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Glossary of Insurance Terms

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Abandoned Property

Property that has been unclaimed for a period of time specified by individual states and has been turned over to the state.


An event or repeated exposure to conditions that unexpectedly causes injury or damage during the policy period.

Actual Cash Value (ACV)

The fair or reasonable cash price for which the property could be sold in the market in the ordinary course of business, and not at forced sale.


specialist trained in mathematics, statistics, and accounting who is responsible for rate, reserve and dividend calculations and other statistical studies.

Additional Living Expenses

If you are temporarily forced to move out of your house due to damage from a fire or a windstorm, you would incur additional living expenses. For example: a temporary rental home or hotel room, cost to park your car at night or have laundry done at the laundromat. These costs, above and beyond what you normally pay, are additional living expenses.

Additional Vehicle

vehicle acquired during the policy period in addition to those already listed in the Declarations.

Admitted Company

An insurance company authorized and licensed to do business in a given state.


An agent is a person who sells and services insurance policies. There are basically two kinds of agents:

  1. Independent agents represent at least two insurance companies. The independent agent's commission is a percentage of each premium paid, and includes a fee for servicing your policy, answering your questions, helping file claims, etc.
  2. An agent who represents a direct writer usually represents only one company. Sometimes this agent is paid on a commission basis in much the same manner as the independent agent. In other cases, he or she may be paid a salary rather than a commission.


A non-fatal auto accident is defined as alcohol-related if the police accident report indicates there is evidence of alcohol present. It does not necessarily mean that the driver or passengers were tested for alcohol. The National Highway Safety Administration defines a fatal auto accident as alcohol-related or alcohol-involved if either a driver, or pedestrian, had a measurable or estimated blood alcohol concentration [BAC] of 0.01 grams per deciliter or above.

Annual Statement

A report to the state insurance department of the year’s financial results. The insurer’s income and expenses are stated in detail as well as its assets and liabilities.


An evaluation to determine the insurable value of your property before you buy a policy, or to determine the amount of a loss when you file a claim.


An amount of money you are required to pay, usually to repair damage to property in which you have a communal interest. An example would be a homeowners’ association that requires each of the homeowners to pay a fee for snow removal from the sidewalks.


The items on the balance sheet of the insurer which show the book value of property owned.

Assigned Risk

Insurance companies are legally required to participate in state-mandated programs — often called assigned risk plans — that make coverage available to drivers who can not obtain it otherwise, perhaps due to a poor driving record or lack of driving experience. Since state laws require all drivers to carry insurance, the state in which the driver lives will assign the policy to an insurance company doing business there.

Automobile Insurance

A contract between you and the insurance company. You agree to pay a premium and, in exchange, the insurance company agrees to reimburse you for automobile-related losses. There are four major categories of automobile insurance: Liability coverage, Personal Injury Protection [PIP], Physical Damage, Uninsured/Underinsured Motorist Protection.


Base Rate

The dollar charge for a given coverage for one car year prior to the application of rating factors.


A temporary insurance policy that expires at the end of a specific time period or when the permanent policy is written. A binder is given to an applicant for insurance during the time the policy paperwork is being completed.

Bodily Injury - Liability

Bodily injury liability coverage protects you against financial loss [including the cost of your legal defense], when you are legally held liable for injuring other persons in an automobile accident. Liability insurance for both bodily injury [BI] and property damage [PD], or proof of financial responsibility, are required by state law. These two coverages together, are often referred to as liability insurance.

Bodily Injury - Uninsured

Bodily injury uninsured or underinsured coverage protects you in situations where you have been injured and the other driver has inadequate coverage or no insurance at all. Your insurance company would then pay you, up to the limit of your policy, for the injuries you suffered.


A trade, profession or occupation.

Business Use

The use of a vehicle for the purposes of the business or occupation.



Termination of an insurance policy by an insured or an insurance company before the policy expiration date.

Catastrophe Reinsurance

A form of excess of loss reinsurance which indemnifies the reinsured for catastrophic loss events in excess of a specified amount, up to a specific limit.


