Texas Insurance Glossary
“This is a great guide to understanding insurance.”
|Actual Cash Value – a. For personal property-Replacement Cost minus depreciation. b. For vehicles-retail price of a vehicle like yours before it was damaged. (See Replacement Cost)
Additional Insured – In auto insurance, a person (other than the Named Insured) or organization protected by the policy through endorsement. This is typically (on an auto policy) an auto leasing company or may be an employer such as a real estate agency.
Agent – A licensed transactor of insurance who always represents the Insurance Company. Within the title of Agent is the authority to Bind coverage. (see Broker)
Antique Auto – An automobile or truck, at least 25 years old which has been substantially restored to original condition, and which is used exclusively for parades, shows, and occasional drives.
Appraisal – A written estimate of value of property to be insured completed by an individual trained to render such estimate. (See Arbitration)
Arbitration – Non-judicial resolution of dispute. Arbitration usually (in auto insurance) concerns matters of at fault parties in an accident, resulting liability for injury and levels of such injury. Arbitration is conducted by a single neutral arbitrator. If the parties cannot agree on an arbitrator, then each shall select and the two so selected shall appoint the single neutral arbitrator. In auto insurance if the dispute involves the value of the vehicle or the amount of damage the resolution may be accomplished by appraisal which is conducted by three vehicle appraisers. (See Appraisal)
|Bailee – An entity (person or organization) having legal possession of one’s property without having title (right to sell) to such property. The best example of a Bailee is a dry cleaner. They have legal possession of garments without having the right to sell such garments. Bailees with regard to automobiles may be auto repair facilities, valet parking, car washes, etc.
Bind – The act of effecting coverage.Binder – A temporary contract of insurance.
Binder Date – The date and time that coverage is bound or put into effect. (See Bind)
Bodily Injury: Physical injury to the person of a Third Party. This includes sickness, disease, pain and suffering, emotional distress, loss of income and even death. (See Third Party)
Broker: A licensed transactor of insurance who represents the client. (See Agent; Bind)
Broker Fee: The fee for services rendered that is charged by a Broker. Such a fee is in addition to or separate from any Commission. (See Broker, Commission)
|Cancel: The act, of either party in an insurance contract, of ending the contract prior to its expiration. Both parties are required to give written notice to the other party to effect such cancellation. The insurer is required to give at least ten(10) days notice prior written warning of such cancellation.Classic Auto: An automobile which has been substantially restored to original condition, the make and model of which the public has shown an unusual degree of interest (i.e. 1957 Ford Thunderbird, 1964 Chevrolet Impala S/S, Early Mustang Convertibles, etc.)Collision(Damage to Your Car): a. Impact of an automobile with another object or person outside the vehicle or the upset (overturning) of such vehicle; b. That coverage which pays for damage to our insured’s vehicle, in the event of the above, regardless of who was driving or who was to blame. This coverage is usually subject to a deductible and limited to your car’s actual cash value. (See Deductible, Actual Cash Value)
Collision Deductible Waiver(CDW): That coverage which, in the event our insured’s car is damaged in an accident which is the fault of an identified Uninsured Motorist, waives (or eliminates) the deductible requirement under the collision coverage when repairing the auto. (See Collision; Deductible)
Combined Single Limit(CSL): A limits structure for Bodily Injury and Property Damage Liability or Uninsured Motorist Bodily Injury coverage which provides one single limit, which is the maximum payable for all damages in any one occurrence. Most commercial auto insurance is written CSL. (See Split Limits)
Commission: Compensation to the producing agent, broker, or agency for writing and servicing the policy from the insurance carrier. Generally a percentage of the Premium. (See Premium)
Comprehensive (Physical Damage Other than Collision): That coverage which pays for direct and accidental damage to the insured’s automobile, other than that caused by collision, such as fire, vandalism or hail. Also pays for a rental car or other temporary transportation if your car is stolen and reported to the police. All losses not specifically excluded are covered and such coverage usually has a deductible.
Conditions: Also referred to as Terms and Conditions. These are typically circumstances that must be present for the coverage to apply.
Contract: A promise or series of promises that are enforceable under the law.
Coverage Limit: Your vehicle’s actual cash value, minus your deductible. (See Limit)
|Declarations: Also known as the “Dec Page” or merely the ” Dec.” That section of the insurance policy that distinguishes one policy from all others. It contains the insured’s name, address, a description of the property insured, the premium, etc.Deductible: An amount of money which, in the event of a covered loss, the insured is required to pay out of pocket prior to the insurer being liable for any damages. The purpose of a deductible is to eliminate the expense of processing small claims.
Defense: Coverage provided in most liability policies, which pays for the cost of defending the insured in the event of lawsuit regarding a covered loss. Defense cost, in the auto policy, is said to be ” unlimited,” in that the policy requires the insurer to pay whatever is necessary, however it is actually limited in that the insurer can pay policy limits in damages and thereby avoid the defense requirement entirely.
