Insurance Coverage Glossary
This General Insurance Coverage Glossary is a handy reference of definitions for the most commonly used words and phrases.
Again, this or any other list is no substitute for a phone call to ask questions you have. Never hesitate to call your agent directly or our home office’s main number 727-584-9999 to be connected.
After this glossary section, you will find definitions of terms that are specific to auto insurance coverage.
We are in the insurance business, but there is nothing more important than making you feel confident, by giving you the knowledge you need. We want you to understand what you’re buying and why. Our commitment to you is transparency about every aspect of every policy and its coverage.
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Coverage Terms and Definitions
A
An amount equivalent to the replacement cost of a stolen or damaged property at the time of the loss, less depreciation. For coverage for vehicles, this amount would be determined by a local area private party sales and dealer quotations. Kelly Blue Book would only be used as a guide and not the final word.
An insurance company authorized to do business in Florida.
A licensed person or organization authorized to sell insurance by or on behalf of an insurance company.
Coverage on the risks associated with driving or owning an automobile. It can include collision, liability, comprehensive, medical, and uninsured motorist coverages.
C
The termination of insurance coverage during the policy period. Flat cancellation is the cancellation of a policy as of its effective date, without any premium charge.
Representative of a single insurer or fleet of insurers who is obliged to submit business only to that company, or at the very minimum, give that company first refusal rights on a sale. In exchange, that insurer usually provides its captive agents with an allowance for office expenses as well as an extensive list of employee benefits such as pensions, life insurance, health insurance, and credit unions.
Notice to an insurer that under the terms of a policy, a loss may be covered.
The first or third party. That is any person who asserts right of recovery.
In personal property insurance, this coverage is for personal property items that are movable, that is, not attached to the building’s structure (the home), such as television sets, radios, clothes and household goods. Not included under the coverage are animals, automobiles, and boats.
D
The company refuses to accept the request for insurance coverage.
The amount of the loss which the insured is responsible to pay before benefits from the insurance company are payable. You may choose a higher deductible to lower your premium.
A decrease in value due to age, wear and tear, etc.
Method of selling insurance directly to insureds through a company’s own employees, through the mail, the Internet, or at airport booths.
E
Amendment to the policy used to add or delete coverage. Also referred to as a “rider.”
Certain causes and conditions, listed in the policy, which are not covered.
The date on which the policy ends.
F
The dollar amount to be paid to the beneficiary when the insured dies. It does not include other amounts that may be paid from insurance purchased with dividends or any policy riders.
Coverage for loss of or damage to a building and/or contents due to fire.
G
A period (usually 31 days) after the premium due date, during which an overdue premium may be paid without penalty. The policy remains in force throughout this period.
An option that permits the policy holder to buy additional stated amounts of life insurance at stated times in the future without evidence of insurability.
H
A policy that will pay specifies sums for medical expenses or treatments. Health policies can offer many options and vary in their approaches to coverage.
An elective combination of coverages for the risks of owning a home. Can include losses due to fire, burglary, vandalism, earthquake, and other perils.
I
A policy provision in which the company agrees not to contest the validity of the contract after it has been in force for a certain period of time, usually two years.
Contractor who represents different insurance companies and who searches the market for the best coverage based on a client’s insurance needs.
The policyholder – the person(s) protected in case of a loss or claim.
The insurance company.
L
A policy that will pay a specified sum to beneficiaries upon the death of the insured.
Maximum amount a policy will pay either overall or under a particular coverage.
The amount which can be borrowed at a specified rate of interest from the issuing company by the policyholder, using the value of the policy as collateral. In the event the policyholder dies with the debt partially or fully unpaid, then the amount borrowed plus any interest is deducted from the amount payable.
M
The policyholder / applicant makes a false statement of any material (important) fact on his/her application. For instance, the policyholder provides false information regarding the location where the vehicle is garaged.
An incorrect estimate of the insurance premium.
P
The cause of a possible loss. For example, fire, theft, or hail.
The written contract of insurance.
The maximum amount a policy will pay, either overall or under a particular coverage.
The amount of money an insurance company charges for insurance coverage.
A policyholder contracts with a lender to pay the insurance premium on his/her behalf. The policyholder agrees to repay the lender for the cost of the premium, plus interest and fees.
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.
Q
An estimate of the cost of insurance, based on information supplied to the insurance company by the applicant.
