Commercial Truck Insurance Glossary

A - C

Accident
An accident is a sudden, unexpected event or occurrence that causes bodily injury or property damage. The event may be at-fault, not-at-fault, reported or unreported. An example of a not-at-fault accident could be where your parked vehicle is struck by another vehicle.

Actual cash value (ACV)
A vehicle’s actual cash value, also called the market value, is essentially the price someone would pay to purchase that exact vehicle today. It’s determined by evaluating a number of factors, including the vehicle’s age and condition, as well as any prior damage, improvements, or special equipment.

Additional insured
A company or person who may be liable for an accident that involves an insured person or vehicle can be added to the policy as an additional insured.

Example: A general contractor can be an additional insured.

ADJUSTER
An individual employed by a property/casualty insurer to evaluate losses and settle policyholder claims. These adjusters differ from public adjusters, who negotiate with insurers on behalf of policyholders, and receive a portion of a claims settlement. Independent adjusters are independent contractors who adjust claims for different insurance companies.

Anti-theft device
A device, either active or passive, that attempts to prevent vehicle theft. Active anti-theft devices can track and recover a vehicle and automatically contact a response center to begin the vehicle recovery process. Passive anti-theft devices attempt to prevent theft by using sophisticated electronic car alarms, simple steering wheel locks, etc.

BALANCE SHEET
Provides a snapshot of a company’s financial condition at one point in time. It shows assets, including investments and reinsurance, and liabilities, such as loss reserves to pay claims in the future, as of a certain date. It also states a company’s equity, known as policyholder surplus. Changes in that surplus are one indicator of an insurer’s financial standing.

Bodily injury liability coverage (BI)
Bodily Injury Liability is one part of Liability Coverage. If you are responsible for causing an accident, Bodily Injury Liability coverage pays for injuries/death to people involved in the accident. Bodily Injury Liability coverage also pays for legal defense costs if you are sued.

CLAIMS-MADE POLICY
A form of insurance that pays claims presented to the insurer during the term of the policy or within a specific term after its expiration. It limits liability insurers’ exposure to unknown future liabilities. (See Occurrence policy)

COINSURANCE
In property insurance, requires the policyholder to carry insurance equal to a specified percentage of the value of property to receive full payment on a loss. For health insurance, it is a percentage of each claim above the deductible paid by the policyholder. For a 20 percent health insurance coinsurance clause, the policyholder pays for the deductible plus 20 percent of his covered losses. After paying 80 percent of losses up to a specified ceiling, the insurer starts paying 100 percent of losses.

Combined single limit (CSL)
CSL is a single number that describes the predetermined limit for the combined total of the Bodily Injury Liability coverage and Property Damage Liability coverage per occurrence or accident.

Example: A CSL of $1 million pays up to a combined total of $1 million for both Bodily Injury Liability coverage and Property Damage Liability coverage for any single accident.

Commercial driver’s license (CDL)
A CDL is a special license needed by operators of tractors, vehicles over 26,000 GVW, or vehicles carrying more than seven passengers.

COMMERCIAL GENERAL LIABILITY INSURANCE / CGL
A broad commercial policy that covers all liability exposures of a business that are not specifically excluded. Coverage includes product liability, completed operations, premises and operations, and independent contractors.

COMMERCIAL LINES
Products designed for and bought by businesses. Among the major coverages are boiler and machinery, business interruption, commercial auto, comprehensive general liability, directors and officers liability, fire and allied lines, inland marine, medical malpractice liability, product liability, professional liability, surety and fidelity, and workers compensation. Most of these commercial coverages can be purchased separately except business interruption which must be added to a fire insurance (property) policy. (See Commercial multiple peril policy)

Comprehensive coverage
If your insured vehicle is damaged due to an event other than a collision, Comprehensive coverage will pay for the damage. This includes damages from fire, theft, windstorm, flood and vandalism.

Collision coverage
When your insured vehicle overturns or collides with another object, Collision coverage pays for the damage to your vehicle.

Continuously insured
Being continuously insured means your insurance coverage was in effect at all times, without a break or lapse in coverage for any reason.

