Auto Insurance Definitions & Terms
Updated January 1, 1 . AmFam Team
Understanding your auto insurance doesn’t have to be difficult. Increase your knowledge and better understand your coverages by browsing our glossary of auto insurance terms. Still have questions? Your American Family agent (Opens in a new tab) is the perfect person to ask!
A
Accidental Death and Dismemberment Coverage: Insurance coverage that pays a certain sum — up to policy limits — for accidental death and specific injuries. This coverage applies while traveling in a car or being struck by a car.
Actual cash value (ACV): The actual value of your vehicle, based on its current cost to replace it minus depreciation.
Adjuster: The person who investigates and settles insurance claims.
Agent: A person who sells insurance on behalf of an insurance company.
Application: The form you fill out with information about you. An insurance company will use this to decide if they should issue a policy and how much your rate will be.
At-Fault Accident: Any accident, regardless of size or amount paid, in which the driver was wholly or partially at fault.
Auto Accident: An event with your car that was not predicted and not expected to happen. Typically includes property damage and/or bodily harm.
B
Binder: When a temporary insurance contract is put in place in order to provide proof of coverage until you receive your permanent policy.
Bodily Injury: Injury, sickness, disease or death that results from an auto accident.
Bodily Injury Liability Coverage: Protects your assets if you are responsible for an accident where other people are injured or killed.
C
Cancel: To terminate a contract or a policy.
Casualty Insurance: Insurance to cover bodily injury or damage to the property of others.
Chargeable Incident: A chargeable incident can either involve an accident or a violation. It is an insurance-reported incident where you are either at fault for an accident, ticketed or summoned to court. Usually, when you’re deemed 50% or more at fault for an accident and the claim is over a certain dollar amount, your insurance company will consider the accident ‘chargeable’.
Claim: The amount of money a person(s) believes he or she should be paid by an insurance company as a result of an accident. Can be for property damage, bodily injury or both.
Claimant: A person who makes an insurance claim.
Collision Coverage: Pays to repair or replace your vehicle if you hit something else and no one else is at fault. Does not include collision with animals.
Comprehensive Coverage: Provides financial protection for damage caused by a number of causes other than an auto accident, including vandalism, fire, theft, flood, falling tree limbs, hail and collision with animals.
Consideration: The exchange of acts or promises needed for a contract to be valid. For example, an insurance company agrees to provide coverage in exchange for payment of the premium.
Contract: An insurance policy is considered a “contract” between the insurance company and the policyholder.
Coverage: The insurance protection in a policy.
Credit-Based Insurance Score: A credit-based insurance score provides an assessment of your insurance risk at a particular point in time. Only credit-related information is used in determining a credit-based insurance score.
D
Declarations Page (Dec): Forms part of the policy and contains information such as when, where and to whom the policy applies. The declarations page will also have a policy number, named insured, mailing address, effective dates, agent's name, listing of insured vehicle, lien holders (if any), rating information, endorsements and premium charges.
Deductible: The amount of the loss the insured agrees to pay before the insurance company pays – up to the policy limits – if one applies.
Depreciation: The loss in value of property due to wear and tear, age or becoming obsolete.
Direct Loss: Damage or loss caused directly by a particular peril.
Disability: When a person cannot continue his or her normal occupation due to bodily injury.
Dismemberment: Loss of (or loss of the use of) certain body parts, such as an arm or leg, resulting from accidental bodily injury.
E
Effective Date: The starting date of the insurance policy.
Emergency roadside assistance: Helps pay for services and support, such as towing, battery jump, tire servicing, delivering gas and oil, unlocking your car and even roadside repairs. Find out more about American Family Insurance Emergency Roadside Assistance.
Endorsement: An add-on coverage to your car insurance policy that provides additional benefits or exclusions. An endorsement may require additional premium. Also known as a rider.
F
Family Car Policy: An automobile policy including one or more of the following coverages: liability, medical expense, physical damage and uninsured motorist. Coverage is only for individually owned private passenger cars and trucks.
