DOI Pat Quinn Governor Andrew Boron, Director

Automobile Insurance Definitions

Jan 2014

Disponible en Español

Note: This information was developed to provide consumers with general information and guidance about insurance coverages and laws. It is not intended to provide a formal, definitive description or interpretation of Department policy. For specific Department policy on any issue, regulated entities (insurance industry) and interested parties should contact the Department.

Listed below are some common auto insurance definitions.

Agent
A representative who sells insurance for one or more companies.
Application
A request for insurance, giving information about the prospective policyholder.
Arbitration
The process in which a third-party arbiter examines facts presented by both you and the insurance company when you disagree about a settlement offer. Arbitration can be binding (the arbiter's decision is final) or non-binding (you can still take the insurer to court if you are unsatisfied).
Auto Replacement Coverage
A supplemental auto insurance coverage that guarantees your car will be completely repaired or replaced, even if the costs exceed its depreciated value.
Binder
A temporary or preliminary agreement, in effect for less than 60 days, that provides coverage until a policy can be written or delivered.
Bodily Injury Liability Coverage
Pays for another person's bodily injury or death in an accident that you may be found legally liable to pay.
Broker
A licensed person or organization you can pay to shop for insurance on your behalf.
Cancellation
Termination of a policy before its normal expiration date.
Claim
Your request for the insurance company to pay you an amount under the terms of your policy.
Claims Adjuster
A person an insurance company hires to settle claims. The adjuster can be a company employee or an independent party under contract with the company.
Collision Coverage
Pays for damage to your vehicle when it collides with another vehicle or object or if it overturns. Your lender may require this coverage if you have a loan on your vehicle.
Comparative Negligence Law
An Illinois law that sets forth how negligence for an accident is determined. Under these rules, you can collect from an at-fault driver only if you are less than 50% at-fault for the accident. In addition, you can only collect for damages in proportion to the amount of fault attributable. For example, if you are involved in an accident and the judge determines you are 20% at-fault for the accident, you can collect from the other driver (since you are less than 50% at-fault) but you cannot collect any more than 80% of your damages from the other driver (since the other driver is only 80% at-fault).
Comprehensive Coverage
Coverage that pays for damage to or the loss of your vehicle from causes other than collision (example: hail, vandalism, flood, fire and theft, etc.) Your lender may require this coverage if you have a loan on your vehicle.
Covered Expenses
The losses or conditions that the policy will pay for.
Custom/Non-factory Equipment Coverage
Covers customized features such as those found on conversion vans, as well as non-factory items such as compact disc players, cellular phones or CB radios.
Declarations Page (“Dec Page”)
A page your company sends you to show your premium and coverage. Some insurance companies only send a new declarations page at renewal unless there’s a change to your policy. You should get a revised declarations page whenever there’s a change to your policy.
Deductible
The dollar amount you must pay out-of-pocket for each claim before the insurance company begins paying.
Gap Insurance
Insurance coverage that pays the difference between what you owe on your auto loan and your totaled car’s actual cash value.
Endorsement
Amendment to the policy used to add, change, or delete coverage. Also referred to as a “rider.”
Exclusions
Specific situations or circumstances listed in your policy describing when benefits will not be paid.
Good Driver Plan
A rating program offered by some insurance companies that reduces your premium if you have had no accidents or traffic violations within a specified time period.
Grace Period
A time period after the due date that you may pay a premium without penalty. The policy remains in force during this time. Not all insurance companies allow grace periods and no Illinois insurance law requires companies to give you a grace period.
Illinois Automobile Insurance Plan (assigned risk plan)
A plan for people who can't obtain insurance through the voluntary market.
Illinois Insurance Guaranty Fund
A fund that pays an insurer’s claims when the company is insolvent. All Illinois-licensed insurance companies belong to the Illinois Guaranty Fund.
Insured
The policyholder or person(s) protected in case of a loss/claim.
Insurer
The insurance company.
Lapsed Policy
A policy that has terminated for non-payment of premiums.
Liability Coverage
Insurance protection that pays for claims or judgments brought against the insured.
Medical Payment
Coverage that pays for limited medical expenses if you, a member of your family, or a passenger in your car is hurt in a car accident.
Negligence/Negligent
A determination of fault in an accident caused by your inattention or carelessness.
Non-Bound Application
There is no coverage involved and you pay no money. The insurance agent submits the application to the company to find out whether or not you will be accepted.
Non-renewal
A notice of the insurance company’s refusal to renew your policy prior to the end of the policy term.
Policy
The contract form issued by the company to explain the coverage provided. It is a legal document.
Premium
The price charged for insurance.
Property Damage Liability
Pays for damage to another person’s car or property such as fences, buildings, utility poles, signs, and trees. Illinois law requires PD liability limits of at least $15,000 per accident.
Rental Reimbursement/Transportation Expenses
An optional policy benefit that pays the rental fee (usually $15 to $20 per day) if you must rent a vehicle for a reasonable time while your vehicle is being repaired.
Settlement
After negotiating, the amount you agree to accept from the insurance company as full payment for your loss.
Total Loss
When the cost to repair a vehicle approaches or exceeds the vehicle’s actual cash value.
Towing and Labor Coverage
Reimburses you when your vehicle breaks down or is damaged and must be towed to a repair shop or to another location.
Umbrella Liability Insurance
A policy that "floats" above your other coverage. You must carry a certain amount of underlying liability coverage before you may buy an umbrella policy. This coverage kicks in if you are sued for an amount greater than the limits of your auto policy.
Underinsured Motorist Bodily Injury (UIM) Coverage
Pays the difference between your UIM limits and the liability limits of the at-fault driver, if lower than your UIM limits. The law requires you to have this coverage if you purchase higher limits of uninsured motorist bodily injury coverage (UM).
Uninsured Motorist Bodily Injury (UM) Coverage
Covers you for your bodily injury caused by a hit-and-run driver or an at-fault driver who has no auto liability insurance. Currently, Illinois law requires uninsured motorist limits of at least $20,000 per person and $40,000 per accident.
Uninsured Motorist Property Damage Insurance (UMPD)
Covers damage to your vehicle caused by an identified, at-fault, uninsured driver. This option is only offered if you choose not to purchase collision coverage. Currently, Illinois law requires that the company offer at least a $15,000 minimum with a $250 deductible.
Youthful Driver
Most insurance companies charge higher rates for young drivers between the ages of 16 and 25.

For More Information

Call our Consumer Assistance Hotline toll free at (866) 445-5364 or visit us on our website at http://insurance.illinois.gov