Best Resources.

Learn More about Car & Auto Insurance Coverage with Our Glossary

Glossary of Auto Insurance Terms

A · back to top · ACTUAL CASH VALUE
An amount paid to a policy holder equal to the fair market value of the stolen or damaged property based on depreciation and original value. For cars, this amount can be determined by a local private party or dealer quotations for comparable vehicles.
ADMITTED COMPANY
An insurance company authorized to do business in a specific state.
AGENT
A licensed and authorized organization or person allowed to sell insurance by or on behalf of an insurance company.
AM BEST RATINGS
Ratings that range from AAA - CC. AAA means the company has extremely strong capacity to meet all financial commitments and is the best rating one can receive. AA means that the company has very strong capacity. A means the company has strong capacity. BBB means a company has adequate capacity. BB and B ratings mean that the company can currently meet all financial commitments, but is under some speculation for the future well being. CCC and CC ratings mean that a company is highly vulnerable to default (CC is at greater risk than CCC) and is dependent on great market conditions and strong returns to remain viable. R means that the company is currently under regulatory supervision. An SD rating means that the company has defaulted on a current liability but is not necessarily going to default on all responsibilities. A D rating means that the company has defaulted on a liability and will most likely default on all others when they are requested
AUTOMOBILE INSURANCE
Coverage to protect consumers from the risks associated with driving or owning an automobile. It can include a variety of types based on policy, and is not limited to collision, liability, comprehensive, medical, and uninsured motorist coverages.
B · back to top · BODILY INJURY
Any physical injury to a person either by oneself or another.  The purpose of liability insurance is to cover bodily injury to a third party resulting from the negligent or unintentional acts of an insured person, such as an auto accident.
BROKER
A licensed person or organization paid by an individual to look for insurance on their behalf.
C · back to top · CLAIM
Notice to an insurance company that depending on the terms of a policy, may be covered.
COLLISION COVERAGE
Portion of an auto insurance policy that covers a driver in the event of a collision that results in the damage to the policyholder's car.
COMPREHENSIVE AUTO COVERAGE
Portion of an auto insurance policy that covers damage to the policyholder's car not involving a collision with another car (including damage from fire, explosions, earthquakes, floods and riots), and theft.
D · back to top · DEDUCTIBLE
The amount of the loss which the insured person is responsible to pay before benefits from the insurance company are paid. You may choose a higher deductible to lower your premium for some auto insurance policies.
DEPRECIATION
A decrease in value due to age, wear and tear, etc.
E · back to top · EXCLUSION
Certain causes and conditions, listed in the policy, which are not covered.
EXTENDED COVERAGE
An endorsement added to an insurance policy, or clause within a policy, that provides additional coverage for risks other than those in a basic policy
F · back to top · FILE-AND-USE STATES
States where insurers must file rate changes with their regulators, but don't have to wait for approval to put them into effect.
FINANCIAL RESPONSIBILITY LAW
A state law requiring that all automobile drivers show proof that they can pay damages up to a minimum amount if involved in an auto accident. Varies from state to state but can be taken care of by carrying a minimum amount of auto liability insurance.
FIRST-PARTY COVERAGE
Coverage meant specifically for the policyholder's own property or person. In a no-fault auto accident, with this coverage, insurance pays for the cost of injuries to one's self. In no-fault states with very broad coverage, the personal injury protection part of the policy pays for medical care, lost income, funeral expenses and, most other cases where the injured person is not able to provide services such as child care. In this case the coverage allows for a substitute arrangement to be made.
G · back to top · GOOD DRIVER DISCOUNT
To be eligible for the Good Drivers Discount varies among companies, however typical prerequisites include that all drivers of the insured vehicle must have their license for at least three years, have no more than a one (1) point charge on their driving record and not be determined "at fault" in an accident resulting in bodily injury or death to any person.
GRACE PERIOD
A period that varies from company to company (typically 31 days) after the premium is due, during which an overdue premium may be paid without penalty. The policy remains valid throughout this period.
GAP INSURANCE
An automobile insurance option, available in some states, that covers the difference between a car's actual cash value when it is stolen or wrecked and the amount the consumer owes the leasing or finance company. Mainly used for leased cars.
I · back to top · INCONTESTABLE CLAUSE
A policy provision in which the company agrees not to contest the validity of the contract after it has been in affect for a certain period of time, in general around two years.
J · back to top · J.D. POWER BILLING & PAYMENT
This score is based on how customers rate the timeliness, clarity, and accuracy of their billing statements as well as the overall simplicity of the payment process of their automotive insurance provider.
J.D. Power Body and Interior Dependability
Taken from the Vehicle Dependability Study (VDS), which looks at owner-reported problems in the first 3 years of new-vehicle ownership, this score is based on problems with wind noise, water leaks, poor interior fit/finish, paint imperfection, and squeaks/rattles.
J.D. Power Comfort
This component of APEAL is based on owner satisfaction with the vehicle's comfort and convenience features and seats.
J.D. POWER CONTACTING INSURER
This score is based on how customers rate how easy it is to interact with their current auto insurance provider, through any means. This can vary between a call-center representative, an automated phone system, or the company's Web site. Contacting specific insurance agents is also a part of this rating.
J.D. Power Features Accessories Quality Design
Taken from the Initial Quality Study (IQS), which looks at owner-reported problems in the first 90 days of new-vehicle ownership, this score is based on problems with the seats, stereo/navigation system, heater, air conditioner, and sunroof.
J.D. Power Feature and Accessory Dependability
Taken from the Vehicle Dependability Study (VDS), which looks at owner-reported problems in the first 3 years of new-vehicle ownership, this score is based on problems with the seats, windshield wipers, navigation system, rear-seat entertainment system, heater, air conditioner, stereo system, sunroof and trip computer.
J.D. Power Features and Instrument Panel
This component of APEAL is based on owner satisfaction with the vehicle's stereo system, gauges/instruments, and heating/air conditioning system.
J.D. Power Overall Dependability
Taken from the Vehicle Dependability Study (VDS), which looks at owner-reported problems in the first 3 years of new-vehicle ownership, this score is based on problems that have caused a complete breakdown or malfunction of any component, feature, or item (i.e., components that stop working or trim pieces that break or come loose).