Your formal demand to be reimbursed for losses covered by your insurance policy.


The impact of a vehicle with another object or vehicle, or the upset of a vehicle.

Collision Insurance

Collision insurance is automobile insurance coverage that reimburses you for damage to your own car when the damage results from overturning your car or from colliding with another object. The other object does not have to be a car — a run-in with a tree or a brick wall would be covered under the collision provision of a policy. Collision insurance is a type of physical damage coverage and also a first-party coverage. First Party coverage pays the policy owner — that is, you. If you have injured someone else or damaged their property, third-party coverage pays for their losses. Liability insurance is called third party coverage, because it pays for losses sustained by third parties — that is, other people. [the second party is your insurance company.] Collision coverage pays for damage to your car regardless of who is at fault in the accident. This means you will not have to wait for the other driver to pay for damage to your car before you get it fixed. If the other person was at fault, your insurance company will try to recover what it paid you from his or her insurance company.


That portion of the premium paid to the agent as compensation for services.

Comprehensive Insurance

Comprehensive insurance reimburses you for damage to your own car from causes other than collision or overturning. The comprehensive portion of your policy pays for loss due to perils like hail, flood, theft, fire, glass breakage, falling objects, missiles, explosions, earthquakes, windstorms, vandalism or malicious mischief, riot or civil commotion, and collision with a bird or an animal — in other words, just about everything except for collision and normal wear and tear. Comprehensive insurance is a physical damage coverage and also a first-party coverage. First-party coverage pays the policy owner — that is, you. If you have injured someone else or damaged their property, third-party coverage pays for their losses. [The second party is your insurance company.] When you look at a policy's comprehensive coverage, check for exclusions or limitations. If you have a special audio system installed in your car, for example, you should make sure your policy would cover the cost of the equipment if it were damaged or stolen. It is also important to know if the policy pays for the actual cash value of damaged or stolen property [its current value after depreciation has been subtracted or the full amount required to replace it today.]


The provisions of an insurance policy stating the rights and obligations of both parties in the contract — you and the insurance company.


Coverage is another word for insurance. Insurance companies use the term "coverage" to mean either the dollar amount of insurance purchased, as in, "You have $200,000 of liability coverage," or the type of loss covered, such as, "This policy includes coverage for theft."

Coverage for Audio, Visual and Data Electronic Equipment and Tapes, Records, Discs and Other Media

Covers the direct and accidental loss to any electronic equipment that receives or transmits audio, visual or data signals, that is not designed solely for the reproduction of sound, and that is permanently installed in your covered auto. It also covers the direct and accidental loss to any accessories used with such equipment and tapes, records, discs or other media that are in your covered auto and are property of yours or a family member.

Coverage for Damage to Your Covered Auto (Physical Damage Coverage)

Insures against damage to an insured auto caused by collision and other than collision losses.

Coverage Territory

Geographic region where coverage is available under the Personal Auto Policy. Includes the United States and its territories and possessions, Canada and Puerto Rico. Coverage is also provided if the auto is damaged while being transported between these ports.



Section of the Policy that shows who is insured, what property is covered, when and where coverage is effective, and how much coverage applies.


Deductible is the amount you pay for a covered loss before the insurance company begins picking up the bill. For example, if you owned a policy with a $200 deductible and you suffered a covered loss totaling $1,000, you would pay the first $200 and the insurance company would pay the remaining $800. If the loss were only $200, you would pay the entire amount and the insurance company would pay nothing.


A decrease in the value of any type of tangible property over a period of time resulting from use, wear and tear, or obsolescence.

Dwelling Coverage

Dwelling coverage protects your house and any structures attached to your home, like the garage and the screened porch. Materials on your property that are being used to expand or repair the house — the lumber being used to add another wing, for example, would also be covered.


Earned Premium

The amount of the premium that has been "used up" during the term of a policy. For example, if a one-year policy has been in effect six months, half of the total premium has been earned.


