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Insurance Terms

At the following terms are useful to know:

  • Assigned Risk Plan

    An auto insurance plan managed by the state for those who aren’t able to get conventional liability coverage due to negative driving records. Drivers are put in a residual market and insurance companies are designated to write policies for these individuals at higher prices.

  • Collision Coverage

    Coverage that pays for damage to the insured’s vehicle as a result of a collision/impact with another vehicle or object. The insured has the responsibility for paying the deductible when the damage is repaired. Learn more on the EverQuote blog: What is Collision Coverage and What Doesn’t It Cover?

  • Collision/Damage Waiver (CDW)

    A waiver that provides an individual who rents a car with protection in the case of an accident. The waiver states that if something happens to the rental car, the rental company will not make a claim against the renter. Some exceptions apply, including if the renter drives under the influence. The cost of a CDW varies by company. Learn more on the EverQuote blog: Should I Get Insurance When Renting a Car?

  • Combined Single Limit (CSL)

    An auto insurance policy that has a single amount limit for liability payment for bodily injury and property damage. It differs from a split limit policy, which has different limits for bodily injury per accident, per person, and for the property damage per accident.

  • Comprehensive Coverage

    Coverage that is used to pay for damage resulting from hazards other than collisions, such as fire, windstorms, explosions, or contact with an animal. Similarly to collision coverage, with comprehensive coverage, the insured is responsible for paying the deductible when their vehicle is replaced or repaired.

  • Comprehensive Loss Underwriting Exchange (CLUE)

    Used by insurance companies to access the insured’s claims information when rating or underwriting a policy. It is inclusive of information such as the type of loss, the date of the loss, the vehicle description, and the amounts paid.

  • Coverage Forms

    Attachments to an insurance policy that are used to complete the policy’s coverage. Also know as endorsement forms.

  • Declarations Page

    A section of an insurance contract containing details such as the description, name, and location of insured property. It also includes addresses and names of the policyholders, the time span for which the policy is in place, the amount of coverage, and the premiums payable. Also known as a “dec sheet.”

  • Declination

    When an insurer decides to refuse coverage to an individual after their insurance application has been evaluated. Some states have rules in place that prevent insurers from declining an application based on poor credit or discriminatory factors.

  • Deductible

    A fee that has to be paid by the insured for covered losses before the insured’s insurance company will pay out for a claim. Deductible amounts can vary from $100 to $1,500. In general, the higher the insured’s deductible, the lower the insured’s premium is likely to be.

  • Deposit Premium

    A deposit paid by a prospective policyholder after an insurance application has been submitted. It is typically the same sum as the first month’s estimated premium or above. The cost is added to the total policy premium.

  • Driver Education Credit

    A discount toward auto insurance premiums for young drivers that is available in some states. Drivers gain eligibility for this credit upon completing a driver education course.

  • Endorsement

    A written agreement that is attached to an insurance policy for the addition or subtraction of coverage. Once it is attached, the original terms of the policy are overwritten.

  • Free Look Period (FLP)

    The period of a policy during which it is possible for the policy to be cancelled by the insured. Typically, the free look period is the first thirty days of the policy, though the number of days differs depending on the state.

  • Independent Agent

    A professional in the insurance field that represents a number of insurance companies. Any single company does not employ them; they simply earn commissions by selling policies.

  • Lapse

    When a privilege or right expires after one party does not fulfill their obligation within the allowed time period. When auto insurance coverage lapses, it could lead to a higher premium for another new policy, since insurers understand that a driver that has maintained the same coverage is far less likely to make an insurance claim than an individual that has allowed their policy to lapse.

  • Liability Insurance

    Coverage for an insured individual’s legal fees and costs in the event they are sued and/or have to pay for property damage, bodily injury, or financial loss that has been caused to others.

  • Loss of Use

    A fee charged by rental agencies that reflects the amount of money the company loses if a car must be repaired after an accident. Learn more on the EverQuote blog: Should I Get Insurance When Renting a Car?

  • Medical Payments Coverage

    An aspect of a standard auto insurance policy that covers funeral bills and medical expenses incurred by the insured and any passengers within the insured’s vehicle in the case of an accident. It does not matter who is at fault.

  • No-Fault Insurance

    Some states have auto insurance laws that make it necessary for companies to cover losses, no matter who caused the accident. See Personal Injury Protection.

  • Personal Injury Protection (PIP)

    Coverage that your insurance company provides for hospital, funeral, and medical expenses that have been caused by a vehicular accident, regardless of who is at fault. Sometimes, it is possible for the insured’s passengers and other expenses to be covered by PIP.

  • Policy Period

    The time span in which an insurance policy applies. The beginning of an auto insurance policy starts and ends at 12:01 am for whatever time zone the insured is in.

  • Premium

    The payment that is necessary to keep an insurance policy in force. Premiums are quoted for either annual or six-month policy periods.

  • Property Damage Liability Coverage

    Coverage that is included in standard auto insurance policies to cover losses incurred as a result of destroying or damaging another person’s property. The policy limit applies, and this kind of coverage is required in the vast majority of states.

  • Replacement Cost

    The cost for the reparation or replacement of damaged or lost property without the allowance of depreciation in value or market value considerations. Guaranteed Replacement Cost coverage is offered by some auto insurance companies, provided that he loss has occurred within 12,000 miles driven or inside the first twelve months of ownership.

  • Residual Value

    The value at which an asset is expected to be at the end of a designated time period. For example, a car valuation at the end of a lease.

  • Split Limit

    A policy with three different amounts as liability payment limits: one for bodily injury per accident, one for bodily injury per person, and one for damage to property that has occurred in an accident.

  • Surcharge

    A rise in the insured’s insurance premium as a result of a moving violation or an at-fault accident.

  • Underinsured and Uninsured Motorist (UM/UIM) Coverage

    Covers the insured’s injuries that result from an accident with a driver that is uninsured, or doesn’t have insurance that adequately covers either party. Standard auto insurance policies provide this form of coverage.