For your convenience, Urban Insurance has prepared the list below of “insurance terms,” Information and their definitions used in the industry. While medical and scientific fields are filled with terms unknown to the majority of people, the insurance industry makes use of terms that are in common use; but can have very specific meanings in the context of your insurance policy.  The fact that you likely understand and use a word in general speech, can be misleading when applied to an element of your coverage.   Of course, we’re happy to explain your policy and answer any questions you may have.

We work hard to answer all of your questions; so if you are not able to find the answer here, please contact us by Clicking Here or call us at 312-664-8088

Insurance Terms and Information

Actual Cash Value

A form of insurance that pays damages equal to the replacement value of damaged property minus depreciation.

Adjuster

An individual employed by a property/casualty insurer to evaluate losses and settle policyholder claims. These adjusters differ from public adjusters, who negotiate with insurers on behalf of policyholders, and receive a portion of a claims settlement. Independent adjusters are independent contractors who adjust claims for different insurance companies.

Agent

Insurance is sold by two types of agents: independent agents, who are self-employed, represent several insurance companies and are paid on commission, and exclusive or captive agents, who represent only one insurance company and are either salaried or work on commission. Insurance companies that use exclusive or captive agents are called direct writers. At Urban Insurance Agency, we are independent agents and can get you the best deal on car insurance.

Auto Insurance Policy

There are basically six different types of coverages. Some may be required by law. Others are optional. They are:

1. Bodily injury liability, for injuries the policyholder causes to someone else.
2. Medical payments or Personal Injury Protection (PIP) for treatment of injuries to the driver and passengers of the policyholder’s car.
3. Property damage liability, for damage the policyholder causes to someone else’s property.
4. Collision, for damage to the policyholder’s car from a collision.
5. Comprehensive, for damage to the policyholder’s car not involving a collision with another car (including damage from fire, explosions, earthquakes, floods, and riots), and theft.
6. Uninsured motorists coverage, for costs resulting from an accident involving a hit-and-run driver or a driver who does not have insurance.

Auto Insurance Premium

The price an insurance company charges for coverage, based on the frequency and cost of potential accidents, theft and other losses. Prices vary from company to company, as with any product or service. Premiums also vary depending on the amount and type of coverage purchased; the make and model of the car; and the insured’s driving record, years of driving and the number of miles the car is driven per year. Other factors taken into account include the driver’s age and gender, where the car is most likely to be driven and the times of day – rush hour in an urban neighborhood or leisure-time driving in rural areas, for example. Some insurance companies may also use credit history-related information. At Urban Insurance Agency, we represent carriers that do not require a credit check. This can save you hundreds of dollars.

Binder

Temporary authorization of coverage issued prior to the actual insurance policy.

Broker

An intermediary between a customer and an insurance company. Brokers typically search the market for coverage appropriate to their clients. They work on commission and usually sell commercial, not personal, insurance.

Collision:

This provides protection against damage to the policyholder’s Car, Truck, Van or other vehicle resulting from the insureds vehicle striking or being struck by an object (most often another vehicle).

Comprehensive Coverage

Portion of an auto insurance policy that covers damage to the policyholder’s car not involving a collision with another car (including damage from fire, explosions, earthquakes, floods, and riots), and theft. This coverage is usually sold along with Collision coverage.

Compulsory (or Mandatory) Auto Insurance

The minimum amount of auto liability insurance that meets a state law. In Illinois the requirements are $25,000 per person Bodily injury /$50,000 Total per accident bodily injury /$20,000 Property damage. In Indiana they are $25,000 per person Bodily injury /$50,000 Total per accident bodily injury /$10,000 Property damage Financial responsibility laws in every state require all automobile drivers to show proof, after an accident, of their ability to pay damages up to the state minimum. In compulsory liability states this proof, which is usually in the form of an insurance policy, is required before you can legally drive a car.

Declaration

Part of a property or liability insurance policy that states the name and address of policyholder, property insured, its location and description, the policy period, premiums, and supplemental information. Referred to as the “dec page.”

Deductible

The amount of loss paid by the policyholder. Either a specified dollar amount, a percentage of the claim amount, or a specified amount of time that must elapse before benefits are paid. The bigger the deductible, the lower the premium charged for the same coverage.

Endorsement

A written form attached to an insurance policy that alters the policy’s coverage, terms, or conditions. Sometimes called a rider.

Excess of Loss Reinsurance

A contract between an insurer and a reinsurer, whereby the insurer agrees to pay a specified portion of a claim and the reinsurer to pay all or a part of the claim above that amount.

