Auto Insurance Glossary – C Definitions
Cancellation
Termination of an insurance policy, normally by the insurer, in accordance with the provisions in the contract. Termination most often occurs as a result of non-payment of a premium, but it can also occur for other reasons, such as an inordinately high number of claims by an insured. Insurers are required by law to provide a minimum period of notice of cancellation (usually 30 days), in order to permit policyholders to remedy breaches or make alternative arrangements.
Captive Agent
An agent who represents only one insurance company, as opposed to an independent agent who represents more than one insurance company. Also referred to as a tied agent or an exclusive agent. Learn more about insurance agents.
Captive Insurer
An insurance company which is a subsidiary company and which exists primarily to insure the risks of its owners. Captive insurers, commonly referred to simply as ‘captives’, are normally established in order to provide their owners with lower rates of insurance than would otherwise be available from the market.
Choice States
A term given to states which allow drivers to choose between the no-fault and tort liability systems with respect to bodily injuries caused by auto accidents. Drivers are given this choice not following an auto accident, but through the type of auto insurance policy which they effect in the first place. Drivers who choose a policy based on the no-fault system must make claims for bodily injuries from their own insurance company (subject to the tort thresholds which exists in their respective states), while those who choose a tort-based contract are free to take a lawsuit against at-fault drivers for recovery of damages which result from those injuries. Policy owners can change between systems, but they must change their auto policy type in order to do so.
Claims Adjuster
A representative of an insurance company who investigates the validity and value of claims made to the insurance company. A claims adjuster determines the monetary value of insured losses under a policy and negotiates settlement with claimants. Learn how to negotiate with a claims adjuster.
Collision Coverage
Insurance which covers loss to an insured’s own vehicle due to collision with another car or object, or due to a rollover. Collision coverage does not cover loss to any other vehicle or to property, or bodily injury to any person. Learn more about collision coverage.
Comparative Negligence
A law applied in states which have adopted a system in which damages are awarded to a plaintiff in proportion to the relative (comparative) contribution which the defendant has made to the cause of the accident. There are three comparative negligence systems in operation across 46 states: (1) Pure comparative negligence; (2) Modified Comparative Negligence – 50% Rule; and (3) Modified Comparative Negligence – 51% Rule. The latter two specify a maximum percentage contribution to the cause of an accident by a plaintiff, which if exceeded results in a plaintiff receiving no damages award whatsoever.
Compensatory Damages
Damages which are awarded to a plaintiff in tort law, and which compensate the plaintiff for losses suffered or injuries sustained as a result of the negligence of another. For example, compensatory damages could be awarded for damage to a car, loss of earnings by the plaintiff or the plaintiff’s pain and suffering. See also exemplary damages.
Comprehensive Coverage
Insurance which covers loss or damage to an insured’s own car through a range of causes such as fire, theft, vandalism, earthquake and adverse weather. Comprehensive coverage does not cover loss or damage due to collision or rollover. Learn more about comprehensive coverage.
Compulsory Insurance
Insurance which is mandated by federal or state law. For example, many states require minimum levels of personal liability coverage in order to drive a car.
Constructive Total Loss
In relation to auto insurance, damage to a car which is deemed by the insurer to amount to a total loss as a result of the assessed repair costs (less any salvage value) exceeding the pre-accident actual cash value of the car. In total loss claims, insurers add a percentage to assessed repair costs when performing constructive loss calculations, in order to allow for any hidden damage which might become apparent during any repair process.
Contributory Negligence
Negligence by a plaintiff in a lawsuit which contributes to the cause of the accident in question. Pure contributory negligence, a system which is applied in the states of Alabama, Maryland, North Carolina and Virginia, and in the District of Columbia, means that if a plaintiff contributes in any way to the cause of an accident (even to the extent of just 1%), then a defendant has a complete defense to the lawsuit and no damages can be awarded to the plaintiff. All other states have implemented systems of comparative negligence, which although they are a form of contributory negligence, provide for damages awards based on the respective percentage contributions to the cause of the accident by the plaintiff and the defendant. Learn more about contributory and comparative negligence.
Cover Note
A written statement, normally issued by an agent, which is provided to an insured in confirmation of coverage before an insurance policy is issued. See binder.
Coverage
Protection provided under an insurance policy. For example, an auto insurance policy may include personal liability, personal injury, uninsured and underinsured motorist, collision and comprehensive coverage.
