Insurance Terms

Accident forgiveness - In most states, customers who have not had an at-fault accident in the previous five years qualify for this program. Accident forgiveness means that GEICO won't add a surcharge to your premium after your next at-fault accident.

Actual Cash Value - The total value of the vehicle or any of its parts that GEICO has agreed to insure. It is the fair market value of the vehicle prior to a loss.

Actuary - A statistician who computes insurance risks and premiums. Actuaries keep GEICO profitable and financially stable by setting prices, assessing trends, and determining how much to hold in reserve to pay claims.

Adjuster - See Claim Adjuster.

Adverse Carrier -  Term used to refer to the other party's insurance company.

Agent - An individual that acts as a representative for the company and sells insurance, usually on a commission basis. This individual could be an "exclusive" or "non-exclusive agent."

Agreed Price - The price or cost of repairs agreed to by the AD (auto damage) adjuster or independent appraiser and the body shop representative.

After-Market Parts - After-market parts (also called competitive auto repair parts) are made by a company other than the manufacturer of the auto. The after-market parts we authorize meet or exceed the quality of the manufacturer's parts but cost less. GEICO guarantees these parts for as long as you own the car.

Amendment -  A change to the basic policy contract. An amendment alters the policy; an endorsement adds to it.

American International Underwriters - GEICO offers overseas insurance from American International Underwriters through GEICO's International Insurance Underwriters agency.

Anti-lock Braking System (ABS) - A computer-controlled high pressure system that assists the vehicle's normal braking system. ABS allows all wheels to slow at the same rate, thereby preventing loss of control.

Anti-theft device - A device that deters auto theft. Autos equipped with these devices may entitle you to a discount on your insurance premiums.

Appraisal - Process that determines the value of property, or the extent of damage, usually performed by an impartial expert.

Arbitration - A process of settling a dispute through an impartial party. It is used as an alternative to litigation.

Assigned Risk (AIP) - A driver or vehicle owner who cannot qualify for insurance in the regular market. He or she must get coverage through a state assigned risk plan which specifies that each company must accept a proportionate share of these drivers/owners.

 Assured -  Means the same as an "insured," "policyholder," or someone who has an insurance policy.

 At-fault -  The party that is legally liable for the damages in an accident.

 Auto Damage (AD) -  Division of the claims department that handles auto claims.

 Auto Insurance - Auto Insurance provides protection from losses resulting from owning and operating an auto. The insurance covers losses to the insured's property and losses for which the insured is liable as a result of owning or operating an auto.

Auto Theft -  The theft of an auto is a type of loss that is covered under comprehensive coverage.

ADMITTED ASSETS - Assets recognized and accepted by state insurance laws in determining the solvency of insurers and reinsurers. To make it easier to assess an insurance company’s financial position, state statutory accounting rules do not permit certain assets to be included on the balance sheet. Only assets that can be easily sold in the event of liquidation or borrowed against, and receivables for which payment can be reasonably anticipated, are included in admitted assets. (See Assets)

ADMITTED COMPANY -An insurance company licensed and authorized to do business in a particular state.

ADVERSE SELECTION - The tendency of those exposed to a higher risk to seek more insurance coverage than those at a lower risk. Insurers react either by charging higher premiums or not insuring at all, as in the case of floods. (Flood insurance is provided by the federal government but sold mostly through the private market.) In the case of natural disasters, such as earthquakes, adverse selection concentrates risk instead of spreading it. Insurance works best when risk is shared among large numbers of policyholders.

AFFINITY SALES - Selling insurance through groups such as professional and business associations.

AFTERMARKET PARTS - See Crash parts; Generic auto parts

AGENCY COMPANIES - Companies that market and sell products via independent agents.

AGENT - Insurance is sold by two types of agents: independent agents, who are self-employed, represent several insurance companies and are paid on commission, and exclusive or captive agents, who represent only one insurance company and are either salaried or work on commission. Insurance companies that use exclusive or captive agents are called direct writers.

ALIEN INSURANCE COMPANY - An insurance company incorporated under the laws of a foreign country, as opposed to a foreign insurance company that does business in states outside its own.

ALLIED LINES - Property insurance that is usually bought in conjunction with fire insurance; it includes wind, water damage, and vandalism coverage.

ALTERNATIVE DISPUTE RESOLUTION / ADR - Alternative to going to court to settle disputes. Methods include arbitration, where disputing parties agree to be bound to the decision of an independent third party, and mediation, where a third party tries to arrange a settlement between the two sides.

ALTERNATIVE MARKETS - Mechanisms used to fund self-insurance. This includes captives, which are insurers owned by one or more non-insurers to provide owners with coverage. Risk-retention groups, formed by members of similar professions or businesses to obtain liability insurance, are also a form of self-insurance.

ANNUAL ANNUITY CONTRACT FEE - Covers the cost of administering an annuity contract.

ANNUAL STATEMENT - Summary of an insurer’s or reinsurer’s financial operations for a particular year, including a balance sheet. It is filed with the state insurance department of each jurisdiction in which the company is licensed to conduct business.

ASSET-BACKED SECURITIES - Bonds that represent pools of loans of similar types, duration and interest rates. Almost any loan with regular repayments of principal and interest can be securitized, from auto loans and equipment leases to credit card receivables and mortgages.

ASSETS - Property owned, in this case by an insurance company, including stocks, bonds, and real estate. Insurance accounting is concerned with solvency and the ability to pay claims. State insurance laws therefore require a conservative valuation of assets, prohibiting insurance companies from listing assets on their balance sheets whose values are uncertain, such as furniture, fixtures, debit balances, and accounts receivable that are more than 90 days past due. (See Admitted assets)

ASSIGNED RISK PLANS - Facilities through which drivers can obtain auto insurance if they are unable to buy it in the regular or voluntary market. These are the most well-known type of residual auto insurance market, which exist in every state. In an assigned risk plan, all insurers selling auto insurance in the state are assigned these drivers to insure, based on the amount of insurance they sell in the regular market. (See Residual market)

AUTO INSURANCE POLICY - There are basically six different types of coverages. Some may be required by law. Others are optional. They are:

1. Bodily injury liability, for injuries the policyholder causes to someone else.
2. Medical payments or Personal Injury Protection (PIP) for treatment of injuries to the driver  and passengers of the policyholder’s car.
3. Property damage liability, for damage the policyholder causes to someone else’s property.
4. Collision, for damage to the policyholder’s car from a collision.
5. Comprehensive, for damage to the policyholder’s car not involving a collision with another car (including damage from fire, explosions, earthquakes, floods, and riots), and theft.
6. Uninsured motorists coverage, for costs resulting from an accident involving a hit-and-run driver or a driver who does not have insurance.


AUTO INSURANCE PREMIUM - The price an insurance company charges for coverage, based on the frequency and cost of potential accidents, theft and other losses. Prices vary from company to company, as with any product or service.
Premiums also vary depending on the amount and type of coverage purchased; the make and model of the car; and the insured’s driving record, years of driving and the number of miles the car is driven per year. Other factors taken into account include the driver’s age and gender, where the car is most likely to be driven and the times of day – rush hour in an urban neighborhood or leisure-time driving in rural areas, for example. Some insurance companies may also use credit history-related information. (See Insurance score)


AVIATION INSURANCE - Commercial airlines hold property insurance on airplanes and liability insurance for negligent acts that result in injury or property damage to passengers or others. Damage is covered on the ground and in the air. The policy limits the geographical area and individual pilots covered.