INSURANCE & CLAIMS
21 legal terms in this category, with plain-English definitions and real-world car accident examples.
Adjuster
An insurance company employee who investigates your claim, evaluates the damage, and decides how much the insurer should pay. Adjusters work for the insurance company, not for you.
After your rear-end collision, the at-fault driver's insurance adjuster calls you asking for a recorded statement and offers you a quick $3,000 settlement, well below your actual medical bills.
At-Fault State
A state where the driver who caused the accident is financially responsible for the other party's injuries and damages. Most states follow this system.
In Texas (an at-fault state), you file a claim against the other driver's liability insurance after they run a stop sign and hit your car.
Bad Faith
When an insurance company unreasonably denies, delays, or undervalues your legitimate claim. Bad faith can give you grounds to sue the insurer for additional damages.
Your insurer ignores your calls for months, then denies your $80,000 claim without explanation despite clear evidence the other driver was at fault.
Collision Coverage
An optional part of your own auto insurance policy that pays for repairs to your vehicle after a crash, regardless of who was at fault.
After a hit-and-run damages your car and the other driver is never found, your collision coverage pays for the $8,000 in repairs minus your deductible.
Comprehensive Coverage
An optional insurance coverage that pays for damage to your vehicle from non-collision events like theft, vandalism, hail, flooding, or hitting an animal.
A deer runs into the road and you swerve into a guardrail. Comprehensive coverage pays for the vehicle damage since it wasn't a collision with another car.
Deductible
The amount you must pay out of pocket before your insurance coverage kicks in. Higher deductibles mean lower premiums, but more cost when you actually have a claim.
Your collision coverage has a $1,000 deductible. After a crash with $8,000 in damage, you pay $1,000 and your insurer pays the remaining $7,000.
First-Party Claim
A claim you file with your own insurance company under your own policy, such as collision coverage, MedPay, or uninsured motorist coverage.
After a hit-and-run, you file a first-party claim under your own uninsured motorist coverage to pay for your $15,000 in medical bills.
Gap Insurance
Coverage that pays the difference between what you owe on your car loan and what the insurance company says your totaled car is worth.
You owe $22,000 on your car loan, but the insurer only values your totaled car at $17,000. Gap insurance covers the $5,000 difference so you're not stuck paying it.
Good Faith Estimate
The insurance company's initial valuation of your claim based on their assessment of your injuries and damages. It's often lower than what your case is actually worth.
The adjuster gives you a good faith estimate of $15,000 for your claim. Your attorney knows the case is worth $50,000 based on similar verdicts and sends a counter-demand.
Liability Insurance
The portion of an auto insurance policy that pays for injuries and property damage you cause to others. Every state requires drivers to carry minimum liability coverage.
Texas requires at least $30,000 per person in bodily injury liability. If you cause an accident, your liability insurance pays the other driver's medical bills up to that limit.
MedPay (Medical Payments Coverage)
An optional coverage on your own auto policy that pays for your medical expenses after an accident regardless of who was at fault, with no deductible.
You have $10,000 in MedPay. After a crash, it immediately pays your ER visit and first round of physical therapy while you wait for the at-fault driver's insurer to pay.
No-Fault State
A state where after an accident, each driver files a claim with their own insurance (PIP) regardless of who caused the crash. You can only sue the other driver if your injuries meet a certain threshold.
In Florida (a no-fault state), your own PIP coverage pays your first $10,000 in medical bills. You can only sue the at-fault driver if you suffered a 'significant and permanent' injury.
Personal Injury Protection (PIP)
Required insurance coverage in no-fault states that pays for your own medical expenses and lost wages after an accident, regardless of who caused it.
Your PIP coverage pays your $10,000 ER bill immediately after the crash, so you don't have to wait for the other driver's insurance to accept fault.
Rider (Endorsement)
An addition or modification to your existing insurance policy that adds, removes, or changes coverage. Riders can add protections like rental car coverage or roadside assistance.
You add a rental car rider to your policy for $3/month. After your car is totaled in a crash, the rider pays for a rental car while you shop for a replacement.
Salvage Title
A title designation given to a vehicle that has been declared a total loss by an insurance company. A salvage title significantly reduces the car's resale value.
Your car is totaled after the accident. The insurer pays you $18,000 and takes the car, which gets a salvage title and is sold at auction for parts.
Subrogation
The process where your insurance company, after paying your claim, seeks reimbursement from the at-fault driver's insurer. It can also mean your health insurer wants to be repaid from your settlement.
Your health insurer paid $50,000 for your accident surgeries. When you settle with the at-fault driver for $200,000, your health insurer exercises subrogation rights to recoup their $50,000.
Third-Party Claim
A claim you file against the at-fault driver's insurance company, rather than your own. This is how you seek compensation from the person who caused the accident.
After a drunk driver T-bones your car, you file a third-party claim against their liability insurance for your $75,000 in medical bills and lost wages.
Total Loss
When the cost to repair your vehicle exceeds a certain percentage of its value (usually 70-80%), the insurer declares it a total loss and pays you the car's pre-accident market value instead of repairing it.
Your car is worth $15,000 and the repair estimate is $12,000. The insurer declares it a total loss and writes you a check for $15,000 minus your deductible.
Umbrella Policy
Extra liability coverage that kicks in when the at-fault driver's standard auto policy limits are exceeded. It provides an additional layer of protection, often $1-5 million.
The driver who hit you has $100,000 in liability coverage, but your injuries cost $300,000. Their $1 million umbrella policy covers the remaining $200,000.
Underinsured Motorist Coverage (UIM)
Coverage on your own policy that kicks in when the at-fault driver's insurance isn't enough to cover all your damages.
The at-fault driver only has $25,000 in liability coverage but your injuries cost $80,000. Your UIM coverage pays the remaining $55,000.
Uninsured Motorist Coverage (UM)
Coverage on your own policy that protects you if you're hit by a driver who has no insurance at all, or in hit-and-run situations where the driver is never identified.
A driver with no insurance runs a red light and totals your car, leaving you with $40,000 in medical bills. Your UM coverage steps in to pay since the other driver has nothing.
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