Topic: Auto Insurance Glossary

Package Policy

A single insurance policy that combines more than one coverage, each of which is usually sold separately. An example is homeowners insurance and auto insurance packaged together.

Per Occurrence Limit

This refers to the cap amount an insurance company will pay for all claims arising from a single incident. In an automobile accident, it comprises bodily injuries sustained by all parties. When Bodily Injury coverage is purchased in split limits, the second limit is the “per occurrence” limit: e.g. $100,000(per person)/$300,000(per occurrence)

Per Person Limit

This refers to the cap amount an insurance company will pay for any one person’s injuries arising from a single incident. In an automobile accident, it comprises bodily injuries sustained by each person. When Bodily Injury is purchased in split limits, the first limit is the “per person” limit: e.g. $100,000(per person)/$300,000(per occurrence)

Peril

The cause of a possible loss. For example, fire, theft, or hail.

Personal Liability Insurance

Personal liability insurance (also called Personal Umbrella Liability Insurance) is designed to protect you against a damaging legal judgment or lawsuit. This type of coverage expands the amount of your liability protection beyond the basic coverage provided under your auto insurance and/or homeowners insurance (or renters insurance) policies.

Personal Injury Protection (PIP) Coverage

In some states, this provides coverage for an insured person for certain “reasonable and necessary” expenses. The types of expenses that qualify for PIP coverage vary from state to state, but some examples of expenses may include: loss of services, income continuation, medical and hospital expenses, funeral expenses, and child care expenses for bodily injury caused by a covered accident (regardless of who was at fault). Click your state name below to see coverage details in your state.

Personal Watercraft

A small but powerful motorized watercraft sold under brand names such as Jet Ski or Wave Runner. Distinct from a boat or yacht.

Policy

The written contract of Insurance.

Policy Limit

The maximum amount a policy will pay, either overall or under a particular coverage.

Power of Attorney

Authority given one person or corporation to act for and obligate another, to the extent laid down in the instrument creating the power.

Premium

The amount of money an Insurance company charges for Insurance coverage.

Property Damage – Liability

Property damage liability protects you against financial loss when you are found liable for damaging any another parties property in an automobile accident. This coverage could be used to fix someone’s vehicle or even City property if you were found to be at-fault for the accident. You could be responsible for any damages that exceed your covered limits.

Pro-Rata Cancellation

When the policy is terminated midterm by the Insurance company, the earned premium is calculated only for the period coverage was provided. For example: an annual policy with premium of $1,000 is cancelled after 40 days of coverage at the company’s election. The earned premium would be calculated as follows: 40/365 days X $1,000=.110 X $1,000=$110.

Quote

An estimate of the cost (also called “rate”) of Insurance, based on information supplied to the Insurance company by the applicant.

Rental Coverage

Auto insurance coverage for the purpose of paying for the cost of renting a car in the event that the insured’s car isn’t drivable (or while the car is being repaired) due to a covered accident. Pays a set amount per day for transportation expenses or car rental while the insured’s car is being repaired.

Renter’s Insurance

Policies available to those who rent a dwelling; usually covers personal possessions and liability, but not the dwelling itself.

Replacement Cost

The cost of replacing a lost or destroyed item; does not factor in depreciation or market value.

Replacement Value

The full cost to repair or replace the damaged property with no deduction for depreciation, subject to policy limits and contract provisions.

Reinstatement

The restoring of a lapsed policy to full force and effect. The reinstatement may be effective after the cancellation date, creating a lapse of coverage. Some companies require evidence of insurability and payment of past due premiums plus interest.

Rider

Usually known as an endorsement, a rider is an amendment to the policy used to add or delete coverage.

Risk

Potential for loss or injury.

Short-Rate Cancellation

When the policy is terminated prior to the expiration date at the policyholder’s request. Earned premium charged would be more than the pro-rata earned premium. Generally, the return premium would be approximately 90 percent of the pro-rata return premium. However, the company may also establish its own short-rate schedule.

Solicitor

A licensed employee of a fire and casualty agent or broker who may act for the agent or broker in some circumstances.

Surcharge

An extra charge applied by the insurer. For automobile Insurance, a surcharge is usually for accidents or moving violations.

Surrender

To terminate or cancel a life Insurance policy before the maturity date. In the case of a cash value policy, the policyholder may exercise one of the nonforfeiture options at the time of surrender.

Towing and Labor Coverage

Provides emergency road service and pays for towing charges. This coverage is not limited just to accidents, but can be used any time the insured’s car breaks down.

Un-insured / Under-insured Motorist Coverage

Insurance coverage in the event that you suffer damages resulting from a motorist (driver) who does not have insurance. Limits typically match those of Bodily Injury liability. Also called “uninsured driver coverage.”

Waiting Period

A period of time set forth in a policy which must pass before some or all coverages begin.