Car Insurance Claim Terms Defined in Plain English

A

Actual cash value (ACV): What your car was worth on the market right before the loss, given its year, mileage, options and condition. It is the most a physical damage claim pays for the car, and it is not what you paid for it or what you owe on it. Explained in full: Total loss claims
Adjuster: The person who investigates a claim for an insurer: they check coverage, look at the damage, decide fault and set the amount offered. A staff or independent adjuster works for the insurance company; a public adjuster, where state law allows one, is hired by the policyholder. Explained in full: What a claims adjuster does
Aftermarket parts: Replacement parts made by a company other than the carmaker, also called non-OEM or competitive parts. Many states require the estimate to identify them and some limit their use on newer cars, so read your estimate line by line. Explained in full: Choosing a repair shop and parts
Appraisal clause: A policy condition that settles a disagreement over the amount of a physical damage loss, not over coverage. Each side picks an appraiser, the two appraisers choose an umpire if they disagree, and any two of the three set the amount. Explained in full: The appraisal clause
At-fault accident: A crash in which the insurer decides you were mainly responsible. The finding drives who pays the other side's damage and often whether your premium goes up at renewal; insurers set their own fault rules, within limits some states write into law. Explained in full: Premium increase after an accident

B

Bad faith: An insurer's unreasonable handling of a claim, such as refusing to pay without a reasonable investigation or ignoring a clear liability claim. Whether you can sue for it, and what you can recover, depends on your state's law; a licensed attorney in your state can tell you. Explained in full: Insurance bad faith
Betterment: A deduction for the part of a repair that leaves your car better than before the crash, such as new tires or a new battery replacing worn ones. The insurer should show how it figured the deduction, and you can question it. Explained in full: Collision claims
Bodily injury liability: The part of your liability coverage that pays for injuries you cause to other people, up to a per-person and a per-accident limit. It does not pay for your own injuries. Explained in full: Liability claims against the other driver

C

Cancellation: Ending a policy before its term is over. Once a policy has been in force for a set period, most states allow an insurer to cancel only for listed reasons, such as unpaid premium, fraud or a suspended license, and require written notice first. Explained in full: Cancellation or nonrenewal after a claim
Claim number: The reference the insurer gives your claim when you report it. Put it on every email, letter and photo you send, and write down who you spoke with and when. Explained in full: How a car insurance claim works
CLUE report: The Comprehensive Loss Underwriting Exchange, a LexisNexis database of past auto and home claims that insurers check when they price or renew a policy. It is a consumer report under the Fair Credit Reporting Act, so you can get a copy and dispute errors. Explained in full: Your CLUE report and claims history
Collision coverage: Pays to repair or replace your car after it hits another vehicle or an object, or rolls over, whoever was at fault, minus your deductible. It is optional unless a lender or lease requires it. Explained in full: Collision claims
Comparable vehicles: Cars of the same make and model, a similar year, trim, options and mileage, sold or offered for sale near you, that an insurer uses to set a total loss value. The NAIC model rule calls for two or more from the local market in the last 90 days. Explained in full: Disputing a total loss value
Comparative negligence: A fault rule that reduces what an injured person can recover by their own share of the blame. Under pure comparative negligence you recover something even if you were mostly at fault; under modified rules you recover nothing once your share reaches 50% or 51%, depending on the state. Explained in full: Liability claims against the other driver
Comprehensive coverage: Pays for damage to your car from causes other than a collision: theft, fire, flood, hail, falling objects, vandalism, broken glass and hitting an animal. It is optional and has its own deductible. Explained in full: Comprehensive claims
Contributory negligence: The strictest fault rule: if you were even slightly at fault, you can't recover damages from the other driver. Only a few places still use it, among them Alabama, Maryland, North Carolina, Virginia and the District of Columbia.

D

Declarations page: The front page of your policy that lists the named insureds, the cars, each coverage you bought, its limits and deductibles, and the policy period. It is the first thing to check after a crash. Explained in full: How a car insurance claim works
Deductible: The part of a covered physical damage loss you pay yourself before the insurer pays the rest. If the other driver's insurer later repays your insurer, you can usually get your deductible back. Explained in full: Subrogation and your deductible
Diminished value: The drop in a car's resale value because it now has an accident history, even after good repairs. Claims for it are usually made against the at-fault driver's insurer, and states treat them differently. Explained in full: Diminished value claims
Direct repair program (DRP): A network of body shops that agree to an insurer's pricing and procedures in exchange for referrals. Using one is usually optional; many states let you choose any licensed shop. Explained in full: Choosing a repair shop and parts
Duties after an accident or loss: The steps a policy requires of you after a crash: prompt notice to the insurer, cooperation with the investigation, sending legal papers you receive, and allowing an inspection of the car. Missing them can put coverage at risk. Explained in full: Reporting to your insurer