An endorsement is an insurance policy amendment that modifies its original terms.

Excess Insurance

Insurance that applies only after limits of primary insurance have been exhausted.


An exclusion is an insurance policy provision that denies coverage for certain specified losses. In most homeowner's policies, for example, earthquake damage is excluded.


Outflows or other using up of assets or incurrence of liabilities (or a combination of both) during a period from delivering or producing goods, rendering services, or carrying out other activities that constitute the entity’s ongoing major or central operations.

Expense Ratio

The percentage of the premium dollar devoted to paying expenses of an insurer, other than losses.


  1. The loss record. It can be that of an insured, an agent, a territory, a type of insurance written, or any other category.
  2. A statistical compilation relating losses to premiums.



A program established by law that makes property insurance available and affordable to insureds who might be otherwise uninsurable because of "environmental hazards."

Family Member

A person related to the insured, or his or her spouse, by blood, marriage or adoption who lives in the named insured’s household.

Financial Responsibility Laws

State laws that require owners or operators of autos to provide evidence that they have funds to pay for automobile losses for which they might become liable.

First-party Coverage

There are three parties named in an insurance policy. You and your family are the first party; the insurance company is the second party; and anyone to whom you cause injury or damage is the third party. First-party coverage is insurance coverage whereby your own insurance company pays for your losses. Collision and comprehensive auto insurance are examples of first-party coverage. By contrast, liability insurance is third-party coverage; it pays other people for injuries you cause.


A floater is a type of insurance that covers movable property — like jewelry, for example — wherever it is, within limits stated in the contract. The coverage "floats" with the property.



Increases in equity (net assets) from peripheral or incidental transactions of an entity during a period except those that result from revenues or investments by owners.



A hazard is anything that increases the likelihood or severity of a loss. For instance, ice on a bridge is a hazard because it increases the chance your car will skid. A pile of oily rags stored in a basement is a hazard because it increases the chance of a fire.

Homeowner's Policy

A homeowner's policy bundles different insurance coverages, providing a broad range of personal property, dwelling and liability protection for homeowners and renters. It is called a package policy because it covers both losses to your own property and damage done to others.

Household Goods Policy

A household goods policy covers personal property only. It excludes liability coverage — insurance that pays for damages you cause to another person.


Increased Transportation Expense Coverage

Extends Transportation Expense coverage to non-owned autos and increases the limits to $30 per day to a maximum of $900. Formerly called Rental Reimbursement Coverage.

Incurred Losses

The losses occurring within a fixed period, whether or not adjusted or paid during the same period. As an example, in Workers' Compensation claims, losses occur during a given policy period, but benefits may continue to be paid for many years. The estimated value of the total claim would be an incurred loss for the policy period during which the loss occurred.

Insurable Interest

An economic interest in the safety or preservation of the subject of insurance from loss, destruction or financial impairment.


Insurance is a way to make an individual's financial losses more affordable by transferring them to a large group of people through an intermediary called an insurance company and a legal contract called a policy. The insurance company pools the risks of hundreds of thousands of people. The premium each policyholder pays is small compared to the potential loss he or she is insuring. The cost of a homeowner's policy, for example, is a fraction of what it would cost to replace your house if it burns down. The insurance company can afford to pay for all the losses that occur in the covered pool — and still make enough to stay in business — assuming (1) that it charges appropriate premiums and (2) that every policyholder does not have a loss at the same time. The larger and more diverse the pool, the less likely that is to happen. Insurance works because it is much easier to predict frequency of loss accurately in a large pool of risks, and therefore to charge appropriate premiums to cover the losses.Statistically, it is easier to predict the frequency of fires among 300,000 houses in a 12 month period, for example, than to predict whether or not a single, specific house on Main Street in your town will burn down this year.


An insured is a person [or an institution] covered by an insurance policy. In an auto policy, other insureds are family members who live with you. "Additional named insureds" on the policy might include institutions from which you have borrowed money to buy the car or the house that you are insuring. [Your house is collateral for your mortgage. Your banker would be very upset if it burned down. That is why you can not get a mortgage on a house that isn't insured against fire.]


