Understanding your insurance



Actual Cash Value

Replacement Cost minus depreciation. The cost of a new item of similar make and model, less depreciation. (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.


A licensed transactor of insurance who represents the Insurance Company and helps insurance customers obtain coverage.  

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.


a) A written estimate of value of property to be insured completed by an individual trained to render such estimate. (See 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)




An entity (person or organization) having legal possession of one's property without having title (right to sell) to such property. Bailees with regard to automobiles may be auto repair facilities, valet parking, car washes, etc.


The act of effecting coverage.


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)


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)




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-days (10) 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.)


(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 the insured's vehicle, in the event of the above. This coverage is usually subject to a deductible. (See Deductible)

Collision Deductible Waiver (CDW)

That coverage which, in the event the 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)

Commercial Auto Insurance 

This type of auto policy covers injuries and damages to the owner, employees and passengers. It only applies to business-related vehicles that are owned, rented or leased.

Commercial Auto Policy

A policy which provides coverage for vehicles that are used for commercial purposes. This coverage is typically written for a commercial enterprise rather than an individual.


Compensation to the producing agent, broker, or agency for writing and servicing the policy from the insurance company. Generally a percentage of the Premium. (See Premium)


That coverage which pays for direct and accidental damage to the insured's automobile, other than that caused by Collision. All losses not specifically excluded are covered and such coverage usually has a deductible.


Also referred to as Terms and Conditions. These are typically circumstances that must be present for the coverage to apply.


A promise or series of promises that are enforceable under the law.




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.


An amount of money which, in the event of a covered loss, the insured is required to pay prior to the insurer being liable for any damages. The purpose of a deductible is to eliminate the expense of processing small claims.


Coverage provided in most liability policies, which pays for the cost of defending the insured in the event of a 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 pay 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)


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 insurance company is unwilling or unable to provide such Limits. The Primary policy may provide Limits of 15/30/5 and the Excess policy 85/270/45 to provide total Limits of 100/300/50.


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.



FireLine Score

A FireLine score is an evaluation tool used to rate a home's risk factors (fuel, slope and road access) and provides an overall hazard score. Its Wildfire Hazard Score also identifies properties exposed to embers carried by wind. Other similar evaluation tools include RiskMeter.

First Party

The insured. A first party loss is a loss that involves injury and/or damage to the property of the insured. (See Third Party)



Good Driver

  • Someone who has been continuously licensed for three or more years;
  • Someone who has been continuously licensed in the U.S. or Canada for eighteen months or more; and
  • Has less than 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 on or after January 1, 1996 - California law states that any driver convicted of a DUI or manslaughter on or after 1/1/1996 will not be eligible for consideration as a good driver for ten years from the conviction date. Good drivers may not be refused insurance by any auto insurance company in the State of California and must be given a twenty percent (20%) discount over the insurance company's best rates.

Gray Market

Medical insurance offered to the employees of a company.



Home Owner

The person who pays the mortgage on the house.

Hold Harmless Agreement

Usually, in a written contract, this agreement holds a contracted third party liable if the agreed upon work they perform causes a loss.



The contractual transfer of the financial consequences of loss.

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.




The legal responsibility for injury done by the insured to a Third Party, or damage done to their property. (See Third Party)


Maximum amounts payable under a given coverage. May be per person, per occurrence, per day or per year. (See Split Limits; Combined Single Limit)

Loan/Lease Gap

In the event of a total loss, the insurer's actual cash value (ACV) payment may or may not be sufficient to pay off the loan or lease. With this coverage, the insurance company will pay additional funds needed to end the contract.

Loss Payee

Typically the finance company holding title to the owned auto.



Mechanical Breakdown Protection

Extends mechanical breakdown protection for auto repairs beyond the basic warranty term provided by the vehicle manufacturer. Subject to a per breakdown deductible, this coverage applies to the specific vehicle assemblies named in the policy

Medical Payments

An optional auto coverage which pays for the medical expenses of the Named Insured, members of his/her family, and passengers of his/her car if injured in a Collision accident. The Named Insured and Relatives are also covered if struck as a pedestrian. This coverage is Excess to any other medical insurance. (See Excess)



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.




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.


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 permission by the insured (See Exclusions).

Personal Injury Protection (PIP) Coverage

This type of coverage protects a business in the event that a third party suffers an injury (not bodily injury) due to false arrest, wrongful eviction, slander and a whole host of other reasons.


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.


Consideration paid by the insured for the policy. The cost of the policy.


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 California.

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 include a police report, a letter from the previous insurer or a letter from the insurance company 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

Damage or destruction including loss of use of a Third Party's property. Reduction in value is the measure of Property Damage.

Punitive Damages

This may be awarded in a civil lawsuit that seeks compensation for injury, negligence, libel or breach of contract.

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.




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 prospective client 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 insurance company 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 and a maximum number of days per Occurrence (See Limit; Occurrence).

Repair or Replacement Cost

The cost of repairing or replacing the damaged property with new property of like kind and quality without deduction for depreciation (See Actual Cash Value),


Rideshare refers to the taxi-like service that people provide through companies that connect passengers to drivers via a smart phone app. Examples of these companies are, but not limited to: Uber, Lyft, Sidecar, etc. Click here to learn more about Rideshare Insurance.




A form filed by the insurance company with the California  Department of Motor Vehicles (DMV) which states that the insured has an auto insurance policy that meets California  financial responsibility requirements and requires that the DMV be notified if such policy is cancelled. The requirement to file such form is usually due to an uninsured accident or due a negligent operator suspension. (See SR22)


A form filed by the insurance company with the California  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 SR1P)

Scheduled Coverage

Extended coverage that goes beyond the standard personal property coverage in homeowners’, renters’ or Condo Insurance. The Personal properties that are protected under this coverage are typically uncommon items that have a higher value than what would be covered in a standard personal property coverage. Items will be listed separately and given an appraised value at the start of the policy so that the full amount will be covered if/when a claim is made for that item. Examples of scheduled items are: jewelry, fine art, firearms, collectibles, furs, silverware, personal computers, cameras/photography equipment, musical instruments/equipment, etc.

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)

Stated Value or Stated Amount

A term used to value property and commonly used in auto insurance. It means that in the event of a loss the insurer will pay the actual cash value, the repair or replacement cost, or the amount stated in the declarations page, whichever is least. This, in effect, places a "ceiling" on the amount to be paid in the event of loss.


The transfer of the insured's legal right against an injuring Third Party to the insurance company. (See Third Party)



Third Party

Someone not protected by the Insurance Policy. Typically the other party in an auto accident. (See First Party)


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 (See Occurrence; Limit).

Trailer Liability

Trailer Liability is always provided by the towing vehicle (See Liability).




This is the review of potential risks in an insurance applications to determine premiums.


A broad liability coverage form that provides another layer of liability coverage so the business can settle claims and cover the cost of legal judgments. 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 Motorist Bodily Injury (UMBI)

That coverage which, in the event the insured is injured in an accident which is the fault of an Uninsured Motorist, covers the Bodily Injury expense of the Named Insured, Relatives and passengers in his/her auto. The coverage is generally written with a per person and per Occurrence limit. (See Occurrence, Limit; Named Insured)

Uninsured Motorist Property Damage (UMPD)

That coverage which, in the event the insured's car is damaged in an accident which is the fault of an Uninsured Motorist, pays the cost of repairing the auto. This coverage is only written when the policy does not cover collision and has a variable maximum Occurrence Limit. (See Collision Deductible Waiver)