We know sometimes the insurance lingo can be a bit scary or hard to understand. That’s why based on our knowledge and various official resources such as the Insurance information Institute and the Illinois and Texas Departments of Insurance, we’ve created this Auto Insurance 101 Glossary. In the next lines you’ll find a list of the most common terms and definitions that you can find in an auto insurance policy, explained with simple words.
Actual Cash Value - An amount that can be given to you in case of loss or property damage. This amount is based on a replacement cost minus the depreciation of your vehicle.
Adjuster - someone who settles insurance claims.
Adverse Carrier - in case of an accident, it refers to the insurance company of the other party.
Agent - A person who usually represents a company and helps you with any question regarding insurance, sales or services.
Amendment - this term will appear if there’s a change or alteration on your policy.
Anti-lock Braking System (ABS) - a system that helps the vehicle’s normal braking system and allows all the wheels to slow down at the same rate.
Anti-Theft - some vehicles are equipped with technology that makes theft much more difficult. If you’re not sure if your car has it, we recommend you to check your vehicle’s manual or google your car model. This might have some perks when getting a policy.
Application - a form that you fill out with your info so that an insurance carrier/company can decide whether to give you a policy or not and how much you would pay.
Appraisal - refers to a process of examination that will give you an estimated value of damage or property.
Arbitration - an out-of-court legal proceeding in which an insurance company and someone insured agree to settle an argument (usually a claim) thanks to an impartial decision made by a third party.
Assured - synonym of insured, it refers to a person who has a policy.
At Fault - refers to someone who in an accident, is legally responsible for the damages.
Binder - a temporary document that declares that a policy is running. This means you are covered prior to when your insurance policy starts and that the company will issue your policy as soon as they can.
Bodily Injury Liability Coverage (Deductible) - in case you are at fault in an accident, this coverage will pay for injuries you’ve caused to others. The amount varies depending on your policy and also determines its limits and conditions.
Cancellation - the possibility of terminating your policy before your insurance policy ends. This can be done by yourself or the company that insured you.
Carrier - any insurance company that insures people.
Catastrophe - an event, usually caused by nature (hurricanes, tornados, floods, earthquakes, wildfires, etc)that causes insured property losses and impacts a lot of policy holders. *Some states refer to a Catastrophe with the word Disaster.
Claim - process in which someone insured asks for a payment or request in term with their policy.
Claim examiner - a person who investigates a claim and sets a solution.
Collision Coverage (Deductible) - this type of coverage pays for repairs to your car if you get into an accident and the accident is your fault. Collision coverage will also repair your car if you hit another object like a fence, telephone pole, garage door, or even a house. (If the accident is the other driver’s fault, then his/her insurance pays).The amount varies depending on your policy and also determines its limits and conditions.
Competitive Auto Repair Parts - refers to parts made by another company which is not the original manufacturer of a vehicle. The term competitive means that these parts are equal in quality but cost less.
Comprehensive Coverage (Deductible) -Fixes your car if something happens to it that isn't the result of an accident, such as a broken windshield caused by a pebble, or a dented roof caused by a fallen tree branch. It also reimburses you the value of the vehicle if it is stolen. Typically covers Theft, Vandalism, Fire, Wind, Hail, Glass Breakage, Collision with animals.
Coverage - the benefits or protection that an insurance policy includes.
Damage - damage caused to a property/person.
Damages - in an accident, it refers to the amount that the party at fault is legally obligated to pay for the damage caused.
Declarations - this is a section in your policy documents where your personal information such as name, address, vehicle insured, location and description is included. The Declarations page(s) will also have the dates of the policy period, the premiums and the coverages you have.
Deductible - how much you would have to pay to have something repaired. It’s the portion that you pay out of your pocket, the other portion will be given by your carrier.
Depreciation - refers to the decrease of value of a property due to time, wear and history.
Drivers - in terms of auto insurance, it refers to the people who are listed in your insurance policy. Be careful! If a driver's name in your household is not listed, they may not have coverage while driving your car.
Endorsement - this term will appear if something is added to your policy. (Think of it as a plus). Most of the time they are extra coverages that you have on your policy.
Estimate - an evaluation of the cost to repair a vehicle/property.
Exclusion - refers to a condition that excludes a coverage in your policy.You may also see exclusions for certain drivers in your household. This means they are excluded from the coverage the policy provides.
Expiration Date - the date when your policy coverage ends. You can find this date on your declarations page. Be sure to have your expiration date in mind so that you can decide if you want to renew or change it.
Field Adjuster - a person who works in insurance and goes outside the office to meet with people and help them through claims, negotiations, inspections and investigations.
First Party - someone insured/holds a policy.
First Party Claims - a claim made by someone insured/that holds a policy.
Final Premium/Final Price - the actual cost of your policy based on the info and facts that you provide the carrier.
Gap insurance - an insurance option that will kick in and help you pay what you still owe if your vehicle is stolen or if your vehicle is totaled. Gap insurance is typically an endorsement that you need to purchase in addition to your basic policy coverages.
Generic Auto Parts - same as Competitive Auto Repair Parts.
High Risk - some carriers consider certain drivers a high risk because of their driving history (if they can’t find any record, if you’re new to driving, if they find various violations). This tends to represent a higher rate on a policy. Luckily, with OCHO you can have a great policy with lower rates and bi-weekly payments! Click here to know more.
Indemnification - a compensation for loss that intends to restore an approximate financial amount prior to the loss.
