Glossary of Automobile Insurance Terms

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Click on one of these common insurance related terms for a "plain English" explanation:

Actual Cash Value (ACV)

Unless otherwise defined in the policy, Actual Cash Value is defined in California as fair market value. The fair market value of an item is the amount at which a knowledgeable buyer (under no unusual pressure) would be willing to buy, and a knowledgeable seller (under no unusual pressure) would be willing to sell. Back to Top

Adjuster

A person who evaluates the damage caused by an accident or other covered loss and determines the amount to be paid. Back to Top

Agent

A person authorized, by and on behalf of an insurer, to sell and service insurance policies. Back to Top

Assigned Risk

A risk which is not ordinarily acceptable to insurers and is, according to state law, assigned to an insurer participating in an assigned risk pool or plan. Each participating company agrees to accept its share of these risks. Back to Top

Automobile Insurance

A type of insurance which protects the insured against losses involving automobiles. Different coverages can be purchased depending on the needs and wants of the insured, e.g., the liability coverages of Bodily Injury Liability, Property Damage Liability, and Medical Payments; and the physical damage coverages of Comprehensive and Collision. Back to Top

Binder

A temporary or preliminary agreement which provides coverage until a policy can be issued/delivered. Back to Top

Bodily Injury Coverage

Pays for an injured person's medical expenses and lost wages if you're at fault in a car accident, subject to the limits you choose when you buy your policy (California law mandates certain minimum limits). Also provides you with a legal defense if there is a law suit against you resulting from the accident. Back to Top

Broker

A person who for payment of a fee (paid by you) procures insurance on your behalf. Back to Top

Cancellation

The termination of an insurance policy before its normal expiration date. Back to Top

Claim

A demand made by an insured, or an insured's beneficiary, for payment of benefits provided by an insurance policy. Back to Top

Commission

That portion of the premium paid to the agent as compensation for his or her services. Back to Top

Collision Coverage

Pays for damage to your car caused by a collision with another vehicle or with any other object, regardless who was at fault. Back to Top

Commissioner of Insurance

The title of the head of most state insurance departments. In some states, the Director or Superintendent of Insurance is used instead. Back to Top

Comparative Negligence

The percentage of fault shared by each driver in an accident in which both contribute to causing the collision. Back to Top

Comprehensive Coverage

Pays for damage to your car caused by reason other than collision, such as fire, theft, windstorm, flood, etc. Back to Top

Credit Insurance

Optional insurance that pays the scheduled unpaid balance if you die or scheduled monthly payments if you become disabled. As with most contract terms, the cost of optional credit insurance must be disclosed in writing and, if you want it, you must agree to it and sign for it. Provident Credit Union offers something similar to credit insurance called Credit Protection. Credit Protection is technically not insurance, but will cancel your required monthly payments and waive finance charges for a fixed period and/or cancel outstanding debt in the event of certain predefined occurrences (such as death, disability, or unemployment). See Provident's Supplemental Coverage page for more details. Back to Top

Credit Protection

Optional protection available with your Provident Credit Union auto loan which will cancel your required monthly payments and waive finance charges for a fixed period and/or cancel outstanding debt in the event of certain predefined occurrences (such as death, disability, or unemployment). See Provident's Supplemental Coverage page for more details. Back to Top

Coverage

The scope of protection provided under an insurance contract. Back to Top

Declarations (Dec) Page

The front page of your policy is called the Declarations page. It contains useful information such as:

• the exact name of your insurance company
• the policy number
• your coverages and premiums
• your deductibles, if applicable
• the vehicles insured, their identification numbers, and the classifications for rating purposes.

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Deductible

The amount of the loss which the insured is responsible to pay before benefits from the insurance policy are payable. You may choose a higher deductible to lower your premium. Back to Top

Exclusion

A contractual provision in an insurance policy that denies coverage for certain perils, persons, property, or locations. Back to Top

Extended Service Contract

Optional protection on specified mechanical and electrical components of the vehicle available for purchase to supplement the warranty coverage provided with the new or used vehicle. Provident Credit Union provides this in the form of Mechanical Breakdown Insurance (MBI). See Provident's Supplemental Coverage page for more details. Back to Top

GAP (Guaranteed Auto Protection)

Optional protection that pays the difference between the amount you owe on your vehicle and the amount you receive from your insurance company if the vehicle is stolen or destroyed before you have satisfied your credit obligation. See Provident's Supplemental Coverage page for more details. Back to Top

Insured

The person(s) entitled to coverage in case of an accident or loss. Back to Top

Insurer

The insurance company providing the insurance. Back to Top

Liability Insurance

Coverage for a policyholder’s legal liability resulting from injuries to other persons or damage to their property. Back to Top

Limits

The maximum amount of benefits the insurance company agrees to pay in the event of a loss. Back to Top

MBI (Mechanical Breakdown Insurance)

A type of extended service contract offered by Provident, with a cost that is often half of what a dealer will charge for the similar coverage. See Provident's Supplemental Coverage page for more details. Back to Top

Medical Payments Coverage

Covers the medical costs (up to the specified limit you choose) resulting from an auto accident for you, your family, and others in your car. It pays regardless of fault. Back to Top

Nonrenewal

The termination of an insurance policy at its normal expiration date. Back to Top

Policy

Written contract of insurance. Back to Top

Premium

The money paid for an insurance policy based upon the coverage provided. Back to Top

Premium Finance Company

A lending institution that finances insurance premiums for a fee. Back to Top

Private Passenger Automobile

Four-wheeled motor vehicles of the private passenger, station wagon, or van type. Private passenger automobiles are designed for use on public highways and subject to motor vehicle registration. Back to Top

Producer

A term applied to an agent, solicitor or other person who sells insurance. Back to Top

Property Damage Liability Coverage

Pays for damages to another person's property (such as a fence, car, or home) if you're at fault in a car accident, subject to the limits you choose when you buy your policy (California law mandates certain minimum limits). Also provides you with a legal defense if there is a law suit against you resulting from the accident. Back to Top

Quote

An estimate of the cost of insurance based on information supplied to the insurance company. Back to Top

Replacement Cost

Replacement cost is the cost of replacing lost or damaged property with new property of like kind and quality, at current market prices. Back to Top

Salvage

Property taken over by an insurer to reduce its loss. Back to Top

Subrogation

The process in which an insurance company, after paying a loss to its insured, recovers the amount of the loss for damages (plus the insured’s deductible) from the legally liable party. Back to Top

Surcharge

An extra charge applied to the premium by the insurer, usually for at fault accidents or moving violations. Back to Top

Underinsured Motorist Coverage

Pays for bodily injury or wrongful death caused by an underinsured motor vehicle (that is, a vehicle which is insured, but at an amount that is less than your uninsured motorist bodily injury (UMBI) limits). Back to Top

Uninsured Motorist Coverage (UMC)

Provides coverage for a policyholder involved in a collision with a driver who does not have liability insurance. UMC comes in two parts:

• UMBI and uninsured motorist property damage (UMPD). UMBI coverage pays for injuries to you or any person in your car when there is a collision with an uninsured driver.
• UMPD coverage pays for the property damage to your car when there is a collision with an identified uninsured driver.

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This material is intended for general information only. It does not expand coverage beyond the policy contract. Please refer to your policy contract for any specific information or questions on applicability of coverage.