What are the different insurance terminologies? Sometimes it is hard to decipher the legal jargon in your homeowner’s insurance policy. This list of terms will help you understand what is covered. Hopefully, it will help you know what your insurance company is saying in the policy.
-A-
Accident
An unfortunate incident that happens unexpectedly and unintentionally, typically resulting in damage or injury.
Act of God
An Act of God is an accident or event resulting from natural causes without human intervention, and one that could not have been prevented by reasonable foresight or care. For example, insurance companies often consider a flood, earthquake, or storm to be an Act of God.
Actual Cash Value (ACV)
An estimate of the fair market value of your property (e.g. home, roof, belongings in your home) was before the loss occurred. Technically, ACV is what it would cost to replace your property minus depreciation, which is how much value the property has lost due to age and wear and tear since you bought it.
Additional Insured
Refers to a person or party other than the policyholder who is added to the policy so they’ll be covered.
Additional Living Expenses (ALE)
Additional Living Expense is insurance that covers the costs of living elsewhere if you cannot live in your home after something happens. It only covers situations where your home or apartment is uninhabitable after an incident.
Adjusted Basis
What a property is worth after you add the value of any improvements you have made and then subtract any value it has lost
Adjuster
A representative of your insurance company who investigates your insurance claim. After investigating the claim, they’ll work with you to determine the amount you’ll be paid.
Agent
A qualified expert that’s licensed to sell insurance on behalf of an insurance company.
All Risks Coverage
A policy that covers you for losses caused by anything that is not specifically listed as being excluded. You pay extra for all risks coverage.
Application
A form created by an insurer that collects information about the property and the person who wants insurance. An insurer relies on this information when deciding whether to issue a policy. You’re required to sign your application to attest to the accuracy of the information.
Assessed Value
What the local tax assessor says your home is worth. This is the amount you pay used to determine your property taxes.
-B-
Basic Limits
The smallest policy you can buy in your state. Usually mentioned in liability policies.
Betterment
An improvement you make after you move into your home. Applies mostly to condominiums. There are special rules for Condo some times if you improve your unit the improvements are not covered. In this case, it is best to ask your agent to explain what the policy covers and what it says about betterment.
Binder
A temporary agreement declaring that the policy is in effect. A binder is used to prove to your lender that you have homeowners insurance when it’s not possible to issue a policy immediately.
Blanket Policy
An insurance policy that covers more than one property
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Casualty Insurance
Insurance that covers the cost when you or a family member, injure people or property.
Catastrophe
A disaster affecting a specific geographic area. They can cause injury, death, or result in extensive property damage. Hurricanes, floods, tornadoes, and even large hailstorms are typical examples of catastrophes.
CLUE Report
(Comprehensive Loss Underwriting Exchange) report provides a history of your property insurance claims for homes, rentals, and vehicles. … “That includes the date of loss, loss type and amount paid, along with general information such as policy number, claim number, and insurance company name. Make sure your CLUE report is correct because mistakes can raise your rate.
Coinsurance Clause
A provision in your home insurance policy that requires you to carry coverage worth a certain percentage of your home’s value. Failure to meet the requirement reduces your compensation after a loss.
Contents Coverage
Contents insurance—also known as personal property insurance—can help you replace the items in your home if you have a theft, fire, or other types of insured claim or loss.
-D-
Declaration Page
The page in a policy that shows the name and address of the insurer, the period of time a policy is in force, the amount of the premium, and the amount of coverage. Usually the first page of your insurance documents.
Deductible
The percentage you will have to pay for damages or losses to your home or possessions. When the company pays the claim they subtract the deductible amount from the amount they pay you.
Depreciation
A decrease in the value of your property (e.g. house, roof, stove, oven, etc.) due to wear and tear or becoming obsolete.
Dwelling Coverage
This is the insurance that covers your home for damage or destruction from any particular hazards your policy covers, such as tornados, hail, fire, and theft.
-E-
Effective Date
The date that your coverage goes into effect.
Endorsement
An add-on to your insurance policy that changes the coverage provided in your policy.
Escrow
Money is placed in the hands of a third party until specified conditions are met.
Exclusion
Type of loss or a cause of loss that is specifically not covered by your homeowner’s insurance policy. Your policy will have a section labeled exclusions that will list them.
-F-
First-Party Claim
A first-party insurance claim is a claim filed with your own insurance company for damages covered by your own policy. If your home is damaged in a tornado and your insurance company says the damage was due to flooding (uncovered by your policy) but you believe the damage was due to wind which is covered.
Floater
Additional insurance that covers a possession wherever you take it, such as a grand piano
Flood Insurance
Flood insurance protects against damage done by rising or overflowing bodies of water. Your homeowner’s policy doesn’t cover flooding, but you can buy flood insurance coverage separately.
-G-
Grace Period
How long you can go without paying your insurance premium before getting canceled.
