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SEATTLE AUTO INSURANCE

DEFINITIONS

Agent — A person who sells and services insurance policies. In Washington state, all insurance agents must obtain an agent license from the Office of the Insurance Commissioner.

Application — An insurance form a potential customer fills out. Based on the form, the insurance company decides whether or not to insure the customer, modify the coverage offered, or decline to cover the customer. An application without premium payment is a request for an offer. With a premium payment, it is an actual offer, unless the
insurance company declines to issue a policy to the customer.

Beneficiary — A person eligible to receive benefits under an insurance policy.

Cancellation — This is when an insurance company or an insured person voluntarily ends an insurance policy according to contract provisions or by mutual agreement.

Carrier — A company that sells insurance (also called an insurer).

Claim — A demand made by an insured person for payment of benefits as described in their insurance policy.

Collision Coverage (refers to auto and business insurance) — This covers the physical damage to the insured person’s vehicle due to a collision with another object, such as another vehicle, a fence, building, etc.

Commission — This is the portion of the premium the agent or broker keeps as compensation for sales, service, and distribution of insurance policies.

Coverage — The scope of protection provided to the insured person under an insurance contract.

Declaration Page (Dec Sheet) (refers to auto, business, and homeowner insurance) — The portion of an insurance policy that contains information about risk. It identifies the parties in the contract and the subject of coverage.

Deductible — The dollar amount an insured person must pay for covered charges during a calendar year before the plan starts paying claims. Only charges outlined in the plan that the insurer would normally pay get applied to the deductible.

Fee — A charge or price for professional services.

GAP Coverage (refers to auto insurance) — If an auto is totaled by an insurance company, this pays the difference between the current market value of the owner’s car and the amount they still owe the lender.

Homeowner Policy — An insurance policy to cover a homeowner’s house, other structures on their property, and personal contents against losses caused by such things as windstorms, fire, or theft. This type of policy also includes liability coverage.

Indemnify — This provides payment, repair, or replacement to a victim of loss.

Insurance — A contract to transfer risk from individuals to an insurance company. In exchange for a premium, the insurance company agrees to pay for losses covered under the terms of the policy.

Insurance Policy — This is the entire written insurance contract.

Lapse — When an insurance company ends a policy because the insured person fails to pay the premium.

Limit of Liability — The maximum dollar amount an insurance company agrees to pay the insured person in case of loss.

Limitations — These are exclusions, exceptions, or reductions of coverage in an insurance policy.

Limits — The maximum amount of benefit the insurance company will pay for a given situation or occurrence. Limits also include the ages below or above what an insurance company will not issue a new policy, or continue a policy.

Loss Ratio —The percentage of each premium dollar an insurance company spends on claims.

Non-Standard Market (refers to auto insurance) — This auto insurance market includes young drivers with less experience, drivers with multiple tickets or accidents, and drivers with reckless or drunk driving histories.

Personal Injury Protection (PIP) (refers to auto insurance) — This is insurance coverage for medical and other expenses, such as wage loss and funeral expenses that result from an auto accident – no matter who is at fault. Auto insurance companies must offer PIP to consumers. If consumers do not want it, they must reject it in writing.

Policyholder — The person who has possession of the policy.

Preferred Market (refers to auto insurance) — This auto insurance market features the lowest premiums. It is available to low-risk drivers with exceptional driving records.

Preferred Risk (refers to auto insurance) — This typically refers to drivers who statistically have fewer accidents than average. Insurance companies take into account factors such as age, gender, or a clean driving record. These drivers are usually eligible for a reduced rate.

Premium — The dollar amount an insured person pays to the insurance company to cover the cost of insurance.

Pro Rata — Dividing the premium proportionately between the insured person and the insurance company based on how long the insurance policy was in force.

Producer — A term applied to an agent, solicitor, or other person who sells insurance.

Proof of Loss — A formal statement made by the insured person to the insurance company about a loss. The purpose is to provide the company with sufficient information about the loss to help it decide its liability under the policy.

Replacement Cost (refers to business and homeowner insurance) — The cost to replace property without deducting depreciation.

Risk — The chance that a loss will occur.

Subrogation — This allows the insurance company to recover the payment it made to the person it insures from the person responsible for the damages or their insurance company.

Term — The period of time that an insurance policy is issued.

Underwriter — A person trained to evaluate risks, and determine rates and coverages for insurance companies.

Unearned Premium — This is the part of an advance insurance premium payment that has not yet been used for coverage written. For example, if an insured person has an annual premium, at the end of the first month of the premium period, 11 months of his or her premium would still be “unearned.”

Uninsured/Underinsured Motorist (UIM) (refers to auto insurance) — This coverage protects an insured driver from losses due to another driver, who doesn’t have auto insurance, or who is not fully covered. Auto insurance companies must offer UIM as part of an auto insurance policy. Consumers who do not want the coverage must sign
a waiver.

Waiver — A waiver is a rider that excludes liability for a stated cause of an accident or sickness. It can be a provision that agrees to waive the insurance premium payment during a period of disability. It can also mean the company could waive its right to have the insured person examined by a doctor it chooses. An agent, adjuster, or insurance company may give a waiver of rights to the insured person orally or in writing.

Write — In the insurance industry, this means to insure. It also means to underwrite or to sell insurance policies.