Actual cash value
What a vehicle was worth just before a crash, based on comparable local sales. The basis of a total loss payment.
Adjuster
The insurance company employee who investigates a claim and negotiates the settlement.
At-fault state
A state where the driver who caused a crash, through their liability insurance, pays the other people’s injury claims. Most states are at-fault states.
Bodily injury liability
The part of an auto policy that pays injury claims of people the policyholder hurts, up to the policy limit.
Comparative negligence
A rule that reduces an injured person’s award by their own share of fault. Pure comparative applies at any fault level; modified versions bar recovery at 50% or 51%.
Contingency fee
A lawyer’s fee paid as a percentage of the recovery, owed only if there is one.
Contributory negligence
A strict rule, used in five jurisdictions, that can bar recovery if the injured person was even slightly at fault.
Damages
Money awarded for a loss. Economic damages have a receipt (bills, wages); non-economic damages do not (pain, suffering).
Demand letter
A letter to the insurer setting out the claim, the damages and the amount needed to settle.
Diminished value
The resale value a vehicle loses because of its accident history, even after repairs.
Economic damages
Losses with a dollar figure: medical bills, future care, lost wages and lost earning capacity.
Lien
A legal claim on settlement money by someone who paid for your care, such as a hospital, health plan or Medicare.
MedPay
Optional auto coverage that pays medical bills after a crash regardless of fault.
Multiplier method
Estimating pain and suffering by multiplying economic damages by a number, usually 1.5 to 5.
No-fault state
A state where your own PIP coverage pays your injury costs first, and you can sue the at-fault driver only above a threshold.
Non-economic damages
Losses without a receipt: pain, emotional distress, loss of enjoyment of life and loss of companionship.
Per diem method
Estimating pain and suffering as a daily rate times the number of days in pain or recovery.
Personal injury protection (PIP)
Auto coverage that pays your medical bills and part of your lost income regardless of fault. Required in no-fault states.
Policy limit
The most an insurer will pay under a policy, written as per person, per crash and property damage, such as 30/60/25.
Release
The document you sign to accept a settlement. It ends the claim for good.
Statute of limitations
The deadline to file a lawsuit. Missing it almost always ends the claim.
Strict liability
Liability without proof of fault, such as dog owners’ liability for bites in many states.
Subrogation
An insurer’s right to be repaid from your recovery for what it paid on your behalf.
Threshold
In no-fault states, the injury severity or medical bill amount you must reach to sue the at-fault driver for pain and suffering.
Underinsured motorist (UIM) coverage
Your own coverage that pays when the at-fault driver’s policy is too small for your injuries.
Uninsured motorist (UM) coverage
Your own coverage that pays when the at-fault driver has no insurance or cannot be found.
Wrongful death claim
A claim by family members for losses caused by a death due to someone else’s negligence.