Glossary of Terms for Homeowners Insurance

There are many terms associated with home owners insurance that you may not know or understand – here is a list of terms that are commonly associated with home owners insurance policies so that you can understand what you are getting with your insurance policy.

Act of God – This is an accident or event that is unpreventable and is the result of natural causes such as lightning or floods.

Actual Cash Value (ACV) – this is the replacement cost of your damaged or lost property at the time of the loss minus the depreciation.

Additional Living Expense (ALE) – Increases in your living expenses caused by the accident for which you are making an insurance claim in order to maintain a normal standard of living.

Applicant – the person who is applying for homeowners insurance.

Application – the written statement given to the potential policy holder that provides the information that will determine the home owner insurance policy to be written.

Appraisal – A claims representative or appraiser’s estimate of the damage to your property or the value of your property and/or possessions.

Basic limits – the lowest possible coverage amount by law or by company.

Cancellation – ending the insurance policy

Catastrophe – A severe disaster that causes a major or total loss unexpectedly and suddenly.

Claim – demanding payment for a loss incurred under your insurance contract.

Conditions – the provisions listed in the insurance policy that includes the rights, duties and responsibilities of the insured and the insurer.

Damages – the payment that a party is legally required to pay to someone as compensation for an injury or loss.

Deductible – the amount of an insurance claim that the insured person agrees to pay. This amount is deducted from the claim payout.

Depreciation – the decrease in value of any property over a period of time.

Effective date – the date that your homeowner’s insurance policy begins.

Endorsement – An amendment to your standard homeowner’s insurance policy that covers unique items.

Exclusion – the perils, people, property or locations that are NOT covered with your homeowners insurance.

Fire insurance – part of your homeowners insurance policy that insures against losses due to fire, lightning and other causes defined in the contract.

Flood insurance – coverage for your possessions and property that are caused by rising and flooding of bodies of water. Flood insurance is separate from home insurance.

Hazard – a condition that increases the likelihood or extent of a loss.

Homeowner’s insurance policy – the package that includes your coverage for theft, comprehensive personal liability and losses due to a number of perils.

Insured – the person who is protected by the homeowner’s insurance policy.

Liability insurance – insurance for injuries to other people.

Loss – the reduction in the value of your property that is caused by a peril covered by your homeowners insurance.

Loss of use – payments/compensation for your losses because you have lost the use of your possessions or property.

Mobile home insurance – special home owners policy designed for mobile home owners.

Non-renewal – a homeowners insurance policy that is not continued by the insurer after it has expired.

Partial loss – loss that does not completely destroy the insured property that is covered by the policy.

Peril – the cause of the accident, claim or loss.

Premium – the amount to be paid for the insurance policy.

Total loss – a complete loss of goods or property that is insured.