R
Cost per unit of insurance. When used to calculate a premium, it must be adequate enough to pay expected losses according to frequency and severity, reasonable to the point that insurers do not earn an excessive profit and not discriminatory or inequitable. Based on the amount of coverage needed, an individual will purchase the appropriate number of units of insurance with the total cost reflected in a premium payment.
The cost to repair or replace an insured item. Some insurance only pays the actual cash or market value of the item at the time of the loss, not what it would cost to fix or replace it. If you have personal property replacement cost coverage, your insurance will pay the full cost to repair an item or buy a new one once the repairs or purchases have been made.
The full cost to repair or replace the damaged property with no deduction for depreciation, subject to policy limits and contract provisions.
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.
Usually known as an endorsement, a rider is an amendment to the policy used to add or delete coverage.
S
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.
A licensed employee of a fire and casualty agent or broker who may act for the agent or broker in some circumstances.
An extra charge applied by the insurer. For automobile insurance, a surcharge is usually for accidents or moving violations.
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.
U
The process of selecting applicants for insurance and classifying them according to their degrees of insurability so that the appropriate premium rates may be charged. The process includes rejection of unacceptable risks.
W
A period of time set forth in a policy which must pass before some or all coverages begin.
Auto Insurance Coverage and Definitions
A company or person who has been named as an additional interest insured on a coverage policy can be liable for an accident that involves an insured person or vehicle. For example, a lienholder can be an additional interest insured.
There are essentially two types of anti-theft devices: passive and active. Passive devices require no action or activation and automatically arm themselves when the vehicle is turned off, the ignition key is removed or a door is shut. Active devices require some action or activation, such as pushing a button or placing a “lock” somewhere in your car. Typically with active devices, you must re-activate them every time you set them or they won’t work. Keep in mind that you could get a discount for having an anti-theft device in your car.
If an insured person is legally liable for an accident, BI coverage pays for injuries/death to people involved in the accident other than the insured driver. BI also pays for legal defense costs if you are sued. Certain exclusions may apply. Refer to your policy.
If your insured vehicle is damaged due to an event other than a collision, Comprehensive coverage will pay for the damage. This includes damages from fire, theft, windstorm, flood and vandalism. If your vehicle is stolen, Comprehensive covers transportation and loss of use expenses when applicable
When your insured vehicle overturns or collides with another object, Collision coverage pays for the damage to your vehicle. Collision coverage also may extend to a non-owned car or one rented for personal use that is in your custody or that you are operating. Certain exclusions may apply. Refer to your policy.
Being continuously insured means your insurance coverage from an insurer or more than one insurer was in effect at all times, without a break or lapse in coverage for any reason.
Also known as an auto insurance coverage summary, this page is provided by your insurance company and lists the following:
- Types of coverage you have elected
- Limit for each coverage
- Cost for each coverage
- Specified vehicles covered by the policy
- Types of coverage for each vehicle covered by the policy
- Other information applicable to the policy
A deductible is the amount you agree to pay out of pocket for damage resulting from a specific loss or accident. Generally, choosing a higher deductible will lower your premium.
Drivers age 55 and older can take a voluntary driver improvement course to refresh and enhance their driving skills. Taking this course may qualify these drivers for a discount if they meet eligibility requirements.
People can be added to policies with the following types of driver status:
- Rated – Actively drive vehicles on the policy
- Excluded – Not allowed to drive vehicles on the policy and will not be covered under your policy in the event of an accident
- Listed – Residents of the household who do not drive the vehicles on the policy (such as a roommate)
“Full coverage” is a common term that people use to describe how much auto insurance coverage they have. Though there is no such thing as “full coverage,” it often implies that the policy has more than just Liability coverage.
A garaging location is the place you primarily park your vehicle when you’re not using it. Generally, this is your primary residence.
An insurance coverage limit is selected by you and is the most an insurance company will pay for damages or injuries that apply to the coverage. Most states have laws that specify the minimum limit that must be purchased for each required insurance coverage.
Life insurance is a financial safety net for your family. If you pass away, your life insurance policy will pay a lump sum of money to your beneficiaries. There are a few common types of life insurance: term, final expense and permanent. See more on the different types of life insurance.