Group Limits
Extra insurance for a group of items whose values when added together are more than your policy limit. If you have a $2,500 jewelry limit but you have three diamond rings worth $2,000 each you need a higher group limit to cover your rings.
-H-
Hazard Insurance
Lenders often refer to homeowners insurance as hazard insurance
-I-
Inflation Protection
When you buy inflation protection, then your dwelling coverage automatically goes up to match inflation. That’s true whether you opt for replacement value or actual cash value.
Insurance Fraud
Intentional lying or concealment by policyholders to obtain payment of an insurance claim that would otherwise not be paid.
Insurance to Value
Insurance is written in an amount approximating the value of your home of insurance or that meets coinsurance requirements. For example, a $75,000 policy on a $100,000 home has 75% insurance to value coverage. Many insurance companies require you to have 80% insurance to value in coverage.
-L-
Lapsed Policy
When you do no pay your insurance bill by the end of the grace period and you lose your coverage.
Liability
Individual responsibility for causing, through negligence, injury to another person or damage to another person’s property. Also called Personal Liability.
Limit of Liability
The maximum amount your insurance company has to pay for a claim. Always make sure to refer to your individual policy to understand your policy limits.
Loss of Use
A part of your homeowner’s policy that provides reimbursement for living expenses when loss of or damage to property by a covered peril forces you to maintain temporary residence elsewhere.
-M-
Manufactured Home Insurance
Specialized coverage for mobile or manufactured homes.
Market Value
What your home would sell for in the current market
Medical Payment Coverage
Insurance that pays the cost of medical care to an injured person regardless of who is at fault for the accident.
-N-
Named Perils
A policy in which you’re covered only for the specific hazards named in your policy, such as wind, hail, fire, earthquakes, flood etc.
Negligence
When a person doesn’t exercise reasonable care in a given situation, they may be considered to be negligent. One can be negligent as a result of doing something or not doing something.
-O-
Occurrence
Something that causes a loss
Other Structure Coverage
The part of your homeowner’s insurance policy that covers the buildings on your property other than your homes, such as a detached garage, barns, and swimming pools
-P-
Partial Loss
When your property or possessions are not completely destroyed, you have a partial loss. When your claim is for less than the limit on your policy, that is also called a partial loss.
Peril
A property insurance term referring to the possible cause of loss such as a fire or a windstorm
Personal Liability Umbrella Policy
An extra layer of liability coverage over and above your primary insurance limits. If a loss exhausts your primary liability coverage, a personal liability policy provides coverage for the excess damages.
-R-
Regulation
Insurance is a state-regulated business. State insurance laws are administered by insurance departments, whose job includes approval of rates and policy forms, investigation of company practices, review of annual financial statements, periodic examination of books and liquidation of insolvent insurers.
Reinstatement
When an insurance company puts a policy back in force after it was lapsed because of nonpayment of renewal premiums.
Replacement Value
The cost of replacing property without deducting for depreciation.
Rider
A written change that adds, deletes, or alters your policy
-S-
Scheduled Personal Property
If you have expensive items, such as jewelry or antiques, your homeowner’s policy may not be high enough to cover the full cost of replacing them. You can pay an additional premium to have them covered as scheduled personal property.
Subrogation
If your loss was caused by someone else, your insurance company may sue them for the loss. If it wins, the recovered money may go toward repaying you for the deductible. That process is called subrogation.
-T-
Tenant or Renter Insurance
A form of homeowners insurance sold to persons who rent vs own their homes. A tenant or renter policy combines personal property and personal liability coverage. It is like a homeowners policy, except that it does not include coverage for the building itself.
Total Loss
When it would cost more to repair your home than it is worth
-U-
Umbrella Insurance
It is additional liability coverage that offers limits over and above your homeowners and auto policies. It may also provide broader coverage than the policies that underlie it.
Underwriter
A company representative who reviews applications for insurance coverage to ensure that they are acceptable and appropriately priced.
-V-
Vacant Home Insurance
Insurance for a home you own that will be vacant for a period of time.
We hope this glossary helps you better understand your homeowner’s policy. It represents only a brief description of terms. Coverage features and limits vary by state and may be subject to change. Some products are not available in every state. Please check with your agent and read the policy for exact details on coverages and exclusions.
Rollins Insurance represents multiple A-rated insurance companies to make sure we deliver the most competitive rate packages to our clients in Kentucky and Ohio.
Contact us (859-781-7283) for more information or get a free quote!
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About Rollins Insurance
Rollins Insurance is an independent insurance agency providing our clients the best prices with the most coverage possible since 2008. We represent multiple A-rated insurance companies to make sure we deliver the most competitive rate packages to our clients in Kentucky and Ohio. We find that most people are under-insured and over-paying when we meet them. We love what we do and our primary business is Personal Auto, Homeowners, and Life and Health insurance. We are a family-owned and managed business that specializes in providing needs-based insurance services.
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