Coverage
Coverage is the word used to describe protection for an insured as provided by an insurance policy. A particular coverage may refer to a specific component of insurance that provides protection under a given set of circumstances.

D - F

Declarations page (Dec Page)
Also known as an auto insurance coverage summary, this page is provided by your insurance company and lists the following:

Types of coverage you have elected
Limit for each coverage
Cost for each coverage
Specified vehicles covered by the policy
Types of coverage for each vehicle covered by the policy, and
other information applicable to the policy

DEDUCTIBLE
The amount of loss paid by the policyholder. Either a specified dollar amount, a percentage of the claim amount, or a specified amount of time that must elapse before benefits are paid. The bigger the deductible, the lower the premium charged for the same coverage.

Doing business as (DBA) name
A DBA is a name by which a company is known to the public but which is not its legal name.

DIRECTORS AND OFFICERS LIABILITY INSURANCE/D&O
Covers directors and officers of a company for negligent acts or omissions, and for misleading statements that result in suits against the company, often by shareholders. Directors and officers insurance policies usually contain two coverages: personal coverage for individual directors and officers who are not indemnified by the corporation for their legal expenses or judgments against them – some corporations are not required by their corporate or state charters to provide indemnification; and corporate reimbursement coverage for indemnifying directors and officers. Entity coverage for claims made specifically against the company may also be available.

EARNED PREMIUM
The portion of premium that applies to the expired part of the policy period. Insurance premiums are payable in advance but the insurance company does not fully earn them until the policy period expires.

Electronic funds transfer (EFT)
EFT is a payment method in which funds are automatically deducted from a customer’s checking account to pay bills on a regularly scheduled basis.

EMPLOYEE DISHONESTY COVERAGE
Covers direct losses and damage to businesses resulting from the dishonest acts of employees. (See FIDELITY BOND)

EMPLOYER’S LIABILITY
Part B of the workers compensation policy that provides coverage for lawsuits filed by injured employees who, under certain circumstances, can sue under common law. (See EXCLUSIVE REMEDY)

ENDORSEMENT
A written form attached to an insurance policy that alters the policy’s coverage, terms, or conditions. Sometimes called a rider.

EXCLUSION
A provision in an insurance policy that eliminates coverage for certain risks, people, property classes, or locations.

Filing
A filing is like a certificate of insurance issued by an insurer that provides proof of specific insurance coverage. There are both federal filings and state filings. Federal filings are submitted to the Federal Highway Administration. They often are required for interstate transportation of goods, people or hazardous materials. State filings are submitted to a specific state’s Department of Transportation or other governing body. They often are required for intrastate transportation of goods, people or hazardous materials.

Federal filings are submitted to the Federal Highway Administration. They often are required for interstate transportation of goods, people or hazardous materials.

State filings are submitted to a specific state’s Department of Transportation or other governing body. They often are required for intrastate transportation of goods, people or hazardous materials.

Federal highway administration (FHWA)
The FHWA is a branch of the federal government that regulates interstate transportation of goods and people.

For-hire truckers
For-hire truckers are truck operators who transport goods for a fee.

FREQUENCY
Number of times a loss occurs. One of the criteria used in calculating premium rates.

G - I

GAP INSURANCE
An automobile insurance option, available in some states, that covers the difference between a car’s actual cash value when it is stolen or wrecked and the amount the consumer owes the leasing or finance company. Mainly used for leased cars. (See Actual cash value)

Garaging location
A garaging location is the place you primarily park your vehicle when you’re not using it. Generally, this is your primary business address.

Gross vehicle weight (GVW)
GVW is the total weight capacity of a fully loaded vehicle. It can be calculated by adding the weight of the vehicle to the maximum weight of a load that could be carried in the vehicle. GVW can be obtained by checking the manufacturer’s general information for the vehicle.

INCURRED LOSSES
Losses occurring within a fixed period, whether or not adjusted or paid during the same period.

Hired auto coverage
Hired Auto coverage provides Liability coverage for a non-owned, unlisted vehicle that you have leased, hired, rented or borrowed.

