Glossary of Auto Insurance Terms

Actual Cash Value (ACV): The market value of your car.

Agent: A representative who sells insurance for one or more companies.

Application: A request for insurance, giving information about the prospective policyholder.

Arbitration: The process in which a third-party arbiter examines facts presented by both you and the insurance company when you disagree about a settlement offer. Arbitration can be binding or non-binding.

Auto Replacement Coverage: A supplemental auto insurance coverage that guarantees your car will be completely repaired or replaced, even if the costs exceed its depreciated value.

Bodily Injury Liability Coverage: Pays for another person’s bodily injury or death in an accident that you may be found legally liable to pay. Current Utah Code requires a minimum limit of $25,000/$65,000, or combined single limit of $80,000.

Broker: A licensed person or organization you can pay to shop for insurance on your behalf.

Betterment: A condition relating to original equipment, or older parts, on your automobile, when having been damaged in an accident may only be replaced with new part(s). The resulting improved condition of the vehicle is known as betterment. Consequently, insurers may ask the insured to contribute to the cost of the repair.

Binder: A temporary or preliminary agreement that the insurance for which you applied is in force. This agreement is in effect until the policy is issued and delivered.

Cancellation: If you don’t pay your premiums, an insurance company can cancel your personal auto policy by giving 10 days written notice. The company is required to give you 30 days written notice if it is canceling your policy for any other reason.

Claim: Your request for the insurance company to pay you an amount under the terms of your policy for a covered peril.

Claims Adjuster: A person an insurance company hires to settle claims. The adjuster can be a company employee or an independent party under contract with the company.

Collision Coverage: Pays for damage to your vehicle when it collides with another vehicle or object, or if it overturns. Your lender may require this coverage if you have a loan on your vehicle.

Comparative Negligence Law: A Utah law that sets forth how negligence for an accident is determined. Under these rules, you can collect from an at-fault driver only if you are less than 50% at-fault for the accident. In addition, you can only collect for damages in proportion to the amount of fault attributable. For example, if you are involved in an accident and the adjuster determines you are 20% at-fault for the accident, you can collect from the other driver, since you are less than 50% at-fault, but you cannot collect any more than 80% of your damages from the other driver, since the other driver is only 80% at-fault.

Comprehensive Coverage: Coverage that pays for damage to or the loss of your vehicle from causes other than collision, example: hail, vandalism, flood, fire and theft, etc. Your lender may require this coverage if you have a loan on your vehicle.

Covered Expenses: The losses or conditions that the policy will pay for.

Credit Score: A numerical value, which is derived from information contained in a consumer credit report. A credit score may be used by an insurer for underwriting and rating purposes.

Custom/Non-Factory Equipment Coverage: Covers customized features such as those found on conversion vans, as well as non-factory items such as tape decks, cellular phones or CB radios.

Declarations Page (“Dec Page”): A page your company sends you to show your premium, coverages and endorsements. Some insurance companies only send a new declarations page at renewal unless there’s a change to your policy. You should get a revised declarations page whenever there’s a change to your policy.

Deductible: The deductible is the amount you agree to pay on each loss before your insurance company pays. Generally, the larger your deductible, the smaller your premium.

Endorsement: Amendment to the policy used to add, change, or delete coverage. Also referred to as a “rider.”

Exclusions: Specific situations or circumstances listed in your policy describing when benefits will not be paid.

GAP Insurance: Insurance coverage that typically pays the difference between what you owe on your auto loan and your totaled car’s actual cash value. There may be exclusions for certain costs or expenses not related to the value of the automobile.

Good Driver Plan: A rating program offered by some insurance companies that reduces your premium if you have had no accidents or traffic violations within a specified time period.

Insured: The policyholder or person(s) protected in case of a loss/claim.

Insurer: The insurance company.

Lapsed Policy: A policy that has terminated for non-payment of premiums.

Liability Coverage: This coverage pays for losses to other people and their property caused by negligence on your part.

Negligence/Negligent: A determination of fault in an accident caused by your inattention or carelessness.

Non-Bound Application: There is no coverage involved and you pay no money. The insurance agent submits the application to the company to find out whether or not you will be accepted.

Non-Renewal: A notice of the insurance company’s refusal to renew your policy prior to the end of the policy term.

Personal Injury Protection (PIP): This is a mandatory no fault coverage for automobile insurance providing benefits including, but not limited to, medical expenses, loss of income resulting from an automobile accident, and essential services.

Policy: The contract form issued by the company to explain the coverage provided. It is a legal document.

Premium: The price charged for insurance.

Proof of Loss: An estimate of damages you provide to an insurance company to support your claim. Insurance companies often use this document to figure how much they will pay.

Property Damage Liability: Pays for damage to another person’s car or property such as fences, buildings, utility poles, signs, and trees. Utah law requires PD liability limits of at least $15,000 per accident.

Quote: An estimate of the premium charge, based upon the information provided for the coverage(s) requested. This quote may not be the final or actual premium, and the premium charged is subject to underwriting adjustments by the insurer.

Rental Reimbursement/Transportation Expenses: An optional policy benefit that pays the rental fee if you must rent a vehicle for a reasonable time while your vehicle is being repaired.

Settlement: After negotiating, the amount you agree to accept from the insurance company as full payment for your loss.

Total Loss: When the cost to repair a vehicle approaches or exceeds the vehicle’s actual cash value.

Towing and Labor Coverage: Reimburses you when your vehicle breaks down or is damaged and must be towed to a repair shop or to another location.

Umbrella Liability Insurance: A policy that “floats” above your other coverage. You must carry a certain amount of underlying liability coverage before you may buy an umbrella policy. This coverage kicks in if you are sued for an amount greater than the limits of your auto policy.

Underinsured Motorist Bodily Injury Coverage (UIM): Is coverage for any bodily injury resulting from the operation of a motor vehicle, which is covered under a liability policy at the time of the injury causing occurrence, but which has insufficient liability coverage to compensate fully the injured party for all special and general damages.

Uninsured Motorist Bodily Injury (UM) Coverage: Covers you for your bodily injury caused by a hit-and-run driver or an at-fault driver who has no auto liability insurance.

Uninsured Motorist Property Damage Insurance (UMPD): Covers damage to your vehicle caused by an identified, at-fault, uninsured driver. This option is only offered if you choose not to purchase collision coverage.