Down Payment: An amount of money (usually a percentage of the premium plus any fees) which the insured must be paid in order for the coverage to be bound. (See Bind)
|Effective Date: The date and time (usually at 12:01 a.m.) in which the policy contract begins. Actual coverage may begin earlier than this due to a Binder. (See Binder Date)Excess: Coverage that applies only after some other policy has paid its full policy Limit. This may result from policy structure, such as in the case of an Excess Liability or Umbrella policy, or as a result of two policies applying to the same loss. (See Primary)
Excess Liability Coverage: Liability coverage that is written to provide higher Limits than those available in the Primary policy. This policy is only liable after the Primary policy has paid its full Limits for a covered loss. It is used where higher Limits of liability are needed, but the primary carrier is unwilling or unable to provide such Limits. The Primary policy may provide Limits of 20/40/15 and the Excess policy 80/260/35 to provide total Limits of 100/300/50.
Exclusion: Language in a policy (or which may be endorsed onto a policy) which specifies that a given circumstance is not covered. An example would be intentional acts of the insured. If an insured were to damage property or cause bodily injury on purpose, the policy will not provide coverage due to the intentional acts exclusion. Another example would be the Named Driver Exclusion, which states that if a designated person specified by name is driving the automobile at the time of loss, the policy will not provide coverage.
|First Party: The insured. A first party loss is a loss that involves injury and/or damage to the property of our insured. (See Third Party)|
|Good Driver: Someone who has been continuously insured for at least 12 months; Someone who has been continuously licensed in the U.S. or Canada for 36 months or more; and Has less that two traffic violations or only one at-fault accident not involving bodily injuries in the last 36 months. Has not been convicted of a DUI or manslaughter.Gray Market: A vehicle which was built for sale outside the U.S. These vehicles (usually built by Porsche, Mercedes, or BMW) do not meet U.S. standards regarding emission control, safety glass, lighting, etc.|
|Home Owner: The person who pays the mortgage on the house. Generally, in order to receive a home owners discount, home owner must live in the home his vehicles are garaged in.|
|Insurance: The contractual transfer of the financial consequences of loss.Insured: Anyone named on the declarations page or driving the insured vehicle with the permission of an insured. (See Permissive User)
Insuring Agreement: Promise made by the insurance company, which outlines its duties. Exclusions, Conditions and definitions that appear later in the policy modify this promise.
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|Liability: The legal responsibility for injury done by the insured to a Third Party, or damage done to their property. (See Third Party)Liability Insurance: Pays other people’s expenses for accidents caused by drivers covered under your policy. See your state guidelines for minimums required. (See Minimum Liability)
Limits: Maximum amounts payable under a given coverage. May be per person, per occurrence, per day or per year. (See Split Limits; Combined Single Limit; Coverage Limit)
Loss Payee: Typically the finance company holding title to the owned auto.
|Medical Payments: An optional auto coverage which pays for the medical expenses and/or funeral bills of the Named Insured, members of his/her family, and passengers of his/her car arising from motor vehicle accidents, including those in which the victim was a pedestrian or a bicyclist. This coverage is Excess to any other medical insurance. (See Excess)Minimum Liability: For Example: Minimum liability is required in the State of Texas at 25/50/25, or $25,000 per person and $50,000 per accident for bodily injury and $25,000 for property damage. This is the only auto insurance required by Texas law (for other states refer to your state’s minimums). NOTE: This is to be increased to 30/60/30 in January 2011.|
|Named Insured: That person so listed on the Declarations and his/her spouse if a resident of the same household.Non-Owned Auto: A borrowed or rented automobile.
Non-Owners Insurance: Personal liability insurance provided by the insurer to an insured who does not own or have regular access to a vehicle.
|Occurrence: An event or series of events which causes Bodily Injury and/or Property Damage. May include repeated or continuous exposure to the same injurious condition.Operator: In auto insurance, that person seated immediately behind the steering controls of the automobile and no other person.|
|Permissive User: An entity not listed on the policy, using the insured’s vehicle with permission. Depending on the particular policy, certain individuals may not be covered, even if given is permission by the insured. (See Exclusions)Personal Injury Protection(PIP): The same coverage as Medical Payments, plus 80% of lost income and the cost of hiring someone to take on the household and caregiver responsibilities of an injured person. (See Medical Payments)
Policy: A legal Contract which contains the agreement between the Insurer and the Named Insured. A Policy is made up of five (5) parts: The Declarations The Insuring Agreement(s) The Exclusions The Conditions The Definitions.
Policy Jacket: A preprinted brochure which contains all policy language except that contained in the Declarations Page and Endorsements. In the Policy Jacket you will find the Insuring Agreement(s), Exclusions, Conditions and Definitions.
Premium: Consideration paid by the insured for the policy. The cost of the policy.
Primary: That policy which must pay first in the event of loss. This would be due to the wording of the policy as in the case of an Excess Liability policy or where two policies apply to the same loss. (See Excess)
Private Passenger Auto: A self propelled motor vehicle, with neither more nor less than four wheels, designed for use upon streets and highways and subject to motor vehicle registration under the laws of Texas.