Full coverage: Though there is no such thing as “full coverage,” it is a common term used to describe the amount of auto insurance coverage someone has, and typically implies that the policy has at least liability, comprehensive and collision coverage.
G
Gap insurance: Lease and loan gap insurance coverage helps pay the difference between the actual cash value of the vehicle and the amount still owed on the lease or loan in the event of a total loss.
Garaging location: The place in which you primarily park your vehicle when it’s not in use — usually this is your primary residence.
Good Student Discount: A reduced automobile insurance premium for students who can prove good grades. This discount is given because studies have shown a relationship between good grades and safe driving.
I
Incurred: A loss is "incurred" when it happens, although it may not be paid until later.
Indemnify: To restore the victim of a loss, in whole or in part, by payment, repair or replacement.
Indirect Damage: Loss caused damage or injury to covered people or property, which is beyond the scope of the covered loss.
Insurance Amount/Limit: The maximum amount/limit an insurance company would pay in the event of an accident.
Insurance policy: The transfer of financial risk from one party (the insured) to another (the insurer). As long as the premium payments are made, the insurer promises to make payment(s) to, or on behalf of, the insured for financial losses that result from an auto accident.
Insurability: A person’s ability to obtain insurance. Many factors are taken into consideration including driving record, occupation, annual miles driven and type of vehicle.
Insured: The person protected under an insurance policy.
Insurer: The insurance company that provides insurance coverage and services.
L
Lapse: A policy that expires or cancels because the insured did not pay the premium amount.
Liability Insurance: Insurance which pays when the insured is legally responsible. Bodily injury liability covers other people’s bodily injuries or death for which the insured is responsible. Property damage liability covers the insured if the insured’s car damages someone else’s property.
Limit: The maximum dollar amount of protection purchased by the policyholder for specific coverage’s.
Loss: Direct and accidental loss or damage to a person or property.
M
MVR: Motor vehicle report. MVRs are kept by the state containing the individual’s licensing status, violations, suspensions and other infractions for a certain number of years.
Mandatory Insurance: When state law requires that auto owners/operators have auto insurance. Requirements vary from state to state.
Medical Expense Coverage: This pays medical expenses of the policyholder and any passengers injured while in the insured auto. This coverage also pays the medical expenses of the policyholder and members of his or her family who are injured while riding in any other auto or struck by any auto.
Minimum Limits: The minimum insurance limits as required by your state’s laws. Because these amounts vary by state, contact your local American Family Insurance agent (Opens in a new tab) for details in your area.
Mutual Insurance Company: An insurance company that is owned by its policyholders — not stockholders.
N
Named driver exclusion: An endorsement on the policy that excludes coverage while a specifically named person is the driver.
Named insured: The first person named on the application is the primary named insured, and the second person named on the application is the secondary named insured. These are the policyholders named on the declaration page.
No-Fault Automobile Insurance: Coverage to compensate victims of automobile accidents without having to prove who was at fault in causing the accident. Because laws vary from state to state regarding no-fault auto insurance, contact your local American Family Insurance agent (Opens in a new tab) for details in your area.
Non-owners policy: Provides liability and additional add-on coverage for someone who does not own a vehicle or have regular use of a vehicle.
Non-Ownership Automobile Liability: Insurance against the liability incurred while driving an auto not owned or hired by the policyholder.
Non-renewal: When an insurance company decided not to renew a policy.
O
Occasional driver: Any person who is not the primary driver of the insured vehicle is known as an occasional driver.
P
Personal Automobile Insurance: Any insurance covering cars for personal use. Auto insurance may include liability coverage, property damage coverage and medical expense coverage.
Personal Injury Protection: Often referred to as "PIP" or "No-Fault" insurance. PIP pays covered medical expenses, and in some states lost wages and other damages — up to the limits of your policy — if you are injured in an auto accident, regardless of who is at fault. Because laws vary from state to state regarding no-fault auto insurance, contact your local American Family Insurance agent (Opens in a new tab) for details in your area.
Policy: A formal written insurance contract describing the term, coverage, premiums and deductibles.