Insurer is another term for an insurance company. Insurance companies are also know as carriers.

Insuring Agreement

Sections of the insurance policy that states what losses will be indemnified, what property is covered and which perils are insured against.


Joint Ownership Coverage

The purpose of this coverage is to provide coverage for individuals, other than husband and wife, residing in the household or nonresident relatives who jointly own a private passenger auto or a pickup or van that has a gross vehicle weight of less than 10,000 lbs. and is not used for the delivery or transportation of goods and materials.

Joint Tenancy

Joint tenancy is property owned by two or more parties in such a way that at the death of one, the survivors retain complete ownership of the property.



Legal Liability

Legal obligation imposed on a party for negligence, failure to fulfill contractual obligations or violation of law.


Probable future sacrifices of economic benefits arising from present obligations of a particular entity to transfer assets or provide services to other entities in the future as a result of past transactions or events.


Liability is any legally enforceable obligation. Liability insurance covers you for money you are legally obliged to pay because a court has found that you were responsible for damage to another person's property.

Liability Insurance

Liability insurance pays claims against you and your legal defense costs, when you are legally responsible for an accident in which you have injured another person or damaged his or her property.


The maximum amount a policy will pay for a covered loss. For example, if you have a $5,000 loss and the limit on your policy is $3,000, the insurance company will only pay $3,000. If you have a $3,000 loss and the policy limit is $5,000, the company pays the entire $3,000.


A loss is the basis for an insurance claim. For example, you have had a loss if the value of your car is reduced because another car hit it.

Loss Assessment

A loss assessment is an expense you may incur as a member of a condominium or co-op owners association. The association itself typically owns an insurance policy, but can assess its members for damage or liability claims that exceed its own policy limits. For example, your building's roof needs to be replaced after a violent storm. The new roof costs $500,000. Unfortunately, the association's policy limit for damage to the property is $250,000. The cost difference would be split among the members of the association. Your own loss assessment coverage will pay for assessments the association makes against you.

Loss Payee

Party, other than the insured (such as a lending institution), having an insurable interest in the vehicle insured. Also called a Lienholder.

Loss Ratio

The losses divided by the premiums paid. The numerator (losses) can be incurred or losses paid, and the denominator (premium) can be earned premiums or written premiums, depending on what use is going to be made of the loss ratio.


Medical Expenses

Medical expenses are reasonable charges for medical, surgical, x-ray, dental, ambulance, hospital, professional nursing, and prosthetic devices.

Medical Payments Insurance - Automobile

Medical payments insurance is coverage that reimburses you and your passengers [whether or not they are members of your family] for medical or funeral expenses stemming from an accident, regardless of who was responsible for the accident.

Medical Payments Insurance - Homeowner's

Medical payments insurance is homeowner's coverage that compensates others who sustain an injury while on your property, or whom you injure accidentally. [Like a delivery boy who slips on a banana peel in your kitchen, or a guest your child accidentally hits with a badly pitched ball.] This coverage excludes the people who live in your house.


NAIC - National Association of Insurance Commissioners

An association of state insurance commissioners formed for the purpose of exchanging information and of developing uniformity in the regulatory practices of the several states through drafting model legislation and regulations.

Named Perils

Named perils are the specific dangers a policy insures you against — such as fire, windstorm, and hail in a homeowner's policy. These perils are named or listed in the policy.


The failure to use the degree of care that is required by law to protect others from harm.

NFIP - National Flood Insurance Program

A federal program providing flood insurance for fixed property.

No-Fault Insurance

If you are involved in an auto accident, your insurance company pays you, your passengers or a pedestrian injured by your car for financial losses like medical expenses and lost wages due to the accident, regardless of who is at fault.

Nonadmitted Assets

Assets that do not qualify under state law for insurance statement purposes. Examples would be furniture, fixtures, agents’ debit balances, and accounts receivable which are over 90 days old.