E

Exclusion: A policy provision that removes something from coverage, such as using your car for paid delivery under a personal policy. A written denial should cite the provision it relies on. Explained in full: When your claim is denied

F

First-party claim: A claim you make under your own policy, such as collision, comprehensive, PIP, MedPay or uninsured motorist. Your insurer owes you the duties in the policy and in your state's claim rules. Explained in full: First-party vs. third-party claims

G

Gap insurance: Guaranteed asset protection: coverage that pays the difference between what you still owe on a loan or lease and the actual cash value paid on a totaled car. Insurers, dealers and lenders sell it. Explained in full: Total loss claims

H

Hit-and-run: A crash in which the other driver leaves without exchanging information. Uninsured motorist coverage may pay, and many policies and some states require a police report within a short time to claim it. Explained in full: Hit-and-run accidents

I

Independent appraiser: A person you hire to value your car or the damage, for example to back up a counteroffer or to serve as your appraiser under the appraisal clause. You pay their fee. Explained in full: Disputing a total loss value

L

Liability coverage: Pays for injuries and property damage you cause to others, up to your limits, and pays for a lawyer to defend you if you are sued. Almost every state requires a minimum amount.
Lienholder (loss payee): The bank or finance company that holds an interest in a financed or leased car. It is named on the policy, and a total loss payment goes to it first.
Loss of use: The value of not having your car while it is being repaired or replaced. In a third-party claim the at-fault driver's insurer usually owes a reasonable rental or its cost; under your own policy it is paid only if you bought rental coverage. Explained in full: Rental reimbursement during repairs

M

Medical payments coverage (MedPay): Pays reasonable medical and funeral expenses for you and your passengers after a crash, whoever was at fault, up to a small per-person limit. It is optional in most states. Explained in full: PIP and MedPay claims
Modified comparative fault: A comparative fault rule with a cutoff: your recovery is cut by your share of fault, and you recover nothing once your share reaches the state's bar, either 50% or 51%. Most states use a version of it.

N

Named insured: The person or people listed on the declarations page as the policyholder. They have the most rights under the policy, including the right to cancel it and to receive notices.
No-fault insurance: A system in about a dozen states where your own personal injury protection pays your medical bills and lost wages first, whoever caused the crash. You can sue the other driver for pain and suffering only when the injury passes the state's threshold. Explained in full: PIP and MedPay claims
Nonrenewal: An insurer's decision not to offer a new term when your policy ends. States set how much written notice the insurer must give, and some limit nonrenewal for accidents you didn't cause. Explained in full: Cancellation or nonrenewal after a claim

O

OEM parts: Original equipment manufacturer parts, made by or for the carmaker. Policies often allow the insurer to pay for parts of like kind and quality instead, so check which parts the estimate lists. Explained in full: Choosing a repair shop and parts
Owner-retained salvage: Keeping your car after the insurer declares it a total loss. The insurer subtracts the salvage value from the payment, and the state brands the title. Explained in full: Total loss claims

P

Personal injury protection (PIP): Coverage that pays medical bills, a share of lost wages and some other costs for you and your passengers, whoever caused the crash. It is required in no-fault states and offered or optional in some others. Explained in full: PIP and MedPay claims
Police crash report: The report an officer writes after responding to a crash, with the drivers, insurers, a diagram and often the officer's view of what happened. Adjusters ask for it, and you can usually order a copy from the agency or the state. Explained in full: When to call the police
Policy limits: The most a coverage pays for one claim, person or accident, as shown on the declarations page. Amounts above the at-fault driver's limits are owed by that driver personally, or by your underinsured motorist coverage if you have it.
Prejudice (to the insurer): Harm to the insurer's ability to investigate or defend because you missed a policy duty, such as late notice. In many states, and under some policy wording, an insurer can deny for late notice only if it shows it was prejudiced. Explained in full: Reporting to your insurer
Proof of loss: The documents, and sometimes a sworn form, that show what happened and how much you are claiming. Many state claim deadlines start to run when the insurer receives it. Explained in full: When your claim drags on
Property damage liability: The part of your liability coverage that pays for damage you cause to other people's property, mostly their cars. If the damage is more than the limit, you owe the rest.
Pure comparative fault: A fault rule in which your recovery is cut by your share of fault but never barred; at 80% at fault you can still recover 20% of your damages.

