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Glossary of insurance terms

We’ve broken down some of the most common words and phrases used in the insurance industry to help you understand insurance.

A

Accident

An unexpected event or circumstance without deliberate intent.

Accidental death and dismemberment coverage

An insurance contract that pays a stated benefit in the event of a covered death and/or dismemberment resulting from an accident.

Auto insurance

Motor vehicle insurance coverage is designed to cover damage—including collision, vandalism, fire, and theft—and other losses to a vehicle. Liability insurance covers a person's legal responsibility for damage to property or injury to another.

B

Bodily injury coverage (BI)

Insurance coverage that pays for the covered injuries of another person—both medical expenses and lost income as the result of an accident you caused. This coverage may also help pay legal fees resulting from the accident.

C

Car insurance

Motor vehicle insurance coverage is designed to cover damage—including collision, vandalism, fire, and theft—and other losses to a vehicle. Liability insurance covers a person's legal responsibility for damage to property or injury to another.

Certificate of financial responsibility (CFR)

Another term for SR22 insurance, showing that you’re meeting your state’s minimum car insurance requirements for a specified amount of time.

Claim

A claim is a request made by the insured for remittance of payment from their insurance company due to a loss incurred and covered under the policy agreement.

Collision

Collision insurance policy coverage is basically what it sounds like—if you hit a physical object (like a car, tree, snowbank), your insurance company will cover the cost of repairs to your vehicle up to a certain limit minus your deductible amount for covered losses.

Comprehensive

Comprehensive insurance policy coverage covers the repair of damage to your vehicle caused by anything other than a collision, minus your deductible amount for covered losses. Comprehensive coverage typically covers theft, vandalism, and other types of losses that are often described as “acts of God.”

Covered loss

Loss or legal liability for which an insurance company will pay benefits pursuant to the terms and conditions of a policy.

D

Deductible

Portion of the insured loss paid by the policyholder.

Driver's license

An official, government-issued document proving your legal right to drive.

DUI/OWI

Also referred to as driving under the influence (DUI) or operating while intoxicated (OWI). This is a charge stemming from an arrest where a driver is suspected of driving with an illegal level of drugs or alcohol in their system. Use of the term and severity of the charge varies by state.

F

FR44/FR 44/FR-44

The FR 44 is a document of financial responsibility in Florida and Virginia proving that you carry car insurance. An FR44 requires your liability coverage limits to be significantly higher than the state minimum.

I

Insurance

A contract or arrangement where a company provides a guarantee of payment to cover specific loss events (damage, injury) in return for a payment of premium.

Insurance agent

An individual who sells and services insurance policies on behalf of a company or independently.

Insured

Anyone covered by an insurance policy.

Insurer

The company or person who underwrites an insurance risk, the party that agrees to pay in the case of a covered loss.

L

Liability

A legal responsibility for damage to property or injury to another. Liability car insurance coverage pays for bodily injuries to others and property damage to others.

M

Medical payments

This coverage pays for reasonable and necessary medical expenses for the driver and passengers in your vehicle resulting from a covered loss. It may also cover funeral expenses. This coverage applies no matter who’s at fault.

Motorcycle insurance

Motorcycle insurance coverage (including collision, vandalism, fire, and theft) that insures against material damage to the insured's motorcycle. Motorcycle liability insurance covers a person's legal responsibility for damage to property or injury to another.

N

Named insured

The individual defined as the person actually named as the policyholder insured in the policy contract.

Non-owner insurance

Non-owner insurance provides bodily injury and property damage liability coverage when driving a vehicle you don’t own and don’t have regular access to as defined in the policy contract.

P

Personal auto policy

Coverage designed to insure private passenger automobiles and certain types of trucks owned by an individual or individuals.

Personal injury

This pays for reasonable and necessary medical expenses for injuries to the driver and any passenger in your vehicle, regardless of who is at fault in the accident. In addition, there may be coverage available for lost wages, lost services, and funeral expenses. It’s not available in all states.

Policy

A written contract ratifying the legality of an insurance agreement.

Premium

The amount paid to procure coverage from an insurance company.

Primary driver

The person indicated on an auto insurance application as the person who will drive the insured vehicle most often.

Proof of insurance

Documentation that proves you have valid insurance with an insurance company.

Property damage

Coverage protecting the insured against loss or damage to real or personal property from a variety of perils, including but not limited to: fire, lightning, business interruption, loss of rents, glass breakage, tornado, windstorm, hail, water damage, explosion, riot, civil commotion, rain, or damage from aircraft or vehicles.

S

SR22/SR 22/SR-22 insurance

An SR-22 is a certificate of insurance that proves you carry car insurance. Some people refer to it as SR 22 car insurance, or a certificate of financial responsibility (CFR) filing. The SR22 simply states you’re meeting your state’s car insurance coverage requirements for driving over a specified amount of time.

U

Underinsured motorist

A driver without enough coverage to cover the total dollar amount of losses.

Underinsured motorist coverage (UIM)

Policy option for bodily injury or property losses caused by a motorist with coverage insufficient to cover total dollar amount of losses. Compensation for the injured party is equal to the difference between the losses incurred and the liability covered by the motorist at fault.

Underwriting company

Organization that examines risk and determines whether the insurer will accept the risk, classifies accepted risks, and determines the appropriate cost for coverage provided.

Uninsured motorist

A driver without insurance, even though some states mandate minimum policy amounts.

Uninsured motorist coverage (UM)

Coverage that pays to treat your injuries if the other driver is at fault and has no insurance, or if it’s a hit-and-run. Property damage is also covered in some states where uninsured motorist property damage coverage is available.