Auto Insurance Glossary...

Aftermarket Part - After-market parts are made by a company other than the manufacturer of the vehicle.

Actual Cash Value- An amount equivalent to the fair market value of the stolen or damaged property immediately preceding the loss. For real property, this amount can be based on a determination of the fair market value of the property before and after the loss. For vehicles, this amount can be determined by local area private party sales and dealer quotations for comparable vehicles.

Admitted Company - An insurance company authorized to do business in California.

Agent - A licensed person or organization authorized to sell insurance by or on behalf of an insurance company.

Auto Insurance - Coverage on the risks associated with driving or owning an automobile. It can include collision, liability, comprehensive, medical, and uninsured motorist coverages.

Binder - A temporary or preliminary agreement which provides coverage until a policy can be written or delivered.

Bodily Injury - Bodily harm, sickness or disease, including death. This does not include communicable diseases such as HIV/AIDS.

Broker - A licensed person or organization paid by you to look for insurance on your behalf.

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Cancellation - The termination of insurance coverage during the policy period. Flat cancellation is the cancellation of a policy as of its effective date, without any premium charge.

Claim - Notice to an insurer that under the terms of a policy, a loss maybe covered.

Claimant - The first or third party. That is any person who asserts right of recovery.

Collision Coverage - Coverage that insures against damage to your vehicle as a result of hitting another vehicle or object (i.e. a tree).

Comprehensive Coverage - Coverage that insures against damage to your vehicle as a result of a loss caused by something other than collision. Some examples are theft, fire, vandalism or falling objects. This coverage is sometimes referred to as "Other-than-Collision".

Coverage - The scope of the protection provided in your insurance contract, as well as any of several risks covered by a policy.

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Declaration - The part of your written policy (contract) that includes your name and address, the property that is being insured, its location and description, the policy period, the amount of insurance coverage and the applicable premiums.

Decline - The company refuses to accept the request for insurance coverage.

Deductible - The portion of a claim you pay out of pocket before the insurance company pays. A higher deductible will lower your premium and you do not have to carry the same deductible for comprehensive and collision coverages.

Depreciation - A decrease in value due to age, wear and tear, etc.

Endorsement - Any change made to a policy.

Exclusion - A restriction in your insurance policy that denies coverage for certain perils, persons, property or locations.

Expiration Date - The date on which the policy ends.

Grace Period - A period (usually 31 days) after the premium due date, during which an overdue premium may be paid without penalty. The policy remains in force throughout this period.

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Insured - The person or organization covered by an insurance policy.

Insurer - The insurance company.

Liability Coverage - Coverage that insures against damages (to other party) for bodily injury or property damage when you are legally responsible for an auto accident.

Limits of Liability - The specified amount up to which the insurance company will protect you as set forth in the policy.

Loss experience - The types and amounts of claims that you have previously had.

Material Misrepresentation - The policyholder / applicant makes a false statement of any material (important) fact on his/her application. For instance, the policyholder provides false information regarding the location where the vehicle is garaged.

Medical Payment Coverage - Coverage that pays for minor medical expenses (to you or your passengers) resulting from an accident, regardless of fault.

No-fault Insurance - An insurance system where your insurance coverage pays for your injuries regardless of who caused the accident.

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Policy - A contract between you and the insurance company.

Premium - The price of the insurance policy.

Premium Financing - A policyholder contracts with a lender to pay the insurance premium on his/her behalf. The policyholder agrees to repay the lender for the cost of the premium, plus interest and fees.

Property Damage - Physical injury to, destruction of or loss of use of tangible property (of other party).

Quote - A cost estimate for insurance coverages based on specific information, including drivers, vehicles and driving record.

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Rate - The amount you pay as premium.

Replacement Cost - The cost to repair or replace an insured item. Some insurance only pays the actual cash or market value of the item at the time of the loss, not what it would cost to fix or replace it. If you have personal property replacement cost coverage, your insurance will pay the full cost to repair an item or buy a new one once the repairs or purchases have been made.

Replacement Value - The full cost to repair or replace the damaged property with no deduction for depreciation, subject to policy limits and contract provisions.

Rider - Usually known as an endorsement, a rider is an amendment to the policy used to add or delete coverage.

Risk - The chance of loss.

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Subrogation - The process of payment recovery whereby your insurance company settles the claim for damage to your car and seeks payment recovery (including your deductible) from the other party if your car is damaged because of that party's negligence.

Surcharge - An extra charge applied by the insurer. For automobile insurance, a surcharge is usually for accidents or moving violations.

Underwriting - The process of determining risk and in what amounts and on what terms the insurance company will accept the risk.

Uninsured/Underinsured Motorist Coverage - Coverage that insures against damages (to you or your passengers) for bodily injury when the responsible party has no insurance or insufficient insurance to pay for damages. This coverage includes hit-and-run accidents.

Auto Insurance 101

What Is Auto Insurance?
An auto insurance policy is a contract between you and an insurance company. You pay a premium. In exchange, the insurance company promises to pay for specific car-related financial losses, within the selected coverage limits, that you may have during the term of the agreement.

