Reading an automobile insurance policy can be hard.

Talking to an insurance agent/lawyer about your insurance policy can be even more difficult. Sometimes those individuals are so experienced in insurance and the words used in insurance policies they forget many of the words are not common and that they were learned over the course of a career.

I hope to help define some of these terms to help you better understand your policy.

INSURANCE TERMINOLOGY 

Here is the list of the most popular car insurance terminology that you may need to know:

Actual Cash Value: The fair market value of property (replacement cost – depreciation).

Adjuster: An employee or agent of the insurance company responsible for attempting to settle a claim.

Amendment: A change to the basic policy or an alteration to the policy originally purchased.

Arbitration: Many insurance policies contain a requirement or an offer that disputes be resolved through arbitration, not a jury trial. In most personal injury contexts requirements to participate in arbitration are unenforceable.

Bad Faith: The term given to conduct of an insurance company that is not legal. See also “good faith” and “good faith and fair dealing”

Benefits: The term used to describe what promises the insurance company makes to the insured person in an insurance policy.

Binder: A temporary agreement declaring that the policy is in effect.  Often used to protect the policyholder when the policy cannot be issued immediately.

Carrier: The insurance company.

Claim: The title given to the right of a person to collect benefits from an insurance policy. In the personal injury context, this is typically used to say that one files or brings a claim against an insurance company. Unresolved, a claim may become a lawsuit against the insurance company.

Claimant: Person or entity presenting the claim.

Claim Examiner: Person responsible for investigating and settling claim. Sometimes used in place of adjuster.

Cooperation/Duty to Cooperate: Most first-party insurance policies contain a requirement that the insured cooperate with the insurance company in the investigation of a claim by doing certain acts to assist the insurance company in its investigation.

Co-pay/co-insurance: The amount, usually a percentage of benefits paid, that an insured must pay after the insurance company has done so.

Coverage: A term used to describe the various benefits available under an insurance policy. For example, PIP coverage, or liability coverage are different coverages of an automobile policy.

Declarations Page: The page in an insurance policy that sets forth all of the coverages and limits available under the policy, usually at the beginning of the policy.

Deductible: The amount of money an insured must pay before an insurance company is required to pay benefits under an insurance policy.

Examination Under Oath (EUO): The process by which an insurance company, through an attorney it hires, asks questions of an insured to assist it in determining what coverages and benefits are available to the insured.

Exclusion: Restriction in the policy that limits and may exclude coverage for certain persons, property, locations, or damages.

First-Party Insurance/Insurer: There are two types of insurance, first party insurance and third party insurance. First-party insurance is insurance that provides benefits to the person who owns the policy. Health insurance is an example of first-party insurance as is PIP, UM, and UIM insurance.

Good Faith: The term is given to the conduct of an insurance company that is legal.

Good Faith and Fair Dealing: Under the law, insurance companies must treat their insureds fairly—more fairly than other businesses in the United States. This phrase is often used to describe the level of fairness required.

Indemnification: The act of providing compensation for a loss with the intent to restore an entity to the approximate financial position held prior to the loss.

Insurance Medical Exam (IME): Most insurance policies contain a requirement that the insured person attend a medical examination by a doctor hired by the insurance company. These examinations are called Insurance Medical Exams or IMEs.

Insured: The person who is entitled to benefits under an insurance policy.

Insurer: The company that provides benefits under an insurance policy.

Liability Limit: The maximum amount of benefits available under a given coverage in an insurance policy.

Medical Payments Coverage: Pays medical expenses related to an automobile accident.  The coverage is purchased and a coverage under a policy.

Named Insured: The person or entity listed on the policy declarations page.

Personal Injury Protection (PIP): A first-party coverage under an insurance policy that pays the costs of medical bills made necessary because of an injury in a car accident.  Statutorily provided in Kentucky.

Policy: The document setting forth the coverages, benefits, duties, and obligations between an insured and an insurer.

Recorded Statement: Following an accident, an insurance company may ask to take a recorded statement about the crash. Usually, you must give a recorded statement to your own insurance company and you do not have to give a recorded statement to the other insurance company.

Release: Legally binding contract stating that all obligations past, present, or future arising from a particular accident or occurrence have been fulfilled.

Right of Reimbursement: The right of an insurance company to be paid back for benefits paid if you receive compensation for the same expenses from another source. For example, if health insurance pays medical expenses following a collision, and if a person collects money from another driver's automobile insurance for the same expenses, the health insurer may have a right of reimbursement for the amount it paid.

Subrogation: The legal right of an insurer to sue directly itself to enforce its right of reimbursement. True subrogation is rare.

Third-Party Insurance/Insurer: There are two types of insurance, first-party insurance, and third-party insurance. Third-party insurance is insurance that provides benefits to another person or entity. Liability insurance is an example of third-party insurance.

Uninsured Motorist Insurance (UM): First-party coverage is available under many insurance policies that provide benefits if a person is injured in a motor vehicle collision by a person who does not have any liability insurance.

Hopefully, this sheds some light on the sometimes difficult to know meanings of words used in an insurance policy and when discussing insurance policies. If you come across a word that isn't here, and if Google doesn't provide an easy-enough-to-understand definition, feel free to reach out.

SERIOUS INJURIES – REQUIRE SERIOUS ATTORNEYS

Our firm understands the repercussions of a serious accident. If you are injured due to another party’s negligence, you should not have to fight the uphill battle for compensation on your own. When you hire Ferrell & Brown, you are hiring a devoted, caring, and aggressive team who will tenaciously fight for you. If you or someone you know was injured in a wreck and wishes to schedule a consultation, please do not hesitate to contact Ferrell & Brown.