Homeowners Glossary

Actual Cash Value: This is the current value of an item. It is calculated by taking the replacement cost of that item and subtracting depreciation and wear and tear. For example, if you bought a lounge chair 5 years ago for $500, over five years the value of the chair decreased due to wear and tear and is now worth $100. $100 would be the actual cash value of the chair.

Actual Loss Sustained: The amount paid is the actual financial cost to the insured, typically up to a specific limit or time period.

Additional Living Expense: If your home is uninhabitable due to a covered loss, your homeowners policy will pay for living expenses that above your normal cost of living. For example, if you have to pay to live in a hotel for a couple of months after a kitchen fire.

Additional Replacement Cost Endorsement: This endorsement pays up to an additional 25%, 50%, or 100% of your dwelling coverage amount, depending upon your specific policy, in the event the dwelling coverage amount of your home is insufficient to replace the home. For example, if your home is insured for a replacement cost of 200,000 and a tornado destroys your home and those around it, construction costs may rise due to the high demand. If you have a 50% additional replacement cost policy, the maximum your carrier would pay to rebuild your home is 300,000 (200,000 x 150%). It is also known as extended dwelling coverage.

Agreed Value: Some policies offer an option to insure an item for an amount agreed to between the insurer and the insured for the term of the policy period. For example, if you insure your boat on an agreed amount basis for $15,000 and the boat is destroyed during that policy period, you will receive settlement for $15,000 minus your deductible rather than on a replacement cost basis, which could be less.

Basic Form: A basic form is a type of property insurance policy contract. It names specific types of losses that the policy will provide coverage for. This type of policy provides the least amount of coverage of any of the available forms.

Broad Form: A type of property insurance policy contract. The language of a broad form policy provides more covered perils than a basic form policy type. This form is also called a named peril policy because the only losses that are paid for are those that are specifically named or listed on the policy.

C.L.U.E: Comprehensive loss underwriting exchange is a clearing house for all insurance claims. Almost all insurance companies participate and share claim data about their policyholders. This is how a new carrier knows about your prior claim history.

Contents: Also known as the personal property on the homeowners policy. Contents coverage provides protection for all of your "stuff." Contents includes, but is not limited to items such as furniture, appliances, decorations, electronics, clothing, and much more!

Deductible: Your deductible is the amount you are responsible for paying after a loss. For example, if you have a $1000 homeowners insurance deductible and you have a tree limb fall into your home, you would be responsible for paying the first $1000 of the loss and the carrier would pay the remaining. A homeowners deductible must be paid for EACH loss rather than per year.

Dwelling coverage: the primary coverage afforded under the homeowners insurance policy. It provides coverage to the main structure of your home for a wide variety of perils such as fire, wind, hail, theft, vandalism, and several others.

Equipment Breakdown: Similar to a home warranty, equipment breakdown coverage provides protection for the essential home systems and appliances in the event of a sudden mechanical or electrical breakdown not caused by normal wear, tear, or corrosion.

Extended dwelling coverage: This is the same as additional replacement cost. This endorsement pays up to an additional 25%, 50%, or 100% of your dwelling coverage amount, depending upon your specific policy, in the event the dwelling coverage amount of your home is insufficient to replace the home. For example, if your home is insured for a replacement cost of 200,000 and a tornado destroys your home and those around it, construction costs may rise due to the high demand. If you have a 50% additional replacement cost policy, the maximum your carrier would pay to rebuild your home is 300,000 (200,000 x 150%).

Guaranteed Replacement Cost: Guaranteed replacement cost means that once your homeowners insurance company has inspected and determined the replacement cost value of your home, they will pay to replace it regardless of how much it actually costs. For example, your insurance company determines the replacement cost to be $500,000. A natural disaster causes construction prices to rise 40% over night. The insurance company will pay to replace the home even though the cost to do so far exceeds the insured amount. This is the highest form of homeowners insurance protection available.

Identity Theft Coverage: Identity theft occurs when someone steals your personal information and uses it without your consent. Many carriers offer some identity theft coverage that reimburses you for expenses related to restoring your identity.

Indemnity: The insurance principal that means to restore someone to the same financial position they had prior to a loss occurred. Indemnity can occur through payment, repair, or replacement.

Insurance Score: Your insurance score is a credit based score derived from different aspects of your personal credit history. It is intended to determine the likelihood of having a future insurance claim rather than to determine your ability to pay your premiums.

Insurance to value: The ratio of the coverage limit on the dwelling value of your home to the actual cost to completely replace your home after a total loss. Different policies require different insurance to value ratios, but almost all homeowners insurance policies require that you insure the home to 100% of its replacement cost value.

Loss Assessment Coverage: If you live in a community or condo that has a homeowners association, you could be assessed for damages to the community property. For example, if your condo building is destroyed and the HOA's insurance is insufficient to rebuild the entire structure, the HOA may assess its members for the remaining costs. Loss assessment coverage can be used to compensate you for this expense.

Loss of use: Also known as additional living expense. If your home is uninhabitable due to a covered loss, your homeowners policy will pay for living expenses that above your normal cost of living. For example, if you have to pay to live in a hotel for a couple of months after a kitchen fire.

Market Value: Market value of your home is the amount you could receive for your home if you were to list it on the open market. It is based upon current economic conditions, location, and a variety of other factors.

Medical Payments Coverage: This homeowners insurance coverage provides protection for guests that are injured on your property, paying for their medical expenses. It does not provide coverage for you or other household members.

Other Structures: Also known as Coverage B on the homeowners policy, provides coverage to structures on the residence premises that are not physically attached to the primary dwelling. Other structures can include items such as pools, fences, detached garages, sheds, or pool houses.

Personal Liability: If someone outside of your household is injured or their property damaged, and you are held legally liable, personal liability will come to your defense. It takes care of the medical expenses, costs of repairs, or legal fees associated with resolving the occurrence.

Personal Property Coverage: Sometimes known as content coverage. Personal property coverage provides protection for all of your "stuff." Contents includes, but is not limited to items such as furniture, appliances, decorations, electronics, clothing, and much more!

Premium: The total amount you are responsible for paying over the course of the policy term in exchange for the coverage provided by the policy.

Property Coverage: Also known as dwelling coverage, it is the primary coverage afforded under the homeowners insurance policy. It provides coverage to the main structure of your home for a wide variety of perils such as fire, wind, hail, theft, vandalism, and several others.

Replacement Cost Coverage: A claim settlement basis that pays for items damaged or destroyed based upon the actual cost to replace the item rather than on the actual cash value basis. For example, if your couch costs $1000 to replace it after a fire, but it was only worth $200 on an actual cash value basis, the insurance company would pay you the $1000 based upon the cost of buying a replacement for the lost item.

Total Loss: A total loss occurs when the cost of repairing exceeds the current value of your property.

Umbrella Policy: A personal liability umbrella provides an additional layer of liability protection above the underlying liability limits of the personal policies you own. A liability umbrella can go over your home, auto, motorcycle, boat, secondary homes, and rental properties. For example, in the event you are personally liable for a severe auto accident, the underlying auto policy would pay up to its limits, then the umbrella would pick up the remaining amount up to the umbrella's liability limit.

Valuable Items: Certain items such as jewelry, silverware, guns, money, and other collectibles typically have limited coverage under a homeowners policy. So if you have any of these items, you may need to consider scheduling them on your policy.


Auto Insurance Glossary

Accident Forgiveness: Some carriers offer this as a reward for loyalty or for maintaining an accident or violation free driving record for a certain period of time. If you earn accident forgiveness, your first at fault accident will not be rated against you on your next renewal after the accident.

Actual Cash Value: Is the market value of your vehicle immediately prior to the accident. It takes into account the cost to replace the vehicle less depreciate, wear, and tear. For example, if your car is worth $9000 prior to the accident, and the vehicle is totaled, you would receive $9000 less your applicable deductible.

Agreed Value: Some policies offer an option to insure an item for an amount agreed to between the insurer and the insured for the term of the policy period. With autos, this typically applies to classic autos. For example, if you insure your 1965 Ford Mustand on an agreed amount basis for $15,000 and the car is destroyed during that policy period, you will receive settlement for $15,000 minus your deductible rather than on a actual cash value basis, which could be less.

Bodily Injury Liability: Helps protect you against medical expenses, lost wages, or pain and suffering that you become legally liable for as the result of an accident that injures another party.

C.L.U.E.: Comprehensive loss underwriting exchange is a clearing house for all insurance claims. Almost all insurance companies participate and share claim data about their policyholders. This is how a new carrier knows about your prior claim history.

Collision Coverage:  Pays to repair damage to your vehicle resulting from the colliding of your vehicle with another object.

Comprehensive Coverage: Sometimes called Other than Collision coverage. It pays to repair damage to your vehicle for other specified causes of loss other than the colliding of your vehicle with another vehicle or object. Some types of losses include but are not limited to theft, hail, fire, flood, or vandalism.

Deductible: Your deductible is the amount you are responsible for paying for damage to your vehicle. For example, if you have a $500 comprehensive coverage deductible and you have a tree limb fall into your car, you would be responsible for paying the first $500 of the loss and the carrier would pay the remaining. An auto deductible must be paid for EACH loss rather than per year.

Guaranteed Auto Protection (GAP): Also called loan and lease protection. If your vehicle is worth less than the amount that you owe on it, and the vehicle becomes a total loss due to an accident, you could be responsible for paying back more on the loan than you receive in settlement for the totaled car. If you have GAP coverage, it would pay the difference between your loan and the actual cash value of the car.

Insurance Score: Your insurance score is a credit based score derived from different aspects of your personal credit history. It is intended to determine the likelihood of having a future insurance claim rather than to determine your ability to pay your premiums.

Loan and Lease Protection: Also called GAP coverage. If your vehicle is worth less than the amount that you owe on it, and the vehicle becomes a total loss due to an accident, you could be responsible for paying back more on the loan than you receive in settlement for the totaled car. If you have GAP coverage, it would pay the difference between your loan and the actual cash value of the car.

Loss of Use: If your vehicle is in the shop due to an accident, you might likely need a rental car during the duration of the repairs. Loss of use coverage provides a daily and monthly amount of reimbursable expense, typically $30 per day up to a limit of $900. Loss of use can also be called Rental Reimbursement.

Medical Payments: Is a first party medical coverage available for you and your passengers. It can assist with hospital bills and other medical expenses related to an accident.

Negligence: Relates to the responsibility for the resulting consequences of someone's action or in-action. Commonly, negligence is what people refer to when determining fault for an accident.

Premium: The total amount you are responsible for paying over the course of the policy term in exchange for the coverage provided by the policy.

Property Damage Coverage: If you are held legally liable for damage to someone else's property, property damage liability will provide for repairing or replacing the property of the impacted party.

Rental Reimbursement: Also known as loss of use. If your vehicle is in the shop due to an accident, you might likely need a rental car during the duration of the repairs. Loss of use coverage provides a daily and monthly amount of reimbursable expense, typically $30 per day up to a limit of $900.

Total Loss: A total loss occurs when the cost of repairing exceeds the current value of your property.

Uninsured/Underinsured Motorist (UM/UIM): Provides the named insured and passengers with bodily injury coverage when involved in an accident with a driver who does not have insurance, has insufficient limits for the amount of damages incurred, or leaves the scene of an accident without providing any identifying information.


Life Insurance Glossary

Accidental Death and Dismemberment: A policy type often included with life insurance that provides a benefit payment if the named insured's death results from an accident. The insured could also receive payment if that person is loses a limb or permanently loses their eyesight.

Accidental Death Benefit Rider: Some policies come with a rider that states that if the cause of death was from an accident, then the beneficiaries receive an additional benefit above the face amount of the policy.

Annually Renewable Term: A policy type that has a one year effective period and is renewable in each successive year.

Beneficiary: The person or entity that receives the proceeds of the life insurance policy after the death of the named insured.

Convertible Term: Allows the named insured to convert a fixed term policy to a permanent life insurance policy.

Death Benefit: The death benefit of a life insurance policy is the amount the beneficiary receives after the death of the named insured. This is also called the face value.

Face Value: The face value of a life insurance policy is amount the beneficiary receives after the passing of the named insured. This can also be called the death benefit.

Final Expense insurance: A lower face value life insurance policy designed to provide coverage for costs relating to resolving your final expenses such as funeral costs. Many do not require a medical exam.

Level Term: A type of policy in which neither the premium nor the face value of the policy change during the course of the policy term.

Paramedical Exam: Most life insurance companies require a medical evaluation of the named insured prior to issuance of the policy.

Permanent Life Insurance: A life insurance policy intended to be carried until the death of the insured rather than only for a specific period of time. Whole life insurance is a type of permanent life insurance.

Policy Term: The policy term is the period of time for which the insurance company agrees to provide a potential death benefit in exchange for premiums.

Premium: The total amount you are responsible for paying over the course of the policy term in exchange for the coverage provided by the policy.

Term Life Insurance: Term life insurance is a life insurance policy that provides a death benefit should the named insured die within a specific time period, the policy term.

Universal Life Insurance: A type of permanent life insurance. It offers flexibility and pricing similar to term life insurance, but adds the savings capabilities of a whole life policy.

Whole Life Insurance: Whole life insurance is a type of life insurance designed to provide the named insured with life insurance coverage until death. Whole life policy also have unique tax, savings, and investment advantages not typically associated with term life policies.