J.D. Power Overall Performance and Design
Taken from the Automotive Performance, Execution and Layout (APEAL) study, this measure is based on owner satisfaction with vehicle Performance, Style, Features and Instrument Panel, and Comfort.
J.D. POWER OVERALL Quality Design
Taken from the Initial Quality Study (IQS), which looks at owner-reported problems in the first 90 days of new-vehicle ownership, this score is based on problems where controls or features may work as designed, but are difficult to use or understand (i.e., overly complicated controls/features that are difficult to operate due to poor location).
J.D. POWER OVERALL Quality Mechanical
Taken from the Initial Quality Study (IQS), which looks at owner-reported problems in the first 90 days of new-vehicle ownership, this score is based on problems that have caused a complete breakdown or malfunction of any component, feature, or item (i.e., components that stop working or trim pieces that break or come loose).
J.D. POWER OVERALL SATISFACTION
This score is based on how customers feel about every aspect of their service experience with their specific auto insurance provider.
J.D. Power Overall Service Satisfaction
This score is based on service experiences within the past 12 months, for original owners in their first three years of ownership.
J.D. Power Performance
This component of APEAL is based on owner satisfaction with the vehicle's powertrain and suspension systems, including acceleration, fuel economy, handling stability, braking performance, and shift quality.
J.D. POWER POLICY OFFERINGS
This score is based on how customers rate the variety of coverage options offered by auto insurance providers and the extent to which they can tailor to a customers' individual preference.
J.D. Power Powertrain Dependability
Taken from the Vehicle Dependability Study (VDS), which looks at owner-reported problems in the first 3 years of new-vehicle ownership, this score is based on problems with the engine or transmission as well as problems that affect the driving experience (i.e., vehicle/brakes pull, abnormal noises or vibrations) only.
J.D. POWER PRICING
This score is based on how customers rate their current auto insurance provider on the price of the policy given when compared to the level of coverage they selected.
J.D. Power Service Facility
This score is based on ease of driving in/out of the dealership, convenience of parking, as well as cleanliness and comfort of waiting area.
J.D. Power Service Initiation
This score is based on the timeliness of the vehicle drop-off process and the ease of scheduling a service appointment.
J.D. Power Service Quality
This score is based on the time required to complete service on your vehicle, the thoroughness of the work performed, and the condition of the vehicle upon return.
J.D. Power Style
This component of APEAL is based on owner satisfaction with the vehicle's interior and exterior styling, uniqueness of styling, and exterior and interior colors.
L · back to top · LIABILITY INSURANCE
Insurance for what the policyholder is legally obligated to pay because of bodily injury or property damage caused to another person. This type of insurance is required by law in order to operate a motor vehicle in the United States.
N · back to top · NEGLIGENCE
Failure to act with the legally required degree of care for others, resulting in harm to those dependent on care. This can be charged to a person that gets into an auto accident and injures or kills those the driver is responsible for.
NO-FAULT Accident Coverage
Auto insurance coverage that pays for each driver's individual injuries, regardless of who caused the accident (it is assumed that neither party is at fault). No-fault coverages and policies containing a no-fault clause vary from state to state. It also refers to an auto liability insurance system that restricts lawsuits to serious cases. Such policies are designed to promote faster reimbursement and to reduce litigation.
O · back to top · OPEN COMPETITION STATES
States where insurance companies can set new rates for policies without prior approval. Some companies do this in order to gain more customers during a specific quarter. To keep a fair market value for the policies, the state's commissioner can disallow these rates if they are not reasonable, adequate, or are discriminatory.
P · back to top · PERSONAL INJURY PROTECTION COVERAGE / PIP
Portion of an auto insurance policy that covers the treatment of injuries to the driver and passengers of the policyholder's car allowing people who do not own the car to drive it and be insured. PIP auto insurance coverage has become a more desirable coverage option for policies since its inception.
POLICY
The written contract of insurance held between a person and insurance agency.
POLICY LIMIT
The maximum amount a policy will pay, either overall or under a particular coverage. This amount varies and is decided by the insurance company.
PREMIUM
The amount of money an insurance company charges for insurance coverage. It varies depending on type of insurance and the policy.
PROPOSITION 103
A California ballot initiative that called for a statewide auto insurance rate reduction and for rates to be based more on driving records and less on geographical location of the insured drivers. The initiative changed many aspects of the state's insurance system.
Q · back to top · QUOTE
An estimate of the cost of insurance, based on information supplied to the insurance company by the applicant. These are free and require some basic information about the person applying.
R · back to top · RATE
The cost of a unit of insurance. Rates are based on historical loss experience for similar risks and are usually regulated by state insurance offices.
REPLACEMENT COST
The cost to repair or replace an insured item. Some insurance policies will only pay the fair market value of the item at the time of the loss, not what it would cost to fix it or replace it. If you have a special policy clause that includes personal property replacement cost coverage, your insurance will pay the full cost to repair an item or buy a new one in some cases.
REPLACEMENT VALUE
The full cost to repair or replace the damaged property, this cost varies with policy but on occasion can represent a cost with no deduction for depreciation.
RIDER
An amendment to the policy that adds or deletes a part of the coverage.
S · back to top · SURCHARGE
An extra charge applied by the insurer to the policy holder. For auto insurance, a surcharge is usually for accidents or moving violations. This does not raise your policy cost but is a charge in addition to whatever the premium is.
T · back to top · TERRITORIAL RATING
A method of classifying risks by geographic location to set a fair price for coverage. For example, the chance of an accident or theft is much higher in an urban area than in a rural one.
TOTAL LOSS
The condition of an automobile when damage is so extensive that repair costs would exceed the value of the vehicle.
U · back to top · UNINSURED MOTORIST BODILY INJURY
A clause in a policy that will pay you and your passengers for bodily injury caused by an uninsured motorist, a hit-and-run driver, or by a driver whose insurance company is unable to pay their debts.
UNINSURED MOTORIST PROPERTY DAMAGE
A clause in a policy that will pay for damages to your automobile caused by an uninsured motorist, but only to a certain limit.
W · back to top · WAITING PERIOD
A period of time set forth in a policy which must pass before some or all coverages begin.

