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Generic Insurance Terms

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 Oklahoma.


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

Aircraft Insurance

Coverage for the insured in the event that the insured's negligent acts and/or omissions result in losses in connection with the use, ownership, or maintenance of aircraft.

Automobile Insurance

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

Automobile Insurance (Combined Single Limit Coverage)

Combined Single Limit (CSL) insurance coverage is a type of car insurance coverage that combines all of your liability coverage into one lump sum, instead of having separate limits for bodily injury per person, bodily injury per accident, and property damage. In Oklahoma, liability limits are typically written as 25/50/25, which means $25,000 of bodily injury protection per person, $50,000 of bodily injury protection per accident, and $25,000 of property damage coverage23. However, with combined single-limit insurance coverage, you have a single limit of coverage that can be used for both bodily injury and property damage expenses related to an accident1. This means that if you are found liable for an accident and the cost of medical expenses and property damage exceeds the individual liability limits, combined single-limit coverage provides more flexibility by allowing you to use the total limit to cover all the costs involved.

Automobile Insurance Common Myths

Whether purchasing auto insurance for the first time or conducting an annual review of your coverage, it’s a good idea to do your homework and not believe everything you hear. Differentiating between fact and fiction will give you a good start on securing the best insurance policy for your vehicle.

Myth: Your credit has no effect on your insurance rate.
Fact: Many insurance companies take your credit-based insurance score into consideration.

It is common for your insurance score to be based on your credit. An insurance score is a measure of how well you manage your financial affairs and this is taken into consideration when you want to purchase, change or renew your auto insurance coverage. When you have good credit, generally you will pay less for insurance if the insurance scores are entered into the pricing equation.

Myth: Any insurance policy will cover you if your car is stolen, hit by an uninsured driver, vandalized or damaged by falling tree limbs, hail, flood or fire.
Fact: Only comprehensive coverage will protect you from those disasters, but it’s optional coverage.

Both comprehensive and collision coverage are optional and will increase the cost of your premium. However, if you finance your vehicle, many lenders require you to carry full coverage on the vehicle. If you drive an older car or one worth less than $1,000, it may not be cost effective to purchase full coverage. But having both collision and comprehensive coverage is the best way to fully protect your vehicle from all types of damage.

Myth: You only need the minimum amount of auto liability insurance required by law.
Fact: State laws require a minimum liability amount to be a legal driver; however, this likely will not be enough coverage in the case of an accident. In Oklahoma, the minimum liability coverage is 25/50/25, or $25,000 of bodily injury protection per person, $50,000 per accident and $25,000 of property damage protection.

Accidents often cost more than these minimum limits and buying only the minimum amount of liability means you will likely pay more out-of-pocket for losses incurred from an accident. A general recommendation from the insurance industry is to carry a minimum of $100,000 of bodily injury protection per person, $300,000 per accident and $100,000 of property damage or 100/300/100.

Myth: If other people drive your car, their auto insurance will cover them in the event of an accident.
Fact: The car owner’s insurance will provide physical damage coverage because comprehensive and collision coverages are specifically linked to the car. In Oklahoma, and most states, the car owner’s liability insurance also follows the car as long as the owner gave the driver permission to drive. If the owner failed to obtain liability insurance, the driver is required by law to carry liability insurance.

Myth: Color determines the price of auto insurance.
Fact: The type of vehicle purchased impacts the price of the policy. A long-standing myth regarding the cost of auto insurance involves the color of the vehicle. For years, many have upheld the belief that a certain color of car will make insurance premiums higher. For example, red cars have been associated with speeding or aggressive driving and thus have been associated with higher insurance premiums.

The fact is, it doesn’t matter what color the vehicle is, only what type. Auto insurance premiums are based on make, model, body type, engine size, the age of the vehicle and the age, driving record and credit history of the driver. Premiums are also based, in part, on the car’s sticker price, the cost to repair it, its overall safety record, and the likelihood of theft. Simply put, insurers have no interest in the color of a car, but they do want to know if you have had any previous car accidents, the number of miles you drive annually and where you live.


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

Bodily Injury

Any physical injury to a person. The purpose of liability insurance is to cover bodily injury to a third party resulting from the negligent or unintentional acts of an insured.

Boiler and Machinery Insurance

Covers losses resulting from the malfunction of boilers and machinery. This coverage is usually excluded from property insurance creating the need for this separate product.


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


Coverage against loss as a result of forced entry into premises.



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.



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


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



Coinsurance is a penalty imposed on the insured by the insurance carrier for under reporting/insuring the value of your property. The penalty is based on a percentage stated within the policy and the amount under reported. As an example:


A building has an actual replacement value of $1,000,000 and has an 80% coinsurance clause but is insured for only $500,000. Since its insured value is less than 80% of its actual replacement cost value there will be a coinsurance penalty at the time of a loss.