Nonowned Vehicle

An auto that is not furnished or available for the regular use of the insured or any family member.


Decision made by the insurance company not to extend coverage for another policy period after the current policy period expires.

Notary Public

A public officer who executes acknowledgments of deeds or writings in order to render them available as evidence of the facts therein contained; administers oaths and affirmations as to the truth of statements contained in papers or documents requiring the administration of an oath.



An accident, including continuous or repeated exposure to substantially the same general harmful conditions.

Other Insurance

A Personal Auto Policy provision that describes how much the insurer will pay when more than one insurance policy or coverage applies to the same loss.

Other Structures Coverage

Separate structures on your property — like utility sheds, guest houses, gazebos and pool houses — are covered under other structures coverage. Dwelling coverage in a homeowner's policy only protects your house and attached structures.

Other Than Collision Coverage (OTC)

Covers damage to a covered auto caused by something other than collision coverage, such as hail, glass breakage and theft. Also called Comprehensive Coverage.

Other Vehicles

The term other vehicles refers to any other vehicles you buy over the next year. [Just be sure to tell your insurance carrier within 30 days of purchase.] You do not need to buy a new policy to insure other vehicles you may own; you can add them to your existing policy with a policy endorsement.

Owner if Other than Insured

An insured is a person [or an institution] covered by an insurance policy. An owner other than insured would be someone [either an individual or a company] who is purchasing the policy for you, or you if you are purchasing the policy for someone else.

Out of State Coverage

Liability Coverage that modifies the Personal Auto Policy to meet other states' financial responsibility requirements and other state laws concerning out-of-state drivers when the covered auto is being driven in that state.


Partial Loss

A loss which does not completely destroy the insured's property or render it worthless.


A specific risk covered by an insurance policy, such as fire, flood, hail, theft, windstorm, or hail. A homeowner's policy is often called a multi-peril policy because it covers you against many specific risks.

Personal Auto Policy

Easy-to-read auto policy that provides broad Liability and Physical Damage coverage for both owned and non-owned autos used, maintained or operated by the insured and his or her family. The Personal Auto Policy is a package policy because it contains both property and liability coverages.

Personal Injury Protection [PIP] (also known as "No-Fault Insurance")

This is a special form of insurance that pays for your medical expenses and loss of income because of an automobile accident. PIP pays for expenses you have actually incurred up to a specific, per-person dollar amount. PIP is a broader form of medical payments insurance. It is also an integral part of the no-fault insurance concept. In fact, states that have no-fault laws require drivers to buy PIP. It is also offered as an optional coverage in some states without no-fault laws. This coverage varies greatly from state to state.

Personal Inventory

Most of the contents of your house is covered by homeowner's insurance, but if you are like most people, you will not be able to remember everything you own after a major loss like a fire — let alone what you paid for everything! That is the information you should list in a personal inventory.

Personal Property Coverage

This part of your homeowner's policy protects your belongings anywhere in the world, but there are a few limitations you should know about: (1) There are restrictions on the amount a standard homeowner's policy will pay on some items — jewelry or furs, for example [you can buy additional coverage for them separately]. (2) The standard reimbursement for items that are damaged, lost, or stolen is their actual cash value — [original value minus depreciation]. If you want to be reimbursed for what it will cost to replace them, select the replacement cost option. (3) Although the policy covers your possessions everywhere, it pays less for losses incurred off your property. For example, a homeowner's policy might pay only 10% of its usual limit for loss on an item that your child took away to college.

Personal Property Exclusions and Limitations

There are some important exclusions and limitations on the coverage for personal property. A homeowner's policy does not cover:

  • Software or disks
  • Animals, birds, or fish
  • Motor vehicles
  • Aircraft and aircraft parts
  • Property of persons who are your tenants, unless they are related to you
  • Paper records, drawings, account books

Coverage for other personal items is also limited. It is important to read the list of exclusions and limitations on your individual policy. You may want to purchase additional insurance for items you own that have only limited coverage in a homeowner's policy.