Explanation of Insurance Rankings

*Ratings range from A++ - D. A++, A+ are rated as superior. A, A- are rated as excellent. B++, B+ are rated as good. B, B- are rated as fair. C++, C+ are rated as marginal. C, C- are rated as week. D companies are rated as poor. An E rating means the company is currently under regulatory supervision. F means the company is undergoing liquidation, and S means the company rating is currently suspended.

**Ratings range from AAA - CC. AAA means the company has extremely strong capacity to meet all financial commitments and is the best rating one can receive. AA means that the company has very strong capacity. A means the company has strong capacity. BBB means a company has adequate capacity. BB and B ratings mean that the company can currently meet all financial commitments, but is under some speculation for the future well being. CCC and CC ratings mean that a company is highly vulnerable to default (CC is at greater risk than CCC) and is dependent on great market conditions and strong returns to remain viable. R means that the company is currently under regulatory supervision. An SD rating means that the company has defaulted on a current liability but is not necessarily going to default on all responsibilities. A D rating means that the company has defaulted on a liability and will most likely default on all others when they are requested.

*** Ratings out of 5 stars

Explanation of Crash Rating Scores

Each vehicle's frontal offset crashworthiness is based on performance in a 40 mph frontal offset crash test. Ratings depend on how well the structure/safety cage protects the occupant compartment, the risk of injury measured for an average-sized male, and how well the restraint system controls occupant movement. Ratings are scored from G to P. G is a good rating, A is an acceptable rating, M is a marginal rating, P is a poor rating.