The Basics of Home Insurance and Frequently Used Terms
Homeowners insurance is sometimes called home insurance or hazard insurance, but each of those terms refers to insurance that covers homes and the contents inside. Home insurance is considered a policy with multiple lines because it covers both property and liability. The premiums (payments) made to insurance company are determined by the cost of replacing the home as well as the contents inside.
Sometimes insurance terms can sound like their own language, so we’ve compiled a list commonly used insurance terms and what they actually mean, so that you aren’t confused with any portion of your policy.
Adjuster: Someone who is trained to examine losses and decide how liable the insurer is when a claim is made. Some work independently, while others only represent a certain insurance company.
Appraisal: When an authorized person, normally an adjuster, evaluates a property claim to determine the property’s value or the value of the damaged property. In order to resolve claim disputes, an appraisal is usually required.
Cancellation: When a homeowners policy is terminated before the expiration date that was agreed upon. Usually there is no premium repayment in this scenario.
Claim: When a homeowner requests to be reimbursed within their policy’s terms.
Deductible: When a claim is accepted, this is the amount in the terms of the policy that the homeowner has to pay from their own pocket first before they get coverage.
Depreciation: The amount that your property is estimated to decrease over time because of normal aging, wear, tear, etc.
Endorsement: A clause or document added into a policy which modifies the coverage that was originally provided.
Exclusion: A circumstance, item, or condition that isn’t covered that is noted specifically in the policy.
Exclusive Agent: This is an insurance agent that will only sell products from a certain insurance company.
Group Policy: This policy is sold through an association, employment-based group, or a special group insurance trust where each member that participates is included under one overarching policy. Individuals who participate will each receive their certificate of coverage.
Independent Agent: This is an insurance agent who will represent and sell products from more than one insurance company.
Individual Policy: This kind of policy is sold to an individual directly.
Lapse: When a homeowner doesn’t pay their premium and there is an interruption in coverage.
Liability Coverage: Protects the homeowner from injuries or property damage on the owner’s property, including legal expenses if lawsuits arise. These are all covered up to a certain limit specified in the policy.
Market Value: What your home and land it is built on is worth currently.
Nonrenewal: When a policy ends its current term and the insurance company declines a renewal.
Peril: The reason for a loss or a certain risk.
Personal Property: Items that are not attached permanently to your home like electronics, furniture, artwork, and clothing.
Policy: The written contract between you and your insurer that lists coverage for losses or damages to your property.
Premium: This is the cost charged by the insurance company for providing coverage on a policy. This number varies depending on how much coverage you get from them.
Property Coverage: Protection against damage or loss for your personal property and/or land.
Underwriting: This is the process used by an insurance company to determine if a customer is eligible for their policies and the premiums for their coverage.