Lets assume a $100,000 fire loss. The simple formula for calculating the coinsurance penalty is: amount of insurance in place / Amount of insurance that should have been in place x the loss, less any deductible is the amount actually paid. In this example the coinsurance penalty would be as follows:

$500,000/ $800,000= .625 x $100,000 loss = $62,500 MINUS the $5,000 deductible = $57,500 which would be the amount of claim actually paid by the insurance company. The coinsurance penalty in this case is $37,500 because if the building were insured to at least 80% of its actual replacement value or $800,000 there would have been no coinsurance penalty and the insured would have collected the full $100,000 loss MINUS their $5,000 deductible.

Calculation: 500,000 (Insured Amt) / 800,000 (RC Amt) X 100,000 (Loss) - 5,000 (Deductible) = 57,500 Claim Amt Paid (Insured owes the remaining 42,500)

Another example of coinsurance...

Consider a $1 million building and a 90% coinsurance clause. Assume that the owner decides to insure the building at $800,000, instead of $1 million or the minimum $900,000 to meet the coinsurance. There also is a $10,000 deductible.

Now, imagine the building catches on fire and causes $300,000 worth of damage. At the time of loss, the owner’s limit was $800,000. Unfortunately, there is not enough coverage because the owner was supposed to purchase at least $900,000 in coverage according to the 90-percent agreement.

The ratio of the amount the owner carried divided by the amount that was required ($800,000/$900,000) is .889. Even though the owner’s loss was $300,000, the insurer will only pay $266,700 ($300,000 x .889) minus the $10,000 deductible, or $256,700. The owner must pay the remaining $43,300 out of pocket.

Calculation: 800,000 (Insured Amt) / 900,000 (RC Amt) X 300,000 (Loss) - 10,000 (Deductible) = 256,700 Claim Amt Paid (Insured owes the remaining 43,000)

Example of Coinsurance requirement that is satisfied (90% coinsurance clause):
The building limit is $90,000
The value of the building at the time of the loss is $100,000
The coinsurance percentage is 90%
The limit of insurance should be at least $100,000 x 90% = $90,000
Because the building limit meets the minimum amount of insurance required under the coinsurance clause, the amount due on a claim is not affected: 
The cost to repair the covered damage is $20,000 
The deductible is $500
The amount payable based on Replacement Cost Value (RCV) is $19,500
This amount represents 100% of the cost to repair the covered damage minus the deductible.

Calculation: 90,000 (Insured Amt) / 90,000 (RC Amt) X 20,000 (Loss) - 500 (Deductible) = 19,500 Claim Amt Paid


In order to make sure you never run into a coinsurance penalty it is vital to make sure that all of your property is insured to the actual replacement cost. Don’t confuse replacement cost with market value. Make sure you review your property values with your agent on an annual basis.

Collision (Auto)

Reimburses you for damage to your automobile sustained in a collision with another car or with any other object, movable or fixed, (for example, you accidentally backed into another object while pulling out from a parking stall and causing damage to the bumper and fender of your covered automobile).

Collision Deductible Waiver

This coverage waves your collision deductible if you are hit by an negligent uninsured motorist.

Common Carrier Liability

Coverage for transportation firms that must carry any customer's goods so long as the customer is willing to pay. Examples include trucking companies, bus lines, and airlines.

Comprehensive (Auto)

Provides coverage for any direct and accidental loss of, or damage to, your covered automobile and its normal equipment, to include but not limited to fire, theft or malicious mischief. (Ex: Windshield, Animal Accidents, Hail Damage, Fire Damage, Stolen Vehicle, Vandalism)

How does Comprehensive Insurance work?

If someone owns a car worth $20,000 with a $1,000 deductible and the car is completely destroyed by an earthquake, the vehicle owner will receive $19,000 from the auto insurance company. If the driver doesn't own comprehensive insurance, they will be responsible for the whole $20,000 since neither liability insurance nor collision insurance covers that kind of damage.

Comprehensive Glass Insurance

Coverage on an "all risks" basis for glass breakage, subject to exclusions of war and fire.

Credit Life Insurance

Insurance issued to a creditor (lender) to cover the life of a debtor (borrower) for an outstanding loan.


The company refuses to accept the request for insurance coverage.


The amount of the loss which the insured is responsible to pay before benefits from the insurance company are payable. You may choose a higher deductible to lower your premium.


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

Disability Insurance

Health insurance that provides income payments to the insured wage earner when income is interrupted or terminated because of illness, sickness, or accident.


Amendment to the policy used to add or delete coverage. Also referred to as a "rider."


Certain causes and conditions, listed in the policy, which are not covered.

Expiration Date

The date on which the policy ends.


Face Amount

The dollar amount to be paid to the beneficiary when the insured dies. It does not include other amounts that may be paid from insurance purchased with dividends or any policy riders.

Financial Guarantee Insurance

A surety bond, insurance policy or, when issued by an insurer, an indemnity contract and any guaranty similar to the foregoing types, under which loss is payable upon proof of occurrence of financial loss to an insured claimant, obligee, or indemnitee.

Fire Insurance

Coverage for loss of or damage to a building and/or contents due to fire.

Good Driver Discount

To be eligible for the Good Drivers Discount all operators of the insured vehicles must have been licensed for three or more year, have no more than a one (1) point charge on their driving record and has not been determined "at fault" in an accident resulting in bodily injury or death to any person.

