the risk of many people together. In exchange for payment of premium, the insurer promises to reimburse the person for all covered losses.

Insurance Score - Used in the underwrittinf departments in some states. An individual's insurance score is frequently based, in part, on a person's credit history, claims history and age.

Insured - A person or organization covered by an insurance policy.

Insurer - An organization that provides insurance.

Legal Liability - Liability imposed by law, as opposed to liability arising from an agreement or contract. The basis of such liability is also refered to as "tort liability."

Liability - Any legally enforceable obligation or responsibility for the injury or damage suffered by another person.

Liability Adjuster - The liability adjuster handles the investigation and processing of a a loss or claim. These adjusters' responsibilities can include collision payments, property damage payments, and bodily injury settlements. In some states, these adjusters may also handle the medical portion of your claim.

Liability Investigation - The process of gathering information to determine the the cause of an accident or loss.

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

Limits - The maximum amount of protection purchased by the insured for a specific coverage.

Limits of Liability - The amount specified in your policy up to which the insurance company will protect you.

Loss - Any measurable dollar cost of damage and/or injury suffered by a person.

Loss of Use - Compensation to a claimant for financial consequences resulting from the inability to use property as the result of accident-related damage.

Medical Adjuster - A medical adjuster is responsible for reviewing all medical bills, replacement/essential services, and lost wages submitted to the company for injuries sustained by you and/or the passengers in your vehicle (depending upon the state in which you live and the coverage on your policy).

Medical Payments Coverage - Pays medical expenses related to an automobile accident. This coverage is subject to the terms, limits and conditions of your policy contract.

Misrepresentation - To make written or verbal statements that are untrue or misleading.

Named Insured - The person or entity listed on the policy declarations page.

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

Occurrence - An event, or repeated exposure to conditions, which unexpectedly causes injury or damage during the policy period.

Original Equipment Manufacturer Parts - Auto parts obtained from the original manufacturer of the car or the supplier of the original part.

Peril - A danger or hazard that can cause a loss, for example, a car collision with an object, or a fire.

Personal Injury Protection - Can pay for your medical treatment, lost wages, or other accident-related expenses regardless of who caused an auto accident.

Personal Property - Property that is not land or connected to land (real estate), such as furniture or jewelry.

Physical Damage - Damage to property.

Policy - A contract between you and the insurance company.

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

Policyholder - The person or entity listed on the policy declarations page.

Premium - The price of the insurance policy that the insured pays in exchange for insurance coverage.

Proof of Loss - A statement made regarding the extent of the claim; it may be requested in accordance with the conditions of the policy.

Property Damage Liability Coverage - Pays for damage to someone else's property resulting from an accident for which you are at fault and provides you with a legal defense.

Proximate Cause - An act or omission initiating an unbroken sequence of events resulting in injury to a person or damage to property.

Release - Legally binding contract stating that all obligations past, present or future arising from a particular accident or occurrence have been fulfilled.

Salvage - Damaged property which is taken over by the insurance company after payment of a claim.

SR-22, Certificate of Financial Responsibility (CFR) - An SR-22 (CFR) is a certificate mandated by the state to verify that an individual is maintaining auto insurance liability coverage. If a person needs an SR-22 (CFR), they will usually be notified by their state's Motor Vehicle Department.

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 an insured.

Tort - A private or civil wrong or injury, other than breach of contract, which violates a person's legally protected right(s), and for which the law may permit a remedy in the form of money damages.

Tortfeasor - One who commits a tort (see above).

Total Loss - Property that has sustained damage so extensive that repairing it is not reasonable. A vehicle is considered a total loss if it cannot be repaired safely, if repairing the vehicle is not economically practical, or if state regulations require the same.

Umbrella Insurance - Provides high limits of additional liability coverage above the limits of your homeowners and auto policy. In addition, it provides coverage that may be excluded by other liability policies.

Underwriting - The process an insurer goes through to determine whether or not it will provide coverage for an applicant.

Uninsured Motorist Coverage - In some circumstances, may pay for your injuries or property damage caused by an uninsured motorist or, in some states, an unidentified driver. In some cases it also includes coverage for underinsured motorists and at-fault drivers with insufficient insurance to pay your claim.