Insurance can be a maze, with terms and conditions a mile long. Understanding the difference between a deductible and a premium is important, but not always easy. Half the battle of understanding your insurance is knowing what some important homeowners insurance terms really mean.
Here’s our guide to some of the basic homeowner’s insurance terms to help you get a handle on things:
Basic Homeowners Insurance Terms
Actual cash value (ACV): The estimated fair market value of your property, including your home’s structure, before the loss occurred.
Additional living expenses: Coverage the pays for extra living expenses, such as hotel rooms and meals if damage to your home causes you to temporarily relocate.
Adjuster: The person from your insurance company who investigates your insurance claim and works with you to determine the amount you’ll be paid.
Binder: A temporary agreement that states your policy is in effect. This proves to the lender that you have homeowners insurance but a policy hasn’t been issued yet.
Blanket coverage: A policy that provides coverage for multiple items with only one limit. Instead of insuring several buildings for separate amounts, a blanket policy provides one coverage limit that includes all buildings.
Cancel: To terminate coverage or a policy.
Claim: A claim is when you request your insurance company pays you after a loss.
Claimant: A third party who makes a claim against you.
Coverage: Protection against financial loss provided by an insurance policy.
Damage: Physical harm or loss of property.
Damages: The money one party is legally obligated to pay another.
Deductible: The amount of damage or loss you’re responsible for paying before your insurance company pays the balance of the claim.
Depreciation: A decrease in the value of your dwelling or property due to wear and tear or becoming obsolete.
Exclusion: A type or cause of loss that specifically isn’t covered by your homeowner’s insurance policy.
Hazard: Anything that makes damage or loss more likely, such as frequent hurricanes or being on a fault line.
Housekeeping: The general care, cleanliness, and maintenance of a property. Housekeeping is a big factor in determining your initial eligibility for coverage.
Improvements: Additions made to a dwelling that increase its value.
Insured: The policyholder, or person who is protected in case of a loss or claim.
Insurer: The insurance company that provides insurance coverage and services.
Liability insurance: The part of your homeowner’s insurance that helps pay for damages resulting from bodily injury or damage to property that occurs on your property or from your actions.
Limit of Liability: The maximum amount of money your insurance has to pay for a claim.
Market value: What your home would sell for in the current market.
Negligence: When someone doesn’t exercise reasonable care in a situation, they can be considered negligent.
Non-renewal: The decision by an insurance company to not renew a policy at its expiration date.
Policy owner: The person or party who owns an insurance policy. This person typically pays the premium and can make changes to the policy.
Premium: The amount of money an insurance company charges to provide coverage.
Renewal: An extension of an existing insurance policy for another term.
Risk: The chance that a loss may occur.
Term: The length of time for which a policy is written.
Umbrella insurance: Additional liability coverage that goes above your regular policy. It may offer broader coverage than your regular policy.
Underwriter: A person who accepts or rejects risks for an insurance company.
While there are far more homeowners insurance terms you’ll find inside your policy and if you ever need to make a claim, these basics will help you begin to more fully understand your policy and your coverage.