AUTO INSURANCE DEFINITIONS
Declaration Page:
Generally the first or second page of the policy that states the name and address of the policy holder, the insured property (home or car), the effective and expiration date, bodily injury/property damage limits, and any supplemental information. It is often referred to as the “dec page”.
Deductible:
A specific amount of loss paid by the policyholder, before the insurance company pays its specified portion. Generally, an auto insurance policy has a deductible between $250 and $2,000; a home insurance policy usually has a higher deductible. If a lower deductible is chosen, premium payments are higher; if a higher deductible is chosen, premium payments are lower.
Binder:
A temporary authorization of coverage issued by an insurance company prior to the actual insurance policy becoming effective.
Bodily Injury:
In a case of an accident caused by the insured, this portion of an auto insurance policy provides coverage to make payment up to a specified amount for injuries to another party.
Property Damage:
In case of accident caused by the insured, this portion of an auto insurance policy provides for payment up to a specific amount for damage caused by the insured to another person’s automobile or property.
Subrogation:
A legal process in which the insurance company, after paying a loss, seeks to recover that amount from another party who is legally liable for the damage.
Uninsured Motorist:
In case of accident caused by another party who does not have auto liability insurance, this portion of an auto insurance policy pays to repair damage to the insured’s own vehicle/property, and then seeks to recover the amount paid through subrogation. This coverage differs from state to state.
Under-Insured Motorist:
In a case of accident caused by another party who does not have enough insurance to cover the total amount of damages, this portion of an auto insurance policy pays the additional, uncovered amount of damage to the insured’s own vehicle/property, and then seeks to recover that amount through subrogation. This coverage differs from state to state.
Personal Injury Protection (PIP):
In case of accident, this portion of an auto insurance policy covers medical treatment of injuries to the policyholder (driver) and the policyholder’s passengers if they are included. PIP coverage is only applicable in a few states.
Full Coverage:
Full coverage auto insurance pays for damages to the insured’s own vehicle/property and to the other party’s vehicle/property, regardless of fault. Full coverage insurance is subject to a deductible.
Liability Only:
Liability auto insurance pays for damages caused by the insured to the other party, but will not pay for damages to the insured’s own vehicle. A liability only insurance policy is less expensive in comparison to a full coverage insurance policy. It is suitable for owners of older cars.
Gap Insurance:
When an insured has an active auto loan, gap insurance coverage pays the difference between the car’s actual cash value and the amount owed to the insured’s leasing company or lender.
Underwriting:
Underwriting involves analysis, acceptance or rejection of insurance risks in order to charge an appropriate premium for insurance. Insurance companies have the right to increase or decrease a premium, even after the policy has been issued, if they discover violations that were not disclosed by the insured. Insurance companies also have the right to cancel a policy, even after it has been issued, if they discover risks that exceed their guidelines.
Umbrella Policy:
An umbrella policy covers losses above and beyond the liability limits of an auto policy or a homeowner policy.
