Auto Insurance Terms Glossary N-W
We've created this simple dictionary of car insurance term definitions to help you sort through some of the more confusing lingo you may encounter while shopping for your policy.
For additional help, see our extensive FAQ files, as well as our guide to auto insurance basics, and how to choose car insurance.
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Named Driver Exclusion
An individual specifically identified on the policy as an excluded driver. This often applies to teen-aged family members, whose inclusion in a policy would raise the premium considerably.
Entities or individuals named on the policy as insured by that policy. Most commonly this refers to spouses and other relatives living in the household.
No Fault Insurance
An auto insurance policy that insures the holder for injury-related benefits caused by an auto accident, regardless of fault in the accident. Covered benefits may include medical costs, loss of wages, loss of services, and funeral expenses. In return for these guaranteed benefits, the right to sue for damages caused by an auto accident is limited. Thirteen states currently use some form of no fault insurance.
Number of Drivers
Somewhat self-explanatory: the number of drivers who covered under your policy. This usually includes you, your spouse, and any relatives living in your household (unless otherwise excluded.)
Number of Vehicles
The number of cars covered under your policy. If you want to insure more than four vehicles, you may have to purchase an additional policy.
Insurance companies often use your occupation, and the distance that you drive to work every day, to calculate risk. Certain professions incur higher premiums, though this is not common.
The total number of miles that a car has been driven in its "lifetime". Certain insurers will not even offer a quote for vehicles with more than a set amount of miles on its odometer.
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.)
Personal Auto PolicyAlso known as "PAP", personal auto policies are the most common type of auto insurance policies sold. They include coverage for liability, medical payments, uninsured/underinsured motorist coverage, and physical damage protection.
Personal Injury Protection
Also known as "PIP", this is the name given to no fault benefits in those states that have some sort of no fault auto insurance laws. This type of coverage usually includes benefits for medical expenses, loss of income, essential services, accidental death, funeral expenses, and survivor benefits.
The physical damage to the covered vehicle caused by (though often not limited to) collision with another vehicle, vandalism, theft, etc.
The actual contract between you and the insurance company which spells out your coverages, rights, and obligations. Learn more about the contents of insurance policy documents.
The period of time during which you are covered by your policy.
The cost of your insurance policy and all the included coverage.
Pro Rata Cancellation
What happens when you cancel your policy before it expires. Pro Rata refers to the amount of money that may be refunded to you based on the amount of time left on your policy that you have already paid for.
Property Damage Liability:
Coverage for physical damage caused to property when the insured person is liable.
Rated Annual Mileage
This is the annual mileage that is used to determine the mileage rating classification that is applied to a vehicle.
This optional coverage will pay for the use of a rental car while damage to your car is being fixed or while the claim for a totaled vehicle is processed.
Enhancements in your car, such as automatic seat belts and driver-side and passenger-side airbags, that reduce your risk of being injured in a collision. Vehicles with safety equipment often qualify for discount car insurance.
Limits set on the types of coverages that are part of one group of benefits. Most often applied to liability insurance.
SR-22 (Financial Responsibility Filing)
A requirement by a state regulatory entity (usually the state Motor Vehicle Department) for an insurance company to certify on a driver's behalf that the driver has the ability to pay future claims up to the state required limit. The certification is done by means of a form called an SR-22.
Suspended or Revoked License
Drivers with a licence suspension on their driving record face higher premiums, and are often barred from getting insurance coverage from mainstream companies.
The period of time during which the policy is in effect.
In the case of some no fault insurance laws, the point at which the insured may bring tort action for non-economic (pain and suffering) damages under a No Fault Auto Plan. Many of these plans prohibit tort action for pain and suffering unless medical bills exceed a set figure, or disfigurement or death occur.
A private wrong or harm (other than a breach of contract) committed against another, resulting in legal liability. A tort is either intentional or accidental (negligent). Auto liability insurance is purchased to protect one from suits arising from unintentional torts.
Towing and Labor Costs
An endorsement, which pays for the costs associated with certain repairs and towing in the event of an accident. You're better off with an auto club.
Uninsured Motorists Bodily Injury
Uninsured motorists bodily injury coverage (which must be offered in most states) pays for a covered person's bodily injuries for which an uninsured or hit-and-run motorist is legally liable, but unable to pay.
Underinsured Motorists Bodily Injury
Underinsured motorists bodily injury coverage (which must be offered in most states) pays for a covered person's bodily injuries for which a person with not enough insurance is legally liable.
Uninsured/Underinsured Motorists Coverage
This coverage provides protection for the insured, resident relatives, and occupants of a covered vehicle in an accident in which the owner or operator of a motor vehicle who is legally liable and either does not have sufficient coverage or does not have any insurance to cover the loss.
The part of your policy term remaining before expiration. If your six-month policy is in effect a months, the unearned premium is 5/6.
The primary function of your vehicle, can be categorized as either "business", "commute", or "pleasure".
VIN (Vehicle Identification Number)
The Vehicle Identification Number is a 17 digit number (which includes both numbers and letters) unique to your car. The VIN tells the company the make, model, body type and year of the insured vehicle. You can find your VIN in several places including the title to your vehicle, your vehicle registration, your insurance card, your insurance policy, the dashboard of your vehicle, the driver side door or engine of your vehicle.
Waiver of Collision Deductible
If you have collision coverage on your car, this option pays your deductible for damage caused by an uninsured or hit-and-run driver, if you can identify the driver and car that caused the damage.
Whole Dollar Premium
Simply stated, premiums are rounded to nearest dollar, up for amounts over 51 cents, and down for fifty cents and lower.
Learn how to set responsible but affordable coverage amounts in our in-depth guide to choosing car insurance coverage.
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