Common Insurance Terms
  1. Actual Cash Value (ACV)-Unless otherwise defined in the policy, actual cash value in California means fair market value. The fair market value of an item is the dollar amount that a knowledgeable buyer (under no unusual pressure) is willing to pay, and a knowledgeable seller (under no pressure) is willing to accept.
  2. Adjuster-The person from your insurance company who investigates and evaluates your damage and losses.
  3. Agent-An individual or organization licensed to sell and service insurance policies for an insurance company.
  4. Binder-A short-term agreement that provides temporary auto coverage until your auto insurance policy starts.Broker-An individual or organization that is licensed to sell and service insurance policies for you.
  5. Broker Fee Agreement-The contract between you and your broker. It lists the fees for your broker's services.
  6. Cancellation-When you or your insurance company ends your policy early. They might do this because you did not pay your premium. You might cancel your policy because you no longer own or drive a car.
  7. Claim-Your request to an insurance company to cover an accident or other loss.
  8. Collision coverage-Pays for damage to your car caused by physical contact with another vehicle or an object, such as a deer, tree, rock, guardrail, building, or person.
  9. Commission-The fee that an insurance company pays an agent or broker when they sell a policy.
  10. Comparative negligence-The percent of responsibility that each driver shares in an accident when both drivers are at fault.
  11. Comprehensive coverage-Pays for damage to your car caused by something other than a collision, such as fire, theft, vandalism, windstorm, flood, falling objects, etc.
  12. Declarations page-Usually the first page of an insurance policy. It lists the full legal name of your insurance company, the amount and types of coverage, the deductibles, and the vehicle(s) insured.
  13. Deductible-The amount of the loss that you must pay before your insurance company pays anything. Only comprehensive and collision coverage have deductibles.
  14. Endorsement/rider-A written statement that changes the coverage or details of an insurance policy.
  15. Exclusion-These are the specific things that your insurance policy does not cover or limits coverage for. For example, your policy may not cover certain kinds of dangers, people, property, or locations.
  16. Gap coverage-This pays the difference between the fair market value of your new car and the balance you owe on your loan or lease.
  17. Insured-The person who can receive covered benefits in case of an accident or loss. Also called the policyholder.
  18. Insurer-The company that issues your insurance.
  19. Liability coverage-Insurance that helps pay for the injuries and damage to others from accidents that are your fault.
  20. Limit-The most money that your insurance company will pay for your loss.
  21. Medical payments coverage-Covers limited medical costs for you or others in your car, when you are in an accident.
  22. Non-renewal-This is when you or your insurance company does not renew your policy at the end of its term.
  23. Policy-This is your contract with the insurance company. It explains your coverage. It also states the rights and duties of both you and the insurance company.
  24. Premium-The amount you pay to buy an insurance policy.
  25. Private passenger automobile-Four-wheeled motor vehicles for use on public highways, like cars, station wagons, SUVs, and vans. They must be registered with the state.
  26. Quotation (quote)-An estimate of your insurance premiums based on the information you give to the agent, broker, or insurance company.
  27. Recision-The cancellation of a policy back to its start date. If this happens, the insurance company does not pay for any of your losses, and your premiums are refunded. This can happen if you knowingly gave false information when you applied for the policy.
  28. Subrogation-When one insurance company pays money on a claim, and then tries to get paid back or reimbursed by another insurance company. 
  29. Surcharge-An extra charge that is added to the premium by an insurance company. This usually happens because a covered driver has had an accident or moving violation that is their fault.
  30. Uninsured/Underinsured Motorist Coverage (UMC)-Provides coverage for a policyholder involved in a collision with a driver who does not have liability insurance or whose liability limits are too low to pay for all the damage.
  1. Disclaimer
  2. This is for informational purposes only.
  3. The actual terms of an insurance policy and related law prevail over the information provided here. 
  4. In the case of a dispute, the insurance policy is controlling and a court of law will rely on the policy as it is written to resolve the dispute.
  5. The policy is the only document that describes what the insurance company will pay.
  6. The information contained here does not create rights or obligations on the part of the insured, the insurer, the agent, the broker, or the state.
  7. This information is not intended to be a substitute for the actual insurance policy.
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