Policy period: The time your policy is in force from the effective date to the expiration date.
Policyholder: The person who applied for, pays for, and is issued the insurance policy.
Premium: The amount of money an insurance company charges to provide coverage.
Property Damage Liability Insurance: Covers the insured if legally responsible for the damage to the property of others.
R
Renewal: An extension of an existing policy for another policy period.
Rider: Supplementary coverage on your insurance policy that provides additional benefits for an added cost. Same as “endorsement”.
Reinstatement: When your policy goes back into force after it lapsed due to nonpayment of premiums.
Rental reimbursement coverage: Reimburses you a set daily amount for a rental car if your car is being repaired due to damage covered by your auto insurance policy.
S
Subrogation: In insurance, subrogation substitutes one party (insurer) for another party (insured) in order to pursue any rights that the insured may have against a third party who is liable for a loss. For example: If you are injured and it is another person’s fault, your insurance company may pay your claim and then pursue (collect) the damages from the other person or his or her insurance carrier.
Surcharge: When an insurance company adds an extra charge to your premium if you have any at-fault accidents or violations.
T
Term: The length of time covered by a policy.
U
Underinsurance: Less than enough insurance to cover the amount of loss that the policyholder may suffer.
Underwriter: One who evaluates and accepts or rejects risks for an insurance company. Also the person who reviews an application for insurance and decides whether the applicant qualified for coverage and at what rate.
Underwriting: The process an insurance company uses when deciding to accept or reject an application for coverage.
Uninsured motorist property damage coverage (UMPD): Helps pay for damages to your insured car when the damages are caused by a driver who is uninsured or caused by a hit-and-run driver. Not available in all states. This coverage is typically not necessary if your car has collision coverage.
V
VIN: Vehicle Identification Number. This is a unique 17-character sequence containing both letters and numbers that identifies a vehicle.
Related Articles
- Is Bundling Insurance a Good Idea?
Having insurance is an easy decision. After all, it protects the things you work so hard for in life. Between your car, home and even your family's financial well-being, you have a lot to protect. Bundling insurance can make things simple by putting multiple types of coverages under one plan by one provider. It’s a good idea on paper, but is bundling insurance a good idea for your unique situation? Read on to learn how to make the smart choice.
What is Bundled Insurance?
You might not even be ready to ask, “Should I bundle home and auto insurance?” We should first answer a possibly more pressing question: “What is bundled insurance?” Simply put, bundling insurance means buying multiple types of insurance policies from one provider. The provider may offer to place some combination of your car, home, rental, umbrella, life, boat, RV, or other coverages under one plan.
The Benefits of Bundling Insurance
With that crucial first question answered, you might now be asking: “Why bundle insurance?” There are plenty of benefits, and we’ll go over some of the more popular reasons below.
1. Bundling saves you time
With our multi-product discount, you can save on your premium. It could apply if you bundle motorcycle and renters insurance, life insurance and RV, or just about any insurance you have. For example, you can save up to 23% by bundling home and auto insurance policies.*
2. Bundling saves you time
Managing even a single insurance policy involves a great deal of responsibility. You must ensure you have the right amounts and types of coverage, track your renewal dates, and make payments. Now imagine trying to balance multiple policies with multiple providers. Bundling puts everything together under one provider, easing the burden.
We make it even easier with the MyAmFam app. It lets customers view their premiums, effective dates and policy info all in one spot. It’s quick and easy to manage your insurance and pay all your policies at once. You can even set up AutoPay and schedule payments within the app. That way, you’ll never have to worry about missing a payment. Download it and sign up for My Account.
3. Bundling makes the claims process easy
If a covered event causes damage to more than one of your belongings, you won’t have to call multiple numbers. You’ll have one number for one insurance company, which can begin the claims process for all your belongings that need restoration.
Filing claims is easier at American Family Insurance with the MyAmFam app or My Account. You can easily file your claim anywhere at any time and track its status across every step. Our 24/7 claims department is always ready to help you get your life back on track.