Exclusion

A provision in an insurance policy that eliminates coverage for certain risks, people, property classes, or locations.

Excluded Drivers

Remember that all residents in your home, or those that DO have regular access to your car must be either listed on your policy or excluded.

Experience

Record of losses. Insurance companies assume the past is a good predictor of future events. A person that has a good driving record and no claims, will likely continue to be a low risk, and be offered a discounted rate.

Exposure

Possibility of loss. All else being equal, the greater the “Exposure” the larger the premium.

Fair Access to Insurance Requirements Plans / Fair Plans

Insurance pools that sell property insurance to people who can’t buy it in the voluntary market because of high risk over which they may have no control. FAIR PLANS, which exist in 28 states and the District of Columbia, insure fire, vandalism, riot, and windstorm losses, and some sell homeowner’s insurance which includes liability. Plans vary by state, but all require property insurers licensed in a state to participate in the pool and share in the profits and losses.

Financial Responsibility Law

Often connected to SR22. A state law requiring that all automobile drivers show proof that they can pay damages up to a minimum amount if involved in an auto accident. Varies from state to state but can be met by carrying a minimum amount of auto liability insurance.

Fraud

Intentional lying or concealment by policyholders to obtain payment of an insurance claim that would otherwise not be paid, or lying or misrepresentation by the insurance company managers, employees, agents, and brokers for financial gain.

Full Coverage:

The most common use of this term refers to the combination of both liability as well as Physical Damage (Comprehensive and collision). This will provide coverage for both the damages you do to others person or property, plus also cover damages that happen to your own vehicle.

Insurance

A system to make large financial losses more affordable by pooling the risks of many individuals and business entities and transferring them to an insurance company or other large group in return for a premium.

Insurance Pool

A group of insurance companies that pool assets, enabling them to provide an amount of insurance substantially more than can be provided by individual companies to ensure large risks such as nuclear power stations. Pools may be formed voluntarily or mandated by the state to cover risks that can’t obtain coverage in the voluntary market such as coastal properties subject to hurricanes.

Insurance Score

Insurance scores are confidential rankings based on credit information. This includes whether the consumer has made timely payments on loans, the number of open credit card accounts and whether a bankruptcy filing has been made. An insurance score is a measure of how well consumers manage their financial affairs, not of their financial assets. It does not include information about income or race. Studies have shown that people who manage their money well tend also to manage their most important asset, their home, well. And people who manage their money responsibly also tend to handle driving a car responsibly. Some insurance companies use insurance scores as an insurance underwriting and rating tool. At Urban Insurance Agency, we avoid the use of credit scoring.

Liability Insurance

Insurance for what the policyholder is legally obligated to pay because of bodily injury or property damage caused to another person.

Life Insurance

See Ordinary life insurance; Term insurance; Variable life insurance; Whole life insurance.

Limits

Maximum amount of insurance that can be paid for a covered loss. The

Limits of Liability

Maximum amount of insurance that can be paid for a covered loss. For auto insurance In Illinois the requirements are $20,000 per person Bodily injury /$40,000 Total per accident bodily injury /$15,000 Property damage. In Indiana they are $25,000 per person Bodily injury /$50,000 Total per accident bodily injury /$10,000 Property damage.

Lloyd’s of London

A marketplace where underwriting syndicates, or mini-insurers, gather to sell insurance policies and reinsurance. Each syndicate is managed by an underwriter who decides whether or not to accept the risk. The Lloyd’s market is a major player in the international reinsurance market as well as a primary market for marine insurance and large risks. Originally, Lloyd’s was a London coffee house in the 1600s patronized by shipowners who insured each other’s hulls and cargoes. As Lloyd’s developed, wealthy individuals, called “Names,” placed their personal assets behind insurance risks as a business venture. Increasingly since the 1990s, most of the capital comes from corporations.

Loss

A reduction in the quality or value of a property, or a legal liability.

Loss Adjustment Expenses

The sum insurers pay for investigating and settling insurance claims, including the cost of defending a lawsuit in court.

Mediation

Nonbinding procedure in which a third party attempts to resolve a conflict between two other parties.

Named Peril

Peril specifically mentioned as covered in an insurance policy.

National Flood Insurance Program

Federal government-sponsored program under which flood insurance is sold to homeowners and businesses.

NonOwners Insurance

Insurance to provide coverage for one that does not own a vehicle, yet still needs car insurance. Please note, the policy does NOT  cover any vehicle “Owned or regularly operated,” those need to be listed on a policy.

