Homeowners Insurance Terms and Definitions

Familiarize yourself with the following commonly used terminology to ensure you understand how