Producer: A fire and casualty licensee who, for compensation, acts or aids in any manner of soliciting, negotiating, or procuring the making of any insurance contract on behalf of the insured.
Producer Fee(Application Fee): The fee charged by the producer for services, which is in addition to the premium.
Proof of Non-Fault/ No B/I: Documentation required by the insurer to support not charging for an accident or not assigning points for bodily injury in an accident. Acceptable forms are limited to a police report, a letter from the previous insurer or a letter from the carrier of the other party in the accident. The insurer may accept a copy of the claims check stub if it contains sufficient information.
Property Damage (PD): Damage or destruction including loss of use of a Third Party’s property. Reduction in value is the measure of Property Damage.
Punitive and Exemplary Damage: That form of damages, awarded by the court, which is intended to punish the wrong-doer, not to compensate the injured party. This form of damages is generally not covered by a liability policy.
|Quote: An estimate of the cost of insurance given to a prospective client. This estimate does not constitute an offer and therefore is not enforceable. It is literally an invitation to the insured to make an offer. The offer, which may be accepted or rejected, is the policy application.|
|Reinstate with Lapse: The act of re-activating a policy which has ceased to be valid due to expiration or cancellation. There is a period between the cessation of coverage and its reinstatement during which the carrier provided no coverage. (See Cancel)Rental Reimbursement: That optional coverage which will reimburse the insured for the expense of renting a vehicle while his/her vehicle is in the shop due to a covered loss. Coverage is usually written with a per day limit, maximum limit, and a maximum number of days per Occurrence. (See Limit; Occurrence)
Replacement Cost: The cost of replacing the damaged property with new property of like kind and quality without deduction for depreciation. (See Actual Cash Value)
|SR22: A form filed by the insurance company with the Texas Department of Motor Vehicles (DMV) which is one of three (3) types: a) Owners filing – States that the person named on the form is insured while driving any vehicle that he/she owns subject to usual policy exclusions. b) Operators filing – States that the person so named is insured while driving any vehicle not owned subject to usual policy exclusions. c) Broad Form Owner/Operator filing – States that the person so named is insured while driving any vehicle. This form requires that in the event of policy cancellation the DMV be notified. (See SR26)SR26: A form filed by the insurance company with the Department of Motor Vehicles (DMV) in the event of policy cancellation. (See sr22)
Split Limits: A limits structure for Bodily Injury and Property Damage Liability or Uninsured Motorist coverage which provides, for Bodily Injury, one limit per person, which is the maximum payable for all damages payable to any one injured person, a separate limit per Occurrence, which is the maximum payable for all Bodily Injury in any one occurrence, and a third limit which is the maximum payable for Property Damage in any one Occurrence. Most personal lines auto insurance is written Split Limits. (See Limit; Occurrence; Combined Single Limit)
Subrogation: The transfer of the insured’s legal right against an injuring Third Party to the insurance carrier. (See Third Party)
|Third Party: Someone not protected by the Insurance Policy. Typically the other party in an auto accident. (See First Party)Towing & Labor: The optional auto insurance coverage which will reimburse the insured for the expense of towing or repairs at the place of disablement in the event the vehicle becomes disabled. Coverage is written with a per Occurrence Limit and also pays labor charges, such as changing a tire, at the place where your vehicle is disabled. (See Occurrence; Limit)
Trailer Liability: Trailer Liability is always provided by the towing vehicle. (See Liability)
|Umbrella: A broad liability coverage form that provides another layer of liability coverage over all covered personal lines exposures, (i.e., the auto policy, the homeowner liability coverage, the boatowners policy, etc.). The form also provides coverage for some exposures that are not covered by the underlying policies such as coverage for libel and slander (Personal Injury). (See Liability)Uninsured/Underinsured Motorist Bodily Injury(UM/UIM BI): That coverage which, in the event our insured is injured in an accident which is the fault of an Uninsured Motorist or hit-and-run driver*, covers the Bodily Injury expense of the Named Insured, Relatives and passengers in his/her auto. Also pays if the other driver did not have enough insurance to cover all your expenses. The coverage is generally written with a per Person and per Occurrence limit without deductibles. (See Occurrence, Limit; Named Insured) *NOTE: Hit-and-runs must be properly reported to policy for coverage.
Uninsured/Underinsured Motorist Property Damage (UM/UIM PD): That coverage which, in the event our insured’s car is damaged in an accident which is the fault of an Uninsured Motorist, a hit-and-run driver*, or an underinsured driver, pays the cost of repairing the auto, a rental car and damage to items carried in your car. This coverage has a variable maximum Occurrence Limit and an automatic $250 deductible. (See Collision Deductible Waiver) *NOTE: Hit-and-runs must be properly reported to policy for coverage.
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|The above definitions are offered for educational purposes only and do not represent contractual agreements. The definitions, auto insurance terms and coverages in a given policy may be different than those suggested here and such policy will be governed by the language contained therein.
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