Interstate
If you cross the border of one state into another state, that is interstate travel.

Intrastate
If you stay within the borders of one state, that is intrastate travel.

J - L

KEY PERSON INSURANCE
Insurance on the life or health of a key individual whose services are essential to the continuing success of a business and whose death or disability could cause the firm a substantial financial loss.

Lease
A lease is a contract or arrangement in which the use of equipment, such as a vehicle, is granted for a specified time at a specified price.

Liability coverage
Liability coverage provides protection against your legal liability for Bodily Injury and/or Property Damage caused by the negligence of your employees or yourself in the operation or use of your insured motor vehicle. This coverage also provides you with legal defense costs in the event you are sued as a result of an accident.

Limited liability company (LLC)
A Limited Liability Company combines the personal liability protections of a corporation and the pass-through tax benefits of a partnership or sole proprietorship. Owners of LLCs typically are called members and share equally in the management responsibilities of the company. LLCs may also choose to appoint certain owners or outside personnel to manage business operations.

Limits
An insurance coverage limit is selected by you at the time you purchase a policy. It describes the maximum an insurance company will pay for damages or injuries that apply to a specific coverage. Most states have laws that specify the minimum limit that must be purchased for each required insurance coverage.

Liability coverage limits can be described as a combined single limit (CSL) or as a split limit.

LOSS RATIO
Percentage of each premium dollar an insurer spends on claims.

LOSS RESERVES
The company’s best estimate of what it will pay for claims, which is periodically readjusted. They represent a liability on the insurer’s balance sheet.

M - O

MEDIATION
Nonbinding procedure in which a third party attempts to resolve a conflict between two other parties.

Named insured
The named insured is the name of the business or person who owns the insurance policy.

NAMED PERIL
Peril specifically mentioned as covered in an insurance policy.

NOTICE OF LOSS
A written notice required by insurance companies immediately after an accident or other loss. Part of the standard provisions defining a policyholder’s responsibilities after a loss.

Owner operator
A truck driver who works as an independent carrier of goods instead of as an employee of one trucking company is an owner operator. The term can also be hyphenated and written as “owner-operator.”

P - R

Partnership
Partnerships are frequently composed of groups of professionals, such as attorneys, accountants and lawyers, but may also be retail and service businesses.

Physical damage coverage
Physical Damage coverage is designed to protect your vehicle. There are several forms of Physical Damage Coverage, including Collision coverage, Comprehensive coverage and Fire and Theft with Combined Additional Coverages.

Placard
A placard is a metal plaque or other form of signage found on vehicles or trucks that displays a message to the public regarding the cargo being hauled, such as hazardous, flammable or explosive.

Policy expiration date
Your current insurance policy ends on your policy expiration date, which is found on your current policy documents, Declarations Page (Dec Page), insurance identification card or recent cancellation notice. This date should not be confused with payment due dates.

It’s also important to note that in many cases, the policy actually expires just after midnight at 12:01 a.m. on the policy expiration date. This means that as of 12:02 a.m., there is no coverage.

Policy term
The length of time your policy is active and in force is your policy term.

POLLUTION INSURANCE
Policies that cover property loss and liability arising from pollution-related damages, for sites that have been inspected and found uncontaminated. It is usually written on a claims-made basis so policies pay only claims presented during the term of the policy or within a specified time frame after the policy expires. (See Claims-made policy)

Premium
A premium is the amount of money paid to an insurance company in return for insurance protection.

Primary address
A primary address is the place where you would like all communications mailed. This is typically your business headquarters.

Primary liability insurance
Primary Liability insurance is Liability coverage for all trucking situations including empty and loaded vehicles.

Primary use
Primary use is how you mainly use your vehicle. Primary use options include:

Business use only
Personal use only
Personal and business use
Nonbusiness use

Principal driver
The person who drives the car most often is the principal driver.

Property damage liability coverage (PD)
Property Damage Liability is the second part of Liability Coverage. If an insured person is legally liable for an accident, Property Damage Liability coverage pays for damage to others’ property resulting from the accident. Property Damage Liability coverage also pays for legal defense costs if you are sued.

