Business Auto Insurance Glossary

Find the answers to frequently asked business insurance questions with a helpful commercial auto insurance glossary from Nationwide. Understand the type of insurance coverage that your company needs.

Actual Cash Value

This is what it would cost to replace your vehicle with one in the same condition. Wear and tear of the vehicle, age, and mileage all determine the actual cash value.

Appraisal

An appraisal determines the value of a vehicle or property, or determines the extent of damage. Appraisals are usually conducted by an impartial expert.

Arbitration

If you cause an accident, you are “at-fault” and legally liable for the damages in an accident.

Assigned Risk

Someone who cannot qualify for insurance in the regular market is considered an assigned risk, and must get coverage through a state assigned risk plan that specifies each insurance company must accept an equal share of these drivers.

At-Fault

If you cause an accident, you are “at-fault” and legally liable for the damages in an accident.

Bodily Injury Liability Coverage

This insurance pays damages for bodily injury or death resulting from an accident for which you are at fault and provides you with funds for a legal defense.

Carrier

The company providing the business auto insurance is called the carrier.

Catastrophe

Events such as tornadoes, hurricanes, flood, fires and hailstorms are examples of catastrophes.

Certificate of Financial Responsibility

This varies from state to state and has different names, but essentially this is a form certifying that specific insurance has been purchased to meet a state’s particular financial responsibility laws.

Certificate of Satisfaction

A form signed by the insured when the insured takes delivery of a car from the repair shop indicating satisfaction with the repairs.

Claim

This consists of a demand or request for payment under the terms of the policy.

Claim Adjuster

Employed by the insurance company, an adjuster investigates and settles claims.

Damages

Damages consist of money that one person is legally obligated to pay another.

Declarations Page

This is a page in your policy that includes basic information, such as your name and address and a description of the vehicle(s) insured; the effective dates of the policy; the amount of insurance coverage and the premiums.

Deductible

This is the portion of a claim that you pay. Having a higher deductible amount will lower your insurance premiums.

Defensive Driver Discount

If available in your state, this is a discount offered to drivers, typically over 50, who have taken a defensive driving course.

Depreciation

Practically unavoidable, depreciation is a decrease in a vehicle’s value due to wear and tear, age, mileage and decline in price, and typically is not insurable. Most auto policies pay for the "actual cash value" which deducts for depreciation.

Endorsement

An endorsement modifies the policy by amending specific coverage. It can add coverage, modify it and even reduce or remove coverage.

Exclusion

This is a restriction in your business auto insurance reducing and/or removing coverage for certain potential events, persons, property or locations.

Expiration Date

This date indicates when your insurance coverage ends. The renewal policy (or new policy) typically starts on this date.

Field Adjuster

An insurance adjuster is one who works outside the office and conducts accident scene investigations, damage inspections and face-to-face meetings with policyholders.

Financial Responsibility Law

This law requires owners and drivers of vehicles to have enough money on hand to compensate people who they injure. Liability insurance is the most common way to satisfy the financial responsibility requirement.

Hazard

This is anything that increases the chances of a collision, or another form of damage to occur.

Indemnification

This provides financial compensation for a loss with the intent to restore a person or entity to the financial position enjoyed before the loss.

Indemnity

When an accident occurs, the insured should be indemnified - restored to the approximate financial condition occupied before the loss occurred.

Inspection

Consists of visual verification of a car or truck’s physical condition.

Insurable Interest

Exists when an individual would suffer an economic loss as the result of damage to property or bodily injury.

Insurance Fraud

Falsifying the facts of an accident to an insurance company to obtain a settlement. It can also occur when facts are omitted or misrepresented when completing the application for insurance. Common types of insurance fraud are staged accidents, faked injuries, and untrue statements about prior accidents, losses, drivers or vehicles.

Insurance ID Card

This is a card issued by your insurance company that contains basic information about your insurance policy.

Insurance Score

A person’s insurance score is often determined by their credit history, and is used in some states to determine if a policy is written or if a billing plan is offered.

Legal Liability

This is liability (or responsibility) imposed by a law, rather than liability coming from a contract or other agreement.

Leased Vehicle

A car or truck rented under a long-term contract, or lease. The company leasing the vehicle retains ownership of the vehicle and is listed on the insurance policy as an insured party.

Liability

A legal obligation or responsibility for the injury or damage suffered by another person, and enforced by law.

Limit

Refers to the maximum amount of coverage purchased by the policyholder and is shown in the contract.

Loss

Any measurable loss, in dollars, of damage to a vehicle or other property, and/or injury suffered by a person. In the insurance world, this term is used interchangeably with the word, claim.

Medical Payments Coverage

This insurance reimburses the driver or passenger of an auto for medical or funeral expenses incurred as the result of an automobile accident. This is regardless of whether the accident was their fault. It also covers medical costs of pedestrians that you may have injured.

Misrepresentation

Making written or verbal statements that are false or misleading.

Motor Vehicle Report

This refers to a report from the division of motor vehicles indicating accidents and violations on your driving record, and to verify information provided by the potential policyholder.

Negligence

The failure to exercise reasonable care that is typically expected in similar instances.

No-fault Insurance

This coverage, if you are in a no-fault state as determined by law, pays for medical expenses, lost wages, or other accident-related expenses regardless of who is responsible for the accident.

Non-Renewal

When an insurance company decides to not renew a policy at the end of its policy period.

Payment Recovery

If your car is damaged in an accident due to another driver’s fault, your insurer can recover the amount of your deductible and any insurance payments from the other party; also known as subrogation.

Personal Injury Protection

This coverage is part of a no-fault policy if you live in a no-fault state. It pays for medical treatment, lost wages, or other medical expenses related to the accident regardless of who caused the accident.

Premium

The premium is the cost of the insurance policy that is paid in monthly, quarterly, semi-annual or annual installments.

Rate

This term refers to the base rating units used to determine the final premium.

Re-inspection

Consists of the review of an estimate or appraisal done by an adjuster to guarantee that the work required in the estimate or appraisal is being completed by the body shop.

Release

This is a legal document indicating that all financial obligations from the past, present or future resulting from an accident or occurrence have been fulfilled.

Renewal policy

Coverage for a policy ends on the expiration date. A replacement policy will be issued on the same date (the renewal date) unless notification was sent advising that the policy would not be renewed.

Risk

Refers to the probability of a particular loss occurring.

Salvage

Damaged property, such a vehicle declared a total loss from an accident, which is taken over by the insurance company after the claim is paid.

Third Party

This refers to an individual or other entity not party to an agreement but who may become involved in an indirect way or be affected by it.

Third Party Claim

Medical claims for injury, or damage to the property of a third party, which allegedly have been caused by the policyholder, constitute a third party claim.

Total Loss

This refers to condition of a vehicle or other property when the damage sustained is so great that repair costs would surpass the value of the vehicle or property.

For more information related to these business car insurance definitions and other important commercial insurance questions, check out the business resource center.