R

Recorded statement: An interview about the crash that an adjuster records. Your own policy usually requires you to cooperate with your insurer; the other driver's insurer has no such contract with you. Explained in full: Giving a recorded statement
Release: The document you sign to accept a settlement. It usually ends any further claim for what it covers, so read whether it covers only the car or also injuries before you sign. Explained in full: When the offer is too low
Rental reimbursement: Optional coverage that pays for a rental car while yours is being fixed after a covered claim, up to a daily and a total limit. Explained in full: Rental reimbursement during repairs
Repair estimate: A line-by-line list of parts, labor hours, paint and materials needed to fix the car. The insurer writes one and your shop may write another; under the NAIC model rule, you get a copy of the insurer's estimate when it settles on it.
Reservation of rights: A letter in which the insurer says it is handling a claim while keeping the right to deny coverage later. It is not a denial, but it signals a coverage question you should read closely. Explained in full: When your claim is denied

S

Salvage title: A branded title a state issues for a car that was declared a total loss or damaged past the state's threshold. The car usually can't be registered for the road until it is repaired, inspected and retitled as rebuilt.
Salvage value: What a damaged car is expected to sell for, usually at auction, after a total loss. Insurers use it in the total loss formula and subtract it if you keep the car.
SR-22: A certificate an insurer files with the state to prove you carry at least the required liability coverage, often after a serious violation or an uninsured crash. It is not a type of insurance, and the state sets how long you must keep it. Explained in full: SR-22 after an accident
Stacking: Adding together uninsured or underinsured motorist limits for several cars or policies to reach a higher total. Some states allow it and some let insurers prohibit it. Explained in full: Uninsured motorist claims
State insurance department: The state agency that licenses insurers and enforces the claim-handling rules. It takes consumer complaints for free and asks the insurer to respond, but it does not act as your lawyer. Explained in full: Complaining to your state
Statute of limitations: The deadline to file a lawsuit, counted from the date of the crash in most cases. It is often 2 or 3 years for injury and property damage, set by each state; see claim rules by state.
Subrogation: Your insurer's right, after it pays your claim, to collect from the driver who caused the loss and that driver's insurer. When it succeeds, you usually get back your deductible, sometimes in proportion to fault. Explained in full: Subrogation and your deductible
Supplement: An added estimate when a shop finds more damage after taking the car apart. The shop sends it to the insurer, which may reinspect before approving it. Explained in full: Collision claims
Surcharge: An increase an insurer adds to your premium after an at-fault accident or a violation, for a period set in its rating plan. Some states limit surcharges for accidents you didn't cause. Explained in full: Premium increase after an accident

T

Third-party claim: A claim you make against another driver's liability insurance. You pay no deductible, but that insurer owes its duties to its own policyholder, and it pays only up to their limits. Explained in full: First-party vs. third-party claims
Total loss: When the insurer decides a car isn't worth repairing and pays its actual cash value instead, minus your deductible on your own policy. The insurer usually takes the car and its title. Explained in full: Total loss claims
Total loss formula: The test used where state law sets no percentage: a car is totaled when the repair cost plus its salvage value is equal to or more than its actual cash value.
Total loss threshold: A percentage of a car's value, set in some states' laws, at which a damaged car must be or may be treated as a total loss, often 75%. Each state's rule is in claim rules by state.

U

Umpire: The neutral third person in an appraisal who decides only the points the two appraisers can't agree on. Each side usually pays its own appraiser and half of the umpire's fee. Explained in full: The appraisal clause
Unfair claims settlement practices: The list of claim-handling conduct a state's law prohibits, based on NAIC model laws, such as failing to act reasonably promptly or refusing to pay without a reasonable investigation. Many states add day-count deadlines by regulation. Explained in full: When your claim drags on
Uninsured and underinsured motorist coverage (UM/UIM): Pays for your injuries, and in some states your car, when the at-fault driver has no insurance, can't be found, or carries too little to cover your damages. Many states require insurers to offer it, and some require you to carry it. Explained in full: Uninsured motorist claims
Uninsured motorist property damage (UMPD): Coverage, available in some states, that pays to repair your car when an uninsured driver hits it, sometimes with its own deductible. Where it isn't offered, collision coverage is the usual fallback. Explained in full: Accident with an uninsured driver