Most states require that you carry automobile liability insurance in certain minimum amounts. If you are at fault in an accident the law requires that you pay the damages sustained by the person who is not at fault. These can include property damage, which is the cost to repair or replace any property that you have damaged. These can also include damages for personal injuries, which include not only the other person's medical expenses and lost wages but also damages for pain and suffering, permanent injury, and loss of enjoyment of life. These damages can come to thousands of dollars even for a minor accident. That's why adequate insurance is essential to your economic health.

The 10 costliest cars to insure

Yes, the cost of repairs has something to do with it, but who drives them and how fast they're driven also are huge factors. Here are the 10 costliest to insure -- and the 10 cheapest.

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If you're shopping for a new car, chances are you're considering things such as gas mileage, vehicle size, comfort and even that all-important CD system. But have you checked on the cost of insurance?

A quick call to your agent might help you narrow your choices -- and avoid a second case of sticker shock after you drive your new car home.

The reason: Along with your own driving record, your ZIP code and the demographics of the drivers in your household, the make and model of your vehicle can have a big effect on your insurance bill, says Russ Rader, spokesman for the Insurance Institute for Highway Safety. Of all of those factors, the type of vehicle you put in your garage is the only variable you can change immediately.

"The choice of the car itself is going to affect, in particular, what you will spend for comprehensive and collision," says Jeanne Salvatore, senior vice president of public affairs for the Insurance Information Institute.

Why some cost more
Collision-damage costs are one of the main factors in differentiating the cost of insuring one type of car over another, says Rader. To a lesser extent, you also want to look at how attractive the car is to thieves.

Vehicles that top the insurance-cost list tend to be either high horsepower, high dollar or expensive to repair, Rader says. An expensive choice: "Sporty cars that are favored by young drivers who are risky drivers, so they are crashing a lot."

Higher horsepower means the driver is more likely to be going faster and getting into more accidents. That will send insurance rates up for everyone who owns a similar car.

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Many of the vehicles that are expensive to insure "share a common problem, and that is horsepower," says Kim Hazelbaker, a senior vice president with the Highway Loss Data Institute, an affiliate of the Insurance Institute for Highway Safety.

Size matters
Some think that a smaller, more maneuverable car is able to outrun trouble and avoid crashes. It's a myth, Rader says.

"When you look at the statistics and insurance claims, small sports cars tend to be in more crashes," he says. Adding to the problem: "They tend to be engaged in faster driving."

From a statistical standpoint, the safest models tend to be the full-sized family sedan-type cars, he says.

A few other special circumstances can also send rates through the roof. If a car is a popular target for thieves, your insurance company might charge you higher rates.

If you're driving a high-priced car, it will likely cost more to fix after a collision. As a result, your insurance bill will go up when you add it to the policy, Rader says. Likewise, some luxury or high-end cars feature aluminum body panels that are more expensive to fix or replace than sheet metal, he says.

One other factor to consider: How much damage is your vehicle likely to inflict in a crash?

As sport utility vehicles have become more popular, insurance companies have had to study and factor that issue into premiums, Salvatore says. As a result, if you drive an SUV, your liability premium (which covers damage to other vehicles), could be higher because of the increased damage a vehicle of that size can cause in an accident, she says.

The 10 cars with the most expensive collision losses, starting with the most expensive, from 2002 to 2004 figures from the Highway Loss Data Institute are:

Most expensive models to insure
Mitsubishi Lancer Evolution
Lexus IS 300

Mercedes CL-Class
Honda S2000

Dodge SRT-4
Acura RSX

Subaru Impreza WRX
Nissan 350Z

Jaguar XK (convertible)
Jaguar XJ

Don't let the list scare you; insurance cost isn't necessarily a reflection of safety.

"A safe car is not necessarily the cheapest car to insure," Salvatore says. The car itself could also be expensive or just expensive to repair after an accident, which would increase insurance costs.

But a high rate is a red flag to ask a few questions. For instance, if a car has a lot of horsepower and is involved in a lot of crashes, that can also send insurance rates up, even if the car itself is relatively inexpensive.

So if you're getting ready to buy your teenager that dream model and the insurance rate comes back sky high, it may be a tip that it's time to search for another make and model.

The least expensive
Sometimes the driver really does make all the difference.

Insurance companies and crash analysts have noticed that vehicles most often associated with family transportation -- such as minivans, station wagons and family sedans -- get in fewer crashes than the high horsepower hotrods that appeal to young male drivers.

"It's pretty traditional to see things like station wagons and minivans there -- vehicles probably operated by soccer moms in non-aggressive fashion," Hazelbaker says.

In addition, many (but not all) of the vehicles that rank low in collision costs also tend to be "generally, not real expensive vehicles," he says.

The 10 least expensive models to insure, in terms of collision losses, starting with the least expensive are:

Least expensive models to insure
Volvo XC90
Pontiac Montana (standard model)

Chevrolet Malibu Maxx
Mazda MPV

GMC Safari
Ford Thunderbird

Buick LeSabre
Pontiac Montana (extended model)

Nissan Pathfinder Armada (2004 only)
Ford Taurus (station wagon)

Just as with the most costly picks, a variety of reasons can land a vehicle on the least expensive list. For instance, the Volvo XC90 and Chevy station wagon that make the top of the "best" list are "likely to be family vehicles, driven differently than the vehicles on the "worst" list," Rader says. And the Ford Thunderbird, he says, "tends to be a second or third car and is not driven as often."

By Dana Dratch. She is a freelance writer based in Atlanta