Physical Damage Coverage

Physical damage coverage insures you against damage to your car. The physical damage section of an automobile policy can include both comprehensive coverage — which protects you against theft and vandalism, among other things — and collision coverage.


A policy is a contract that sets forth the rights and obligations of both a policyholder and an insurance company. The policyholder pays a premium and, in exchange, the insurance company promises to pay for losses covered in the policy. Like all contracts, an insurance policy is valid only if both parties are competent to sign it [you are not legally competent if you are a minor, for example] and it does not cover anything that is illegal.

Policy Period

Period of time listed in the Declaration when coverage under the policy is in effect.


A policyholder is a person who pays a premium to an insurance company in exchange for the protection detailed in an insurance policy.

Policyholder Surplus

Residual interest in the assets of a P&C Co. that remains after deducting its liabilities.


A premium is the annual amount paid for an insurance policy.

Premium Notice

A form notice from an insurer or agency to a policyowner that a premium will be due on a given date.

Primary Policy

A primary policy is the insurance policy that pays first when you have a loss that is covered by more than one policy. Let's say you buy an umbrella policy, in order to get more liability insurance than is provided in your homeowner's policy. Your homeowner's policy is your primary policy. The umbrella policy would start paying for a loss only after your homeowner's policy had paid for that loss up to its limit of coverage.

Private Passenger Auto

A four-wheel motor vehicle, other than a truck, owned or leased for at least six continuous months.

Property Damage - Liability

Property damage - Liability is insurance coverage that pays for your financial loss if you are found liable for damages to a third party — i.e., anybody who is not also covered by your policy. Members of your family who are covered by your insurance policy are not considered third parties.

Property Damage - Uninsured Motorist

Property damage uninsured or underinsured coverage protects you in situations where your vehicle has been damaged by another driver who does not have adequate coverage or has no insurance at all, and can not pay for your losses. With this coverage, your own insurance company would pay up to the limit of your policy, to have your car repaired or replaced.

Punitive Damages

Damages awarded to a plaintiff that are meant to punish the defendant for anti-social actions rather than reimburse the plaintiff for loss.



Rating Factor

Characteristics that differ depending on the individual risk that is being rated, such as the type of vehicle to be insured and the age and sex of the insured driver. For most personal auto coverages, they are used to modify the finished rate.


A transaction wherein the reinsurer, for a consideration, agrees to assume an agreed upon portion of the financial loss exposure from the ceding company.


A renewal is a new policy or a standard certificate from an insurance company, stating that the conditions of your old policy will stay in effect for a specified period of time.

Renter's Policy

A renter's policy is a homeowner's policy that has been adapted to the needs of people who rent. It provides coverage for both your personal property and/or personal liability, but excludes damage to the structure itself, since that belongs to the landlord. It is also called a tenant's policy.

Replacement Cost for Contents

Replacement cost is an essential concept to understand. A policy covering your belongings for actual cash value sounds fine — but it will not pay enough to replace them if they are destroyed or damaged. Why not? Because an item's actual cash value is its value minus depreciation. Let's say you bought a new television 5 years ago for $600. Could you sell it for the same $600 today? Considering its age and wear and tear, and all the new features available on TV's now, you would probably only get around $150. If your television were stolen or damaged, that $150 is all you would get from the insurance company with an actual cash value policy. If you want enough money to be able to replace your television with a new set, you need replacement cost coverage.

Replacement Value

Replacement value is the amount of money you would need to rebuild your house or replace any of your belongings that have been damaged, destroyed or stolen, at current price levels.

Replacement Vehicle

A vehicle the insured acquires during the policy period that replaces one shown in the Declarations.


(1) An amount representing actual or potential liabilities by an insurer to cover debts to policyholders. (2) An amount allocated for a special purpose. Note that a reserve is usually a liability and not an extra fund. On occasion a reserve may be an asset, such as a reserve for taxes not due yet.