Grace Period

A specified period immediately following the premium due date during which a payment can be made to continue a policy in force without interruption. This applies only to Life and Health policies. Check your policy to be sure that a grace period is offered and how many days, if any, are allowed.

Guaranteed Insurability

An option that permits the policy holder to buy additional stated amounts of life insurance at stated times in the future without evidence of insurability.

Health Insurance

A policy that will pay specifies sums for medical expenses or treatments. Health policies can offer many options and vary in their approaches to coverage.

Homeowner Insurance

An elective combination of coverages for the risks of owning a home. Can include losses due to fire, burglary, vandalism, earthquake, and other perils.

Incontestable Clause

A policy provision in which the company agrees not to contest the validity of the contract after it has been in force for a certain period of time, usually two years.


The policyholder - the person(s) protected in case of a loss or claim.


The insurance company.

Legal Insurance

Prepaid legal insurance coverage plan sold on a group basis.

Liability (Auto)

Coverage for a policyholder's legal liability resulting from injuries to other persons or damage to their property as a result of an auto accident. (Ex: Property Damage, Bodily Injury)

How to decide liability coverage limits?

While calculating your limit, you want it to be high enough that it can protect all your property but not too high that you end up paying too much in premiums. The first thing you need to do is to calculate your net worth. To do this, add up all your assets like your home, savings, cars, stocks, and others then deduct your liabilities like debts. You’ll want the middle number to be higher than your net worth. For instance, if you found your net worth to be $230,000, a good policy would have 100/250/100 liability limits. 

Liability Insurance

Coverage for all sums that the insured becomes legally obligated to pay because of bodily injury or property damage, and sometimes other wrongs, to which an insurance policy applies.

Life Insurance

A policy that will pay a specified sum to beneficiaries upon the death of the insured.


Maximum amount a policy will pay either overall or under a particular coverage.

Loan Value

The amount which can be borrowed at a specified rate of interest from the issuing company by the policyholder, using the value of the policy as collateral. In the event the policyholder dies with the debt partially or fully unpaid, then the amount borrowed plus any interest is deducted from the amount payable.

Marine Insurance

Coverage for goods in transit and the vehicles of transportation on waterways, land, and air.

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 Payments

Will pay reasonable expenses incurred for necessary medical and /or funeral services because of bodily injury caused by accident and sustained by you or any other person while occupying a covered automobile.


An incorrect estimate of the insurance premium.

Mortgage Insurance

Life insurance that pays the balance of a mortgage if the mortgagor (insured) dies.


The cause of a possible loss. For example, fire, theft, or hail.


The written contract of insurance.

Policy Limit

The maximum amount a policy will pay, either overall or under a particular coverage.


The amount of money an insurance company charges for insurance coverage.

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.

Pro-Rata Cancellation

When the policy is terminated midterm by the insurance company, the earned premium is calculated only for the period coverage was provided. For example: an annual policy with premium of $1,000 is canceled after 40 days of coverage at the company's election. The earned premium would be calculated as follows: 40/365 days X $1,000=.110 X $1,000=$110.

Property Damage

Damage to another person's property. The purpose of liability insurance is to cover property damage to a third party resulting from the negligent or intentional acts of an insured.


An estimate of the cost of insurance, based on information supplied to the insurance company by the applicant.

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.


The restoring of a lapsed policy to full force and effect. The reinstatement may be effective after the cancellation date, creating a lapse of coverage. Some companies require evidence of insurability and payment of past due premiums plus interest.


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

Short-Rate Cancellation

When the policy is terminated prior to the expiration date at the policyholder's request. Earned premium charged would be more than the pro-rata earned premium. Generally, the return premium would be approximately 90 percent of the pro-rata return premium. However, the company may also establish its own short-rate schedule.


A licensed employee of a fire and casualty agent or broker who may act for the agent or broker in some circumstances.

Sprinkler Insurance

Coverage for property damage caused by untimely discharge from an automatic sprinkler system.


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


To terminate or cancel a life insurance policy before the maturity date. In the case of a cash value policy, the policyholder may exercise one of the non-forfeiture options at the time of surrender.

Title Insurance

Coverage for losses if a land title is not free and clear of defects that were unknown when the title insurance was written.



The process of selecting applicants for insurance and classifying them according to their degrees of insurability so that the appropriate premium rates may be charged. The process includes rejection of unacceptable risks.

Uninsured Motorist Bodily Injury

Will pay you and your passengers for bodily injury cause by a negligent uninsured motorist, a hit-and-run driver, or by a driver whose insurer is insolvent.

Uninsured Motorist Property Damage

Will pay for damages to your automobile, set up to a limit, when caused by a negligent uninsured motorist.

Waiting Period

A period of time set forth in a policy which must pass before some or all coverages begin.

Workers Compensation Insurance

Coverage providing four types of benefits (medical care, death, disability, and rehabilitation) for employee job-related injuries or diseases as a matter of right (without regard to fault).

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