Insurance Terms
Insurance Terms To Know
Once you get your home or auto insurance quote, it may seem like you’re good to go – but understanding the quote itself might just be the hardest part!
To help you navigate through some of the more complicated wording, we have put together this glossary of insurance terms. Knowing what everything on your quote means will make you confident that you are properly protected from anything that may happen in the future.
Glossary of Insurance Terms:
Actual cash value (ACV) – The value of your property, based on the current cost to replace it minus depreciation.
Additional living expenses (ALE) – Reimburses the policyholder for the cost of temporary housing, food, and other essential living expenses, if the home is damaged by a covered peril that makes the home temporarily uninhabitable. Policies cap the amount of ALE payable to 20 percent of the policy’s dwelling coverage.
Adjuster – An individual employed by an insurer to evaluate losses and settle policyholder claims.
Appraisal – An evaluation of a home insurance property claim by an authorized person to determine property value or damaged property value. Many policies provide an “appraisal” process to resolve claim disputes.
Cancellation – Termination of an insurance policy by the company or insured before the renewal date.
Claim – A policyholder’s request for reimbursement from an insurance company under a home insurance policy for a loss to property.
Claimant – A person who makes an insurance claim.
Declarations 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.
Deductible – The amount the insured must pay in a loss before any payment is due from the company.
Depreciation – Decrease in the value of property over time due to use or wear and tear.
Earned premium – The portion of a policy premium that has been used to actually buy coverage, or that the insurance company has “earned.” For instance, if you have a six-month policy that you paid for in advance, two months into the policy, there would be two months of earned premium. The remaining four months of premium is “unearned premium”.
Effective date – The date on which an insurance policy becomes effective.
Endorsement – A written agreement attached to a policy expanding or limiting the benefits otherwise payable under the policy. Also called a “rider”.
Escrow – Money placed in the hands of a third party until specified conditions are met.
Exclusion – A provision in an insurance policy that denies coverage for certain perils, people, property, or locations.
First-party claim – A claim filed by an insured against his or her own insurance policy.
Grace period – The time (usually 31 days) during which a policy remains in force after the premium is due but not paid. The policy lapses as of the day the premium was originally due unless the premium is paid before the end of the 31 days or the insured dies. This is not a “free-insurance” period.
Independent adjuster – A person who charges a fee to an insurance company to adjust the company’s claim.
Inflation protection – Automatically adjusts your home insurance policy limits to account for increases in the costs to repair or rebuild a property.
Insurable interest – Any financial interest a person has in the property or person insured. In life insurance, a person´s or party´s interest – financial or emotional – in the continuing life of the insured.
Liability coverage – Covers losses that an insured is legally liable. For homeowners insurance, liability coverage protects you against financial loss if you are sued and found legally responsible for someone else’s injury or property damage.
Loss – The amount an insurance company pays on a claim.
Loss of use – A provision in homeowners and renters insurance policies that reimburses policyholders for the additional costs (housing, food, and other essentials) of having to live elsewhere while the home is being restored following a disaster.
Market value – The current value of your home, including the price of land.
Non-renewal – A decision by an insurance company not to renew a policy.
Peril – A specific risk or cause of loss covered by an insurance policy, such as a fire, windstorm, flood, or theft. A named-peril policy covers the policyholder only for the risks named in the policy. An all-risk policy covers all causes of loss except those specifically excluded.
Personal property – All tangible property (other than land) that is either temporary or movable in some way, such as furniture, jewelry, electronics, etc.
Premium – The amount paid by an insured to an insurance company to obtain or maintain an insurance policy.
Replacement cost – Pays the dollar amount needed to replace the structure or damaged personal property without deducting for depreciation but limited by the policy’s maximum dollar amount.
Rider – A written agreement attached to the policy expanding or limiting the benefits otherwise payable under the policy. Also called an “endorsement”.
Third-party claim – A claim filed against another person’s insurance policy.
Underwriter – The person who reviews an application for insurance and decides if the applicant is acceptable and at what premium rate.
Underwriting – The process an insurance company uses to decide whether to accept or reject an application for a policy.
Even with these definitions, insurance can still be tricky to understand. If you have any questions at all, our Swisher Insurance agents are here to guide you through the process. Give us a call at (502) 340-1200, or fill out our contact form here to get in touch today.