The term resident has a special legal connotation. It is not necessarily limited to the people currently living in your house. A son or daughter away at school or in the military may still be considered a resident of the household, if he or she intends to return and considers it home.

Return Premium

A portion of the premium returned to a policyowner as a result of cancellation, rate adjustment, or a calculation that an advance premium was in excess of the actual premium.


Inflows or other enhancement of assets of an entity or settlement of liabilities (or a combination of both) during a period from delivering or producing goods, rendering services, or other activities that constitute the entity’s ongoing major or central operations.


From your point of view, risk is the chance of injury, damage or loss. Insurance companies sometimes refer to their policyholders as risks — as in, "Because of her good driving record, she's a good risk."



A list of items covered by an insurance policy with their descriptions and values.

Service Charge

A fee charged by the insurer when the installment payment option is chosen by the insured.

Single Limit

A policy with a single limit of liability pays up to a single maximum amount for any type of liability loss. By contrast, a policy with split limits pays different maximum amounts for different types of losses.

Split Limit

Split limits restrict the maximum amount that a policy will pay for a specific type of loss, such as property damage and bodily injury. A split limits auto insurance policy, for example, might pay $50,000 per person and $150,000 per accident in bodily injury benefits, and $50,000 in property damage per accident. By contrast, a single limit policy might pay up to $200,000 for all property damage and bodily injury resulting from a single accident. Although the total amount of coverage is the same, the single limit policy is more flexible, because it does not cap the amount that can be paid for any type of loss.

Stated Amount Insurance

Insurance written to cover an item of property for a specific amount of insurance.


The substitution of one person in place of another with reference to a lawful claim, demand or right. In the case of insurance, this principle of law has been incorporated into all policies. Upon payment of a loss to an insured, the insurance company is entitled to the insured's legal and equitable rights against third parties. These rights are only those related to the loss, and the company is only entitled to the extent of its loss payment.


Tax ID Number

Each company or corporation has a Tax ID number. However, if Tax ID is asked of any individual, social security number should be entered in the place of Tax ID.

Temporary Substitute Auto

An auto or trailer that the named insured does not own that is used as a temporary substitute for a vehicle that is out of normal use because of breakdown, repair, servicing, loss, or destruction.


The period of time for which a policy is issued.


Tort is a legal term meaning a wrongful act, resulting in injury or damage, on which a civil action may be based.

Towing and Labor Coverage

Coverage that pays for charges incurred by the insured for towing and labor charges.


Vehicle designed to be pulled by a private passenger auto, pickup or van.


Umbrella Liability Insurance

Umbrella liability insurance covers losses in excess of the limits imposed in your primary liability insurance policies, such as auto and homeowner's insurance. An umbrella policy may also protect you in situations not covered by primary automobile liability policies.

Unearned Premium

That portion of the written premium applicable to the unused part of the period for which the premium has been paid. Thus, in the case of an annual premium, at the end of the first month of the premium period, eleven-twelfths of the premium is unearned.

Uninsured Motor Vehicle

A vehicle that has no Liability coverage, has Liability coverage that does not meet the state’s financial responsibility requirement, is driven by an unidentified hit-and-run driver, or has invalid Liability coverage because the insurer is insolvent or denies coverage.

Uninsured/Underinsured Motorist Coverage

Uninsured motorist coverage pays for injuries sustained by you and your passengers caused by an uninsured motorist. Underinsured motorist coverage pays when you or your passengers are injured as a result of negligence by someone with insufficient liability insurance to cover your losses. The definition of an underinsured motorist varies from state to state.


Vehicle Use

Insurance companies want to know how you are using your car:

  • Pleasure [or occasional use] - if you do not use the car in your occupation, or business
  • Business - if you use the car in your occupation, profession or business
  • Farm - if you use this vehicle chiefly on a farm or ranch




Your Covered Auto

Vehicles listed in the policy Declarations and, under certain circumstances, newly acquired autos and replacement autos.