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Homeowners Insurance Lingo
It is important to understand your Homeowners Insurance policy and be aware of all the exclusions and limitations it may contain. Knowing the meaning of all the specific terms and definitions will provide insight into your coverage's ins and outs and make you feel even more protected.
Homeowners Insurance (also Home Insurance, Hazard Insurance, HOI) is a form of insurance that indemnifies the insured property against loss from common disasters such as fire, lightning, storms, explosions, etc, as well as from theft, and vandalism. It also contains personal liability coverage, which insures against lawsuits concerning injuries which occurred on your property.
Homeowners policies normally combine property and liability coverage.
Personal Property (personal effects, movable property, personalty, goods and chattels) is any property of an insured other than real estate (land, permanent buildings on the land). It includes furniture, equipment, cars, jewelry, securities, bank accounts, and pets. Personal property of an insured is protected by Homeowners policies, and business personal property is protected by commercial forms of Property Insurance.
Premium is the amount of money you have to pay for your Homeowners Insurance policy.
Risk is the chance of loss from a peril, injury or damage. Risk is also the term referred to the person or entity that is insured.
Deductible is the amount of money an insured has to pay out-of-pocket per claim toward the total amount of an insured loss, before the insurance company pays the remaining amount of the covered loss.
Claim is a request for compensation for a loss that is covered by the insurance policy.
Peril is a specific risk or an event that causes a loss covered by an insurance policy to your home and property. These are such risks and events as fire, flood, windstorm, and theft. Policies normally have two sets of such risks: covered and excluded. A named-peril policy covers the policyholder for the risks specified in the policy, while an all-risk policy covers all causes of loss except for exclusions.
Causes of Loss is the term that replaces the term "perils" in the latest commercial property forms.
Actual Cash Value (ACV) is the value of a damaged or stolen property item at the time of the loss. This value is based on the cost of repairing or replacing the item with the similar kind and quality item. Actual cash value of property is usually less than the replacement cost since depreciation decreases it.
Replacement Cost is the cost of replacing a stolen or damaged property item with a new one of similar quality at today's prices.
Replacement Cost Guarantee provides the full cost to repair or replace your dwelling or personal property, even if you were underinsured and the replacement tends to exceed the original cost of the property. It pays for the full cost of damaged property replacing without a dollar limit or a deduction for depreciation.
Depreciation is the reduction in the property's value over time due to aging, use, wear and tear, obsolescence or deterioration.
Settlement is the dollar amount a policyholder agrees to accept from his/her insurance company as reimbursement for their loss.
Endorsement is an attachment or amendment to your insurance policy that adds to, removes or modifies the original terms of the contract. With the help of endorsement a policyholder can tailor a policy to his/her needs.
Exclusions are specific causes, conditions, or circumstances your insurance policy does not cover. Coverage of certain risks, property, locations or persons may be ruled out.
Insurer is the insurance company which provides the coverage and indemnifies for losses.
Insured Premises is the term describing the place where you live, as well as any structures on your property and surrounding land under your care and control for which an insurance policy provides coverage.
Underwriting is the process by which an insurance company assesses the eligibility of a customer before issuing insurance policies and classifies risks based on their degree of insurability.
Floater is additional insurance which can be added to your policy to cover personal property items whose full value is not covered by Standard Homeowners policies: antiques, jewelry, furs, guns, computers, valuable art work etc.
Dwelling Coverage is a Homeowners Insurance policy form that is designed to cover a house, attached structures, materials or supplies used in construction, fixtures in the house and outdoor equipment, and provide coverage for direct physical loss against fire, wind, theft, and other perils.
Other Structures are detached structures, such as a garage or tool shed separated from an insured dwelling by a clear space, and fixtures attached to the land, such as fences, retaining walls, driveways, sidewalks, and patios.
Personal Liability covers the policyholder and all their family members living in the home against claims, lawsuits and the cost of legal defense arising from bodily injury and property damage to others caused by an accident on the policyholder's property, with the exception of intentional acts.
Temporary Living Expenses are additional living expenses an insured incurs to live somewhere else and maintain a normal standard of living while his/her home is uninhabitable due to a covered reason of loss (costs for a hotel or motel, restaurant meals, and laundry expenses).
Umbrella Liability is insurance protection that covers against catastrophic losses when primary limits of the basic liability policy are exhausted.
Basic Coverage Form is the limited coverage offering protection against only a few risks such as fire, lightning, windstorm, hail, smoke, volcanic eruption, theft, vandalism, damage from vehicles or aircraft, explosion, civil commotion, or glass breakage.
Broad Form is a term used to specify comprehensive extended insurance coverage policies for the dwelling and personal property that include multiple types of perils, or additional types of coverage beyond the standard one. Broad Form coverage may extend certain perils listed in Basic Form plus add other risks, for example building collapse, freezing of or accidental discharge of water from within plumbing, heating, or air-conditioning, weight of snow, ice, and bursting of steam or hot water heating systems.
Special Coverage Form is a Property Insurance form which provides the broadest coverage on an all-risk type basis and covers any possible peril except for those specifically listed as exclusions in the policy.
Tenants Policy is a Homeowners Insurance form which is designed for persons who rent their accommodation. Tenants Policy package usually combines coverage for personal liability, medical coverage, additional living expenses, and personal property coverage but does not cover the building itself. It may have a provision to cover tenant improvements though.
Condominium is a home ownership form in which individual units of a larger complex are not rented but sold. The word itself applies to the legal ownership arrangement.
Condominium policy covers unit owners for their personal possessions and liability separate from the insurance the condo association carries.
Business Personal Property is the term which refers to furniture, equipment, fixtures, materials, machinery, merchandise, and other personal property the insured uses for business.