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.