Radius of operation
The maximum distance traveled one way, as the crow flies, by an insured, from the point of garaging to the point of delivery, is the radius of operation.

RESERVES
A company’s best estimate of what it will pay for claims.

S - U

SCHEDULE
A list of individual items or groups of items that are covered under one policy or a listing of specific benefits, charges, credits, assets or other defined items.

SEVERITY
Size of a loss. One of the criteria used in calculating premiums rates.

Sole proprietorship
A sole proprietorship is a one-owner company that is not registered with the state as an LLC or corporation. The owner of a sole proprietorship is personally responsible for the debts and liabilities of the company and reports the company’s losses and profits on his or her personal taxes.

Split limits
A series of three numbers (ex. $15,000/$30,000/$10,000), split limits describe the predetermined maximum amounts to be paid on Bodily Injury Liability coverage and Property Damage Liability coverage per person and per occurrence or accident.

Example: A split limit of $15,000/$30,000/$10,000 would pay out, per accident, up to $15,000 in Bodily Injury Liability coverage for each covered person injured in the accident and up to a maximum total of $30,000 for all covered people injured in the accident. It also would pay out up to $10,000 in Property Damage Liability coverage.

Stated amount
A stated amount is the value submitted by the insured as representative of the current value of an insured vehicle, after accounting for depreciation and including the value of any special or permanently attached equipment.

SUBROGATION
The legal process by which an insurance company, after paying a loss, seeks to recover the amount of the loss from another party who is legally liable for it.

SURETY BOND
A contract guaranteeing the performance of a specific obligation. Simply put, it is a three-party agreement under which one party, the surety company, answers to a second party, the owner, creditor or “obligee,” for a third party’s debts, default or nonperformance. Contractors are often required to purchase surety bonds if they are working on public projects. The surety company becomes responsible for carrying out the work or paying for the loss up to the bond “penalty” if the contractor fails to perform.

TERRORISM COVERAGE
Included as a part of the package in standard commercial insurance policies before September 11, 2001 virtually free of charge. Since September 11, terrorism coverage prices have increased substantially to reflect the current risk.

THIRD-PARTY ADMINISTRATOR
Outside group that performs clerical functions for an insurance company.

TOTAL LOSS
The condition of an automobile or other property when damage is so extensive that repair costs would exceed the value of the vehicle or property.

Trailer interchange agreement
A trailer interchange agreement is a written contract between truckers or trucking companies that provides for the loan of trailers by the owner to a third party.

Example: Joe’s Trucking Company has a trailer interchange agreement with Sue’s Trucking Company. Joe hauls a trailer full of cargo from point A to point B. Sue takes Joe’s trailer and hauls it from point B to point C for Joe.

Trailer interchange coverage
Trailer Interchange coverage provides Physical Damage insurance for trailers that you do not own while they are in your care, custody or control, such as being hauled under a trailer interchange agreement.

Uninsured motorist coverage (UM)
If a driver or owner of a vehicle does not have insurance and is legally liable for an accident, you can use UM coverage for injuries, including death, that you, your resident relatives and occupants of your insured vehicle sustain, up to the limits that you select.

Underinsured motorist coverage (UIM)
If a driver or owner of a vehicle is legally liable for an accident but does not have enough insurance, you can use UIM coverage for injuries, including death, that you, your resident relatives and occupants of your insured vehicle sustain, up to the limits you select. In some states, UIM coverage is included as part of UM coverage.

V - Z

Vehicle identification number (VIN)
A VIN is a combination of 17 letters and numbers that can be used to identify the make, model and year of a car. The Vehicle Identification Number (VIN) for a vehicle is usually found on the driver’s side of the dashboard, the vehicle registration or the title.

WORKERS COMPENSATION
Insurance that pays for medical care and physical rehabilitation of injured workers and helps to replace lost wages while they are unable to work. State laws, which vary significantly, govern the amount of benefits paid and other compensation provisions.