Terminology

Question 1

Who are the two parties involved in an insurance contract?

Answer 1

The policyholder and the insurance company

Question 2

What is the function of insurance?

Answer 2

Protects the consumer against risk (the uncertainty of a loss occurring)

Question 3

Automobile insurance

Answer 3

A contract. A type of insurance that protects against losses involving automobiles. Can contain different types of coverage

Question 4

What do the different types of coverage depend on?

Answer 4

The needs and wants of the policyholder.

Question 5

What are some factors that affect an automobile insurance?

Answer 5

Driver’s age, driving record, car history, make and model, area of vicinity, level of coverage, etc.

Question 6

Agent

Answer 6

A licensed individual or organization authorized to sell and service insurance policies for an insurance company

Question 7

License

Answer 7

A certificate of authority issued by the department of insurance to an insurer, agent, broker, to transact insurance business. Different types of insurance require different types of license certification

Question 8

Insured

Answer 8

The policy-holder entitled to covered benefits in case of an accident or loss

Question 9

Insurer

Answer 9

The insurance company who issued the insurance and agrees to pay for losses and provide covered benefits; the insurance provider

Question 10

Quotation

Answer 10

“Quote” an estimate of the cost of insurance based on the information supplied to the agent, broker, or insurance company

Question 11

How can an insurance quote be more accurate?

Answer 11

By providing more accurate, specific information

Question 12

Commission

Answer 12

A portion of the policy premium that is paid to an agent by the insurance company as compensation for the agent’s work

Question 13

Policy

Answer 13

An agreement (contract) between insured and insured that states the rights and duties of each party. Contains critical informations about the policy and what it does for the client

Question 14

Premium

Answer 14

The amount (in dollars) of what a policy is worth for a specified period of time (monthly or annually)

Question 15

Limits

Answer 15

The maximum amount of benefits the insurance company agrees to pay in the event of a loss

Question 16

Liability insurance

Answer 16

Coverage of a policyholder’s legal liability resulting from injuries to other person(s) or damage to their property

Question 17

Comprehensive insurance

Answer 17

Pays for damage to car caused by reason other than collision
Ex. Fire, theft, vandalism, sand damage, hail damage, etc

Question 18

Collision coverage

Answer 18

Pays for damage to your car caused by physical contact with another vehicle or with other objects such as a tree, Boulder, guardrail, structure, etc.

Question 19

Deductible

Answer 19

The amount that the policyholder is responsible to pay upfront before covered benefits from the insurance company are payable. Applicable to comprehensive or collision coverage only

Question 20

Why is a deductible payment required?

Answer 20

To keep policyholder’s from a using the policy and prevent minor dings and dents

Question 21

What is full coverage?

Answer 21

Financial coverage for all parties involved in incident (up to policy limit)

Question 22

What is a finance company?

Answer 22

Lenders, lien holders, banks

Question 23

ACV

Answer 23

Actual Cash Value

A method of determining the value of insured property. What the property is actually worth and not what it sells for

Question 24

Uninsured motorist coverage

Answer 24

Provides coverage for a policyholder involved in an accident with an at-fault driver who does not have insurance. Per California law, must be either included or rejected in writing by the customer at the point of sale

Question 25

Medical payments coverage

Answer 25

Covers medical costs (up to specified limit) resulting from an auto accident for you, your family, or others in your car. This coverage pays regardless of fault

Question 26

Claim

Answer 26

Notice to insurance company that a loss has occurred which may be covered under the terms and conditions of the policy

Question 27

Appraiser

Answer 27

The person who evaluates the damage caused by an accident or other covered loss and determines the amount to be paid under the policy terms

Question 28

Insurance

Answer 28

A contract between two parties (policyholder and the company) in which the insurance company agrees to pay specific benefits against specific benefits against specific losses as stated in the specific policy for the specific customer

Question 29

How many parties are involved in an automobile insurance contract?

Answer 29

3
First party- policyholder
Second party- insurance company
Third party- the other person(s) involved in the loss/accident with the name insured

Question 30

Loan gap coverage

Answer 30

Pays the difference between the Actual Cash Value of the vehicle and the loan balance owed to the lender/lien holder

Question 31

Declarations (DEC) page

Answer 31

First page of policy that contains summary of insurance policy

Question 32

What information does the DEC page contain?

Answer 32

Name of insurance
Name and address of policyholder
Listed drivers
Policy number w/ effective & expiration dates
Amounts & types of coverage
Deductibles
Vehicles insured and VIN

Question 33

Endorsements

Answer 33

Changes to auto insurance policy that alters it’s current status

Question 34

Exclusions

Answer 34

A contractual stipulation in an insurance policy that denies or restricts coverage for certain perils, persons, property, or locations.

Question 35

Total loss

Answer 35

Damage or destruction to real or personal property to such extent that it cannot be rebuilt or repaired to its condition prior to the loss.

Question 36

What amount is paid by the insurance company in the event of a total loss?

Answer 36

A check in the amount of the actual cash value of the vehicle

Question 37

Salvage

Answer 37

Severely damaged policyholder property that is legally signed one to an insurer in a loss settlement

Question 38

Surcharge

Answer 38

An extra charge applied to the premium by an insurance company

Question 39

When is a surcharge usually applied to the premium?

Answer 39

For a moving violation.