Insurance Dictionary

Insurance coverage can be confusing, but it doesn’t have to be. To help you make informed decisions about your insurance coverage, take a look at some of the common insurance terms and definitions. Still have questions? Review these frequently asked questions or contact your insurance agent.

Accident forgiveness

Insurance accident forgiveness is a type of discount you may qualify for that refers to your insurance rates not raising after your first at-fault car accident.

At fault

When someone’s involved in an accident, the insurance company has to figure out who caused it and how other drivers (if there were any) played a role. In the end, the insurance companies assign a percentage of fault to each driver. The insurance companies investigating the claims use these percentages to determine how much each insurance company pays to cover the costs of the damages.

Claim

If you're involved in a car accident, or something else happens that damages your car, one of the first things you'll do is report it to your insurance company — that's filing a claim. This begins the process so you can get reimbursed for your loss.

Claims adjuster

Once you file a claim, the insurance company representative you’ll be working with is the claims adjuster. You can expect the claims adjuster to contact you, explain the process and then begin his or her investigation of the claim. It’s helpful to keep your information about your policy and claim in one place and within reach throughout the claims process.

When the investigation is completed, the claims adjuster will make a settlement, which is the amount the insurance company will pay for the loss. Their goal is to help you understand the process, and make sure you and any other individuals involved are fairly compensated.

Deductible

The deductible is how much money you’ll be paying out of pocket before insurance kicks in. Let’s say you crash your car into a tree, causing $1,200 in damages to your car. Your policy has a $500 deductible. That means you would pay the first $500 toward the repair bill and the insurance company would pay for the remaining $700. Many people opt for higher deductible plans in exchange for lower premiums.

Endorsement

An endorsement is when a change is made to an existing insurance policy. What often triggers an endorsement are life changes, which include: marriage, moving, buying a new vehicle, adding a driver to your family or removing a driver. When events like these happen, it’s always a good time to review your insurance policies and make sure you have all the coverage you and your family need. Endorsements could also mean a coverage part. For instance, if you purchase Roadside and Rental, the Roadside and Rental coverage will be attached to your policy.

Gap insurance

If you’re paying on a car loan or a lease, your car may be valued for less than what you owe. So, if your car is totaled in an accident, gap insurance helps you pay off your loan or lease, minus the deductible.

Liability coverage

Let’s say you caused an accident and were found at fault. Perhaps you rear-ended a car stopped at a traffic light, or perhaps you lost control of your car on an icy road. Your liability will cover the costs of the damage you caused the other vehicles and property, as well as injuries to other people involved in the accident. In most states, liability coverage is mandatory. Property damage liability won’t cover damage to your own vehicle. That’s where collision coverage comes in.

No-fault insurance

No-fault insurance can help pay for a covered loss regardless of who is found at fault. No-fault insurance is sometimes referred to as personal injury protection insurance (PIP) and may not be available in all states.

Umbrella

A personal umbrella policy provides an extra layer of liability protection. It provides an additional $1 million coverage (up to $5 million available) for you and your eligible family members against lawsuits arising from personal injury or property damage claims.