Loan/Lease Payoff coverage, sometimes called “gap” coverage, pays the difference between what you owe on your vehicle and what your insurance pays if your vehicle is declared a total loss or stolen and not recovered, less your Comprehensive or Collision deductible. Learn more about Loan/Lease Payoff coverage.
MedPay is an optional insurance coverage that pays for reasonable and necessary medical and funeral expenses for covered persons. These expenses must be incurred as a result of an auto accident.
The first person in whose name the insurance policy is issued.
A person who is not the primary or principal driver of the insured vehicle is an occasional driver.
PIP is a coverage in which the auto insurance company pays, within the specified limits, the medical, hospital and funeral expenses of the insured person, people in the insured vehicle and pedestrians struck by the insured vehicle. PIP is the basic coverage implemented in no-fault automobile insurance states.
Your current insurance policy ends on your policy expiration date, which is found on your current policy documents, Declarations Page (Dec Page), insurance identification card or recent cancellation notice. This date should not be confused with payment due dates.
The length of time your policy is active and in force is your policy term.
A premium is the amount of money paid to an insurance company in return for insurance protection.
A primary residence is the place where you will live for the majority of your policy term.
Primary use is how you mainly use your vehicle. Primary use options include to/from work, business, pleasure or farm use.
The person who drives the car most often is the principal driver.
If an insured person is legally liable for an accident, PD coverage pays for damage to others’ property resulting from the accident. PD also pays for legal defense costs if you are sued. Certain exclusions may apply. Refer to your policy.
Rental Reimbursement provides rental car coverage if you have a claim that is covered under Comprehensive or Collision coverage. Daily rental amounts are subject to the limit purchased.
Roadside Assistance provides services such as towing, flat tire change, locksmith service and battery jump-start to customers, who can elect the service for an additional premium if it is not already included with their insurance policy. Learn more about Roadside Assistance.
State laws determine if a vehicle requires a salvage title.
- Some states base salvage titles on the extent of damage a vehicle has sustained. For example, in Louisiana, damage to a vehicle must equal or exceed 75 percent of the vehicle’s retail value in order for it to require a salvage title, according to state law.
- Other states, such as Florida, require a vehicle to have a salvage title if the insurance company declared the vehicle a total loss. These titles generally indicate whether the vehicle is “rebuildable” (can be repaired and driven on the road) or “not rebuildable” (must be sold for parts).
- Other states “brand” or “notate” the vehicle’s title when the estimate of damages reaches a certain percentage of the vehicle’s retail value (in New York, it is 75 percent), even if the vehicle has not been declared a total loss and is able to be repaired.
- Other states have no guidelines for issuing salvage titles.
The named insured or listed agent/broker on a policy may request to designate any other person listed on the policy as a second named insured. The second named insured has the same coverage under the policy as the named insured.
An SR-22 is a document required by the court that demonstrates proof of financial responsibility for persons convicted of certain traffic violations.
If a driver or owner of a vehicle does not have insurance and is legally liable for an accident, you can use UM coverage for injuries, including death, that you, your resident relatives, and occupants of your insured vehicle sustain, up to the limits you select. Certain exclusions may apply. Refer to your policy.
If a driver or owner of a vehicle is legally liable for an accident but does not have enough insurance, you can use UIM coverage for injuries, including death, that you, your resident relatives, and occupants of your insured vehicle sustain, up to the limits you select. Certain exclusions may apply. Refer to your policy.
If driver or owner of a vehicle is legally liable for an accident but does not have insurance or does not have enough insurance, you can use UMPD to cover damage to your insured vehicle, up to the limits you select. In some states, UMPD is available as an alternative to Collision coverage. Certain exclusions may apply. Refer to your policy.
The Vehicle Identification Number (VIN) for your vehicle is usually found on the driver’s side of your dashboard, the vehicle registration or the title. The VIN is a combination of 17 letters and numbers that can be used to identify the make, model and year of a car.
Comprehensive Coverage is Powerful
Call Florida Best Quote at any time to clarify these definitions or to obtain a quote for coverage. We are more than happy to share the information we have gleaned with our years of insurance expertise.
Feel free to visit our main office located at 801 West Bay Drive, Suite 102 in Largo off the corner of Clearwater-Largo Road and West Bay Drive or visit any one of our satellite offices throughout the Tampa Bay area.
Otherwise, for any information about insurance coverage and premiums, please call an agent directly or our home office’s main number 727-584-9999 to be connected.