4. Your agent is your bundling expert
When you bundle, your agent gets to know you and your insurance needs. They’ll identify any gaps in your coverage and make recommendations, so you’ll be protected against the unexpected.
Is Bundling Right for You?
The benefits of bundling insurance can be a big deal. Even so, be careful about jumping right into it. “Is bundling insurance a good idea?” isn’t always an easy question to answer. Like anything involving coverage, it’s worth thinking about what is best for you. You should at least compare rates — which means more than seeing which price tag’s number is bigger.
More important is determining which one gives you more for your money. The coverages included in insurance bundles may be less than what you’d get from purchasing them individually. They might not even have the same insurance company underwriting and servicing your policies, which could mean an inconsistent level of service. Whatever your decision, make sure it’s an informed one based on the pros and cons of bundling your insurance.
Bundle Your Insurance with American Family
When you have a lot to protect, it makes sense to bundle. Your American Family Insurance agent can help get you started. Connect with yours today and learn how much you can save bundling your home and auto insurance. You’ll get the protection you need and the peace of mind you deserve.
This article is for informational purposes only and includes information widely available through different sources.
*Customers who bundle auto and home insurance policies may save up to 23% on both policies together (as of July 2022). Discounts may vary by state, property, policy form and company underwriting the auto and/or home policy. Discounts may not apply to all coverages on an auto or property policy.
- What Is Umbrella Insurance?
Umbrella coverage offers additional financial protection over and above the personal liability limits of other currently active insurance policies you have. Think of umbrella insurance as a powerful financial shield that can help protect your savings and future earnings under certain situations.
Whether you’re found at fault for a multi-vehicle crash on the interstate, or a guest slips and falls down the icy steps outside your home — the added coverage in an umbrella policy can kick in and help cover any remaining costs should the liability limits on your underlying car or homeowners max out.
And umbrella insurance coverage doesn’t stop there. Liability lawsuits can come in many forms and the hefty financial judgements that frequently accompany them can also drain your savings. Today, let’s take a closer look at umbrella insurance to help you understand how this coverage can help protect your financial dreams and everything you’ve worked so hard for.
- Tax Identity Theft
You’ve probably heard the saying, “the early bird gets the worm.” But what does that mean for Americans who file their tax returns early?
To most of us, it usually means quicker refunds. But early filing could also mean significantly reducing your chances of falling victim to a growing trend in identity theft. It’s called tax return identity theft and it’s affecting Americans at an alarming rate. In fact, per the Taxpayer Advocate Service (TAS), an independent organization within the IRS, 5.2 million tax returns were tagged as fraudulent in 2020. Not to fret! We’ll help you understand tax related identity theft, the signs to look out for, and what to do if it happens to you.
What Is Tax Identity Theft?
Tax return identity theft is the act of filing a return using a stolen identity and taking the victim’s refund.
Equipped with three simple ingredients — a name, birthdate and Social Security number — the thief can commit tax fraud resulting in delayed or stolen refunds. And while a swiped refund may seem like a worst-case scenario, thieves may also use your stolen identity to obtain employment, an act with even greater impact.
When an identity thief uses your SSN for employment, all the income they earn under your identity must be reported. Meaning that when you go to file your taxes and the earned income numbers don’t match, the IRS will flag your return as suspicious. This can have significant financial impacts if taxes on the unclaimed earnings are imposed and can lead to prolonged stress with a request to audit your taxes.
The victims of fraudulent tax return identity theft can face stressful obstacles on their path to recovering from a stolen tax return and identity theft. One of the most significant steps in protecting your financial future from being compromised is education and understanding how this type of theft occurs, and what to do if you find yourself in this situation.
- Dog Liability Insurance for Homeowners
Whether you raised him from a pup or adopted her later in life, you don’t just view your dog as a pet: you consider them a member of your family. According to a survey by the American Pet Products Association, almost 90 million dogs are owned as pets in the United States — and while your dog offers a whole lot of love and laughter, they can also be a potential liability. Luckily, we offer dog-friendly homeowners insurance.
At American Family Insurance, we love pets and understand that they’re part of your household. That’s why we want to make sure you understand exactly how your dog affects your homeowners insurance and ensure that you have the proper protection in place not only for your home, but for your dog, too.
Is My Dog Covered by My Homeowners Insurance?
Whether or not your dog is covered by your homeowners insurance depends on who you have as an insurance provider. With American Family, your home, renters, manufactured home or condo policy will provide dog liability coverage — a form of financial protection against liability claims, including lawsuits for accidental bodily injury or damage to someone’s property. This includes paying for medical expenses if your dog injures someone or helping cover costs if your dog destroys someone else’s property.
It's important to note that your homeowners insurance won’t cover damage done by your pets to your own home, such as if your dog chews a hole in your sofa or scratches your doors or woodwork. And, keep in mind, your homeowners policy doesn’t cover injuries to you and the residents of your household. It only pays for injuries to others.
Need insurance for your dog? Consider pet insurance from an American Family Insurance agent to help you care for your pet through all stages of its life.
We also offer a special add-on pet coverage that provides up to $1,000 for veterinarian services, final expenses (like burial or disposal fees) or the cost to replace your dog if death occurs. This coverage is applicable after a covered property loss.
Does Homeowners Insurance Cover Dog Bites?
Whether you’re walking your dog through the park or at home playing in the yard, the liability portion of your homeowners insurance policy will help cover you if your dog bites someone or if they bite another dog.
Remember, a dog can bite out of fear, to protect their territory, to correct another dog’s behavior or for several other reasons. Because dog bites occur for a variety of reasons, keep these tips in mind to prevent your favorite family pet from biting:
- Keep your dog on a leash.
- Don’t leave your dog unattended with strangers or children.
- Make sure people respect your dog’s space.
- Spay or neuter your dog — this helps reduce their desire to roam and fight with other dogs. According to the National Canine Research Foundation, neutered dogs are three times less likely to bite.
- Socialize your dog. Introduce your dog to many people and situations so it isn’t nervous or frightened under normal social circumstances.
- Enroll your pooch in a dog training class. Not only does it help your pet learn better behaviors, but it teaches you to be a good pet owner, too.
And it’s not just bites that cause liability incidents — if your overly excited pup jumps on someone, knocks them over and breaks their wrist, you’ll be able to cover their medical expenses with the help of your liability coverage.
How Much Coverage Do I Need for My Dog?
Your homeowners policy has a liability “limit” that, in the event of a loss, will cover up to a certain dollar amount. Your liability limit is the amount available to cover anything from a dog bite to your neighbor slipping and falling on your icy steps. To understand your potential pet liability cost and the amount of coverage you need, think about the amount it may cost for medical expenses and if someone were to sue you. Sometimes this number is well into the six figures! For instance, if your liability amount is $300,000 but your dog bit someone and medical expenses and legal fees came to $500,000, you’ll be responsible to pay the remaining $200,000.
If you want to ensure you have adequate coverage in place, an umbrella policy is an added layer of protection which provides a much higher level of coverage to financially protect you from unexpected incidents with your dog.
Homeowners Insurance Dog Breed Restrictions
Unfortunately, not all dogs will meet the criteria to be included under a policy. While most dog breeds won’t impact your eligibility for homeowners coverage, there are some breeds that require additional considerations, such as whether your yard is fully and securely fenced. You must also provide certain documentation to be considered eligible, like evidence of up-to-date annual vaccines and proof that your dog has been spayed or neutered.
It’s also important to note that, depending on your dog’s prior history (e.g. history of biting, if they were trained or used as an attack or guard dog), they might be subject to a dangerous dog liability limit that reduces their liability coverage for losses to $25,000.
Your American Family Insurance agent can help you determine the specific requirements for insurability based on the breed of your dog.
At American Family, we want to help protect all the things that matter most to you. Connect with your agent and gain peace of mind that you have the right coverage in place for your four-legged friend.
This article is for informational purposes only and includes information widely available through different sources.