Policy

A written contract for insurance between an insurance company and policyholder stating details of coverage as well as the “Effective Dates” for which the coverage will remain in forse. Prior to the policy’s conclusion, the insurance carrier must provide a price quote describing the cost to “Renew”(reactivate) the coverage, or state the reason why they are unwilling to rewrite the poilicy. If a company declines to Renew a policy, the must list a reason and provide at least 30 days notice. It is important to keep in mind that your current policy will likely qualify for discounts as well as possible additional benefits. Urban Insurance always searches for ways to give you credit and provide the lowest possible rates

Premium

The price of an insurance policy, typically charged annually or semi.

Proof of Loss

Documents showing the insurance company that a loss occurred.

Property/Casualty Insurance

Covers damage to or loss of policyholders’ property and legal liability for damages caused to other people or their property. Property/casualty insurance, which includes auto, homeowners and commercial insurance, is one segment of the insurance industry. The other sector is life/health. Outside the United States, property/casualty insurance is referred to as nonlife or general insurance.

Renewal

A Policy is a written contract for insurance between an insurance company and policyholder stating details of coverage..

Rider

An attachment to an insurance policy that alters the policy’s coverage or terms.

Risk

The chance of loss on the person or entity that is insured.

Salvage

Damaged property an insurer takes over to reduce its loss after paying a claim. Insurers receive salvage rights over property on which they have paid claims, such as badly-damaged cars. Insurers that paid claims on cargoes lost at sea now have the right to recover sunken treasures. Salvage charges are the costs associated with recovering that property.

Self-Insurance

The concept of assuming a financial risk oneself, instead of paying an insurance company to take it on. Every policyholder is a self-insurer in terms of paying a deductible and co-payments. Large firms often self-insure frequent, small losses such as damage to their fleet of vehicles or minor workplace injuries. However, to protect injured employees state laws set out requirements for the assumption of workers compensation programs. Self-insurance also refers to employers who assume all or part of the responsibility for paying the health insurance claims of their employees. Firms that self insure for health claims are exempt from state insurance laws mandating the illnesses that group health insurers must cover.

Severity

Size of a loss. One of the criteria used in calculating premiums rate.

SR-22 Form

The name of the form used by insurance companies to notify the state that the insured has the required insurance coverage. People will sometime refer this car insurance as SR-22, or FR Filing or sometimes as just “Filing” insurance. While insurance is mandatory in Illinois, most drivers are not required to purchase SR22 insurance.

Term Insurance

A form of life insurance that covers the insured person for a certain period of time, the “term” that is specified in the policy. It pays a benefit to a designated beneficiary only when the insured dies within that specified period which can be one, five, 10 or even 20 years. Term life policies are renewable, but premiums increase with age.

Territorial Rating

A method of classifying risks by geographic location to set a fair price for coverage. The location of the insured may have a considerable impact on the cost of losses. The chance of an accident or theft is much higher in an urban area than in a rural one, for example.

Third-Party Coverage

Liability coverage purchased by the policyholder as a protection against possible lawsuits filed by a third party. The insured and the insurer are the first and second parties to the insurance contract.

Total Loss

The condition of an automobile or other property when damage is so extensive that repair costs would exceed the value of the vehicle or property.

Underinsurance

The result of the policyholder’s failure to buy sufficient insurance. An underinsured policyholder may only receive part of the cost of replacing or repairing damaged items covered in the policy.

Underwriting

Examining, accepting, or rejecting insurance risks and classifying the ones that are accepted, in order to charge appropriate premiums for them.

Unearned Premium

The portion of a premium already received by the insurer under which protection has not yet been provided. The entire premium is not earned until the policy period expires, even though premiums are typically paid in advance.

Uninsurable Risk

Risks for which it is difficult for someone to get insurance. (See Insurable risk).

Uninsured Motorists Coverage

Portion of an auto insurance policy that protects a policyholder from uninsured and hit-and-run drivers.

Vandalism

The malicious and often random destruction or spoilage of another person’s property.

Void (or Null and Void)

A policy contract that for some reason specified in the policy becomes free of all legal effect. One example under which a policy could be voided is when information a policyholder provided is proven untrue. If the carrier finds out that the applicant gave false, misleading statements in order to obtain coverage for which they otherwise would not be eligible, they could drop the policy “NULL and Void”. It is advised that you read your policy carefully, and notify your company or agent if there are any errors.

Special Thanks to Insurance Information Institute

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Urban Insurance Agency, LLC  800 W Huron St #301, Chicago, IL 60642   312-664-8088