Independent Adjuster - an impartial insurance worker who works on estimating losses.
Inspection - the verification process of a vehicle’s condition.
Insurance - an agreement between a company and a person by which the company provides protection and guarantees compensation in specific situations, in return for the payment of a premium.
Insurance Card - a card that contains the basic info of your policy. With OCHO you have 24/7 access to it on your OCHO Profile!
Insurance Fraud - refers to the act of lying or exaggerating the facts on an accident to get higher deductibles or benefits that don’t correspond to what really happened. This often occurs when people exaggerate injuries, stage accidents, intentionally damage their vehicles, inflate repair claims, etc.
Insured - a person who holds a policy/someone with insurance.
Insurer - the company that provides insurance.
Leased Vehicle - a vehicle that is being rented and has a Lease Agreement. If your auto is leased be sure to state that in your policy, the owner or leasing company must appear.
Liability - the responsibility to respond to an injury or harm caused to an individual/an individual’s property.
Liability Examiner - in an accident it refers to the person that examines the case and determines the damages and liabilities of the accident.
Lienholder - a person or company who leases something in exchange of an amount of money until the lender pays off the agreement.
Limit - the maximum amount of money that will be given to someone insured. Each coverage has its own limit.
Loss - a measurable cost of damage or injury that someone holds/suffers.
Material Damage - the damage on a property due to an accident.
Medical Claim Examiner - a person who reviews all the services and bills submitted to a company for the injuries suffered by you or the passengers who were inside your vehicle during the accident.
Medical Payments - this coverage pays your and your passengers’ medical bills, up to a predetermined limit, regardless of who was at fault in the accident.
Motor Vehicle Report (MVR) - a motor vehicle record/report that contains your driving history.
Named insured - individual(s) listed on the Declarations Page of your auto insurance policy.
Negligence - when an entity/party fails to take proper care of a specific situation.
Occurence - an event or incident that occurs during your policy period and unexpectedly causes damage/harm.
OCHO insurance - a company created by immigrants that helps people achieve their dreams by helping them get the insurance they need at a price they can afford. OCHO insurance is also the first credit building insurance.
OCHO Pay - an OCHO insurance payment option that allows you to pay every 2 weeks when you get paid. Ocho Pay can also help you build your credit score, and qualify for $0 down payment.
Ocho the Owl - OCHO’s insurance mascot, his full name is Octavio. He is an owl that crossed the border many years ago to work hard and have a better life. Now he works at a company to help people build financial wealth for their families and their future.
Payment Plans - refers to the plan you choose to pay for your insurance policy.
Peril - an event or danger that can cause damage or loss of your vehicle.
Policy - the contract that you have with an insurance carrier/company. Policies include the coverages and benefits you will have during the agreed time.
Policy Change - any change on your insurance policy during its period of existence.
Policy Holder - someone who buys insurance.
Pre-accident Condition - the state of a vehicle before an accident.
Premium - the price you will be paying to a carrier for your insurance.
Proof of Loss - a document that helps an insurance carrier initiate the claim process in case of property loss.
Quote - a statement that declares the premium you will be paying for the insurance policy you chose.
Rate - base ratings or average base prices, usually used before determining a final premium (which is personalized according to each case).
Release - a contract that states that all obligations (past, present and future) from a particular accident have been completed.
Renewal Date - some policies have a renewal option, this means that when your policy expires you’ll have a specific date when it will begin again.
Rider - in case of a motorcycle, it refers to the driver. In terms of policies, it can be an extra document (amendment) that adds or deletes coverage.
Reinstatement - if for any reason your policy was terminated it can be resumed if you meet the carrier's conditions.
Roadside Assistance - This coverage will help cover costs associated with the following types of claims: dead battery, engine failure, flat tire, stuck in the mud, or towing. Not all policies contain this type of coverage.
Salvage - refers to the property that has been damaged and will be taken over by the insurance company after a claim has been paid.
Subrogation - if your vehicle gets damaged because of someone else’s negligence, your insurance company can help you ask for the other party’s insurance company so you can get a payment recovery and deductible.
Theft - when someone steals another person's vehicle with the intent of permanently taking it away.
Third Party - someone who is not part of a situation/agreement but has a particular interest in it.
Totaled/ Total Loss - when your vehicle isn’t repairable because it would cost more to repair that what is worth. Click here to read more.
Towing and Labor Coverage - assistance in case your vehicle needs towing. This coverage is often part of the Roadside Assistance Coverage.
Underwriting - a process in which an insurance company/carrier decides to accept or reject an application.
Uninsured Motorist Bodily Injury - this type of coverage pays for bodily injury liability losses from an accident if you are hit by an Uninsured or Underinsured Motorist.
Uninsured Motorist Property Damage - this type of coverage pays for property damage losses from an accident if you are hit by an Uninsured or Underinsured Motorist. It helps you protect your own assets.
Vehicle Identification Number (VIN) - a 17 digit number that every car made in the US since 1980 has. Think of it as your car’s fingerprint! This number can be used to verify its authenticity for registrations, warranty claims, theft and of course, auto insurance policies.
Waiting period - a period of time that must pass before certain or all coverages are valid.
Warranty - a document that states the integrity of a product and the chance for replacement or repairs of defective pieces during a certain amount of time.
That’s it! We tried to cover all of the specific vocabulary that might be a little tricky in terms of auto insurance. You might have noticed that there weren’t any words with letters J,K,X, Y and Z, which means less new words to remember.