• A.M. Best
A nationally recognized organization that evaluates insurance companies and rates their financial stability according to their rating system.
An unintentional, unforeseen and unexpected detrimental event.
• Actual Cash Value (ACV)
The value of your property at the time of a loss or damage. ACV may be determined as the replacement cost minus depreciation.
• Adjusted basis
The cost of a property plus the value of any improvements and minus depreciation.
A person who investigates and settles insurance claims on the behalf of the insurer.
A licensed person who sells insurance policies.
An increase in the value of a property or asset caused by economic factors such as inflation or other causes. The opposite of Depreciation.
• Assessed Value
The value placed on property for purposes of taxation.
An improvement that increases the value of a property or facility.
A preliminary, temporary agreement that provides proof of insurance until the policy is official.
• Blanket Insurance Policy
A single policy that covers more than one person or piece of property.
The failure to perform a promised act or obligation.
Voluntary termination of an insurance policy by the insurer or the insured prior to the renewal date.
• Cash Value
The amount of money which the policy owner will receive as a refund if the coverage is cancelled and the policy is returned to the company. Also known as cash surrender value.
• Casualty Insurance
The type of insurance covering the legal liability for losses caused by injuries to others or property damage caused by you or other residents of your home.
Articles of personal property.
A person who makes an insurance claim.
The sharing of risk between the insurer and the insured.
• Coinsurance Clause
A provision in a hazard insurance policy that states the amount of coverage that must be maintained — as a percentage of the total value of the property — for the insured to collect the full amount of a loss.
• Common Areas
Those portions of a building, land, and amenities owned (or managed) by a planned unit development (PUD) or condominium projects homeowners’ association (or a cooperative projects cooperative corporation) that are used by all of the unit owners, who share in the common expenses of their operation and maintenance. Common areas include swimming pools, tennis courts, and other recreational facilities, as well as common corridors of buildings, parking areas, means of ingress and egress, etc.
• Company Profile
A synopsis of a company’s performance including licensing data, an A.M. Best rating, financial information and complaint history.
• Conditional Receipt
A premium receipt which makes the insurance effective only if or when a specified condition is met.
Multi-family housing where units are owned individually by private owners but common areas are the shared responsibility of all tenants.
• Contents Coverage
Contents Coverage, sometimes referred to as “Coverage C” or “Personal Property Coverage”, is the portion of your home insurance policy that covers the cost of replacing your possessions, or home’s contents, in the event that they are destroyed in a covered peril (wind, fire, hail, lightening, theft, etc.). Contents coverage limits are usually 50%-70% of your dwelling coverage.
In most cases, the term “contract” refers to an insurance policy. A policy is considered to be a contract between the insurance company and the policyholder.
• Declarations Page
The page in your policy that shows the name and address of the insurer, the period of time a policy is in force, a description of the insured property, the amount of the premium, and the amount of coverage.
The amount that a policyholder has agreed to pay on a claim before the insurer is liable for any damages.
A payment given as a guarantee that an obligation will be met.
A decrease in the value of property. The opposite of Appreciation.
An amount of money from earnings that an insurance company may decide to distribute to policyholders.
• Dwelling Coverage
Dwelling Coverage, sometimes referred to as “Coverage A”, protects against the damage and possible loss of your home in the event of a covered claim such as a hurricane, hailstorm, lightening strike or fire.
• 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 there would be two months of earned premium. The remaining four months of premium is called unearned premium.
• Effective Age
An appraiser’s estimate of the physical condition of a building. The actual age of a building may be shorter or longer than its effective age.
• Effective Date
The date on which an insurance policy becomes effective.
A written amendment attached to a policy that modifies the terms of the insurance contract.
Specific situations, conditions, or circumstances listed in your policy that are not covered by your home insurance policy.
• Experience Period
The period of time that a company will reference when making evaluations of an insuring policy.
• Expiration Date
The date on which an insurance policy expires.
• First Party Loss
A situation involving only the insurer and insured.
• Flood Insurance
Insurance that compensates for physical property damage resulting from flooding. It is required by lenders for properties located in federally designated flood areas.
• Grace Period(s)
The time during which a policy remains in force after the premium is due but not paid.
• Hazard Insurance
Insurance coverage that compensates for physical damage to a property from fire, wind, vandalism, or other hazards.
• Homeowners insurance
An insurance policy that combines personal liability insurance and hazard insurance coverage for a dwelling and its contents.
A provision that places a time limit – up to two years – on a company’s right to deny payment of a claim because of material misrepresentation on your application.
• Independent Adjuster
A person who charges a fee to the insurance company to adjust the company
• Inland Marine
Movable property (e.g., furs, jewelry, stamp collections) insured by policies called floaters.
A contract that provides compensation for specific losses in exchange for a periodic payment. An individual contract is known as an insurance policy, and the periodic payment is known as an insurance premium.
• Insurance Binder
Written evidence that insurance is temporarily in effect until the specified expiration date. At that time a permanent policy must be obtained.
The person or firm covered by an insurance policy.
The insurance company.
When a policy holder fails to make payments the policy becomes null and void.
• Legal description
A property description, recognized by law, which is sufficient to locate and identify the property without oral testimony.
Responsibility to compensate another for your negligence.
• Liability Coverage
Home insurance coverage that protects the insured against injury or damage claims.
• Liability Insurance
A policy that protects owners against claims of negligence, personal injury or property damage.
• Limit of Liability
The maximum amount of damages an insurer is bound to pay in case of a loss.
The amount sought through an insurer’s claim.
• Loss History
Refers to an insured’s history of losses (claims) with other companies, or the company they are currently with. A company will consider ‘loss history’ when underwriting a new policy or considering a renewal of an existing policy.
• Loss of Use Coverage
Loss of use coverage, sometimes referred to as “Coverage”, provides for your living expenses in the event that you cannot live in your home due to a covered claim. This type of coverage typically covers hotel and restaurant bills and other living expenses you may incur while your home is being repaired. Coverage limits for loss of use is usually around 20% of your dwelling coverage.
• Material Misrepresentation
False statements by an applicant or policyholder that affect whether or not the insurer will accept the risk and issue a policy.
• Medical Payments Coverage
Medical Payments Coverage, sometimes referred to as “Coverage F” or “MedPay”, helps cover medical expenses that you might be held responsible for due to an injury sustained on your premises when there is no lawsuit. Medical Payments limits vary depending on your policy but usually coverage injuries of up to $1,000 per person, per covered incident.
• MedPay MedPay coverage, short for “Medical Payment coverage” and sometimes referred to as “Coverage F”, is the section of a standard home insurance policy that will cover medical costs in the event that someone is injured on your property and does not want to sue you. When someone is injured on your property and does not want to sue you for the damages, you can use MedPay to help cover medical costs MedPay limits vary depending on your policy but usually coverage injuries of up to $1,000 per person, per covered incident.
• Net Cash Value
The cash value amount available to a policy owner after adjustments have been made to the cash surrender value to account for policy loans and dividends.
The decision made by an insurance company not to renew a policy.
• Other Structure Coverage
Other Structure Coverage, sometimes referred to as “Coverage”, protects structures on your property such as detached garages and sheds. The typical coverage limits for other structures is 10% of your dwelling coverage-although higher amounts may be purchased if necessary.
This event occurs when a policy will not require any further premiums to keep the coverage in force.
Refers to a specific risk or cause of loss covered by an insurance policy, such as a fire, windstorm, lightening, hail, smoke damage or theft.
• Personal Liability Protection Coverage Personal liability protection coverage, sometimes referred to as “Coverage”, protects you and/or covered family members against lawsuits. Coverage limits vary depending on your policy but most standard homeowners policies include a minimum of $100,000 worth of coverage.
• Personal Property Coverage
Personal Property Coverage, sometimes referred to as “Coverage” or “Contents Coverage”, is included in a standard home insurance policy and protects your personal items and household contents in the event they are stolen or destroyed by fire, hurricane or other peril covered in your policy. These items may include, but are not limited to, furniture, clothing, and sports equipment. Contents coverage limits are usually 50%-70% of your dwelling coverage.
A contract issued by an insurance company to the insured.
• Policy Owner
The person or party who owns an individual insurance policy.
• Policy Period
The period a policy is in force, from the beginning or effective date to the expiration date.
The amount paid by an insured to an insurance company to obtain or maintain an insurance policy.
• Premium Expense Charges
An amount deducted from each premium payment, which reduces the amount credited to the policy.
• Property Damage (PD)
Destruction or loss of use of tangible property.
• Property Insurance
Home Insurance coverage for your personal or real property.
• Public Adjuster
A person who acts as an advocate for the policy holder in the insurance claim process.
• Rated Policy
An insurance policy that is issued at a higher than standard premium to cover a person classified as a higher than average risk.
• Renewal Policy
A policy issued as a renewal of an expired policy in the same company or agency, not new business.
• Replacement Cost
The cost associated with replacing property at current market prices.
• Return Premium
The premium returned to an insured for canceling or amending a policy.
Also known as an endorsement, a rider is an amendment to a policy used to add or delete coverage.
• Staff Adjuster
Employee of the insurance company’s claim department.
The right of the insurance company after payment of a loss to recover from the responsible party.
An extra charge added to your premium by an insurance company. For home insurance, a surcharge is usually added if you have a claims history.
• Third Party Loss
A situation involving a person other than the insurer and insured, i.e., a person making a liability claim against the insured.
A person who reviews and evaluates an application for a loan or insurance policy.
The process an insurance company uses to decide whether to accept or reject an application for a policy.
• Unearned Premium
The insured’s remaining premium equity in his policy; that part of the policy premium that has not been “used up.”
DISCLAIMER: the information provided above is intended to be a guide to understanding common homeowners insurance terms. CFB Insurance does not intend this information to be official or legally binding. CFB Insurance uses this list as a basic guide to understanding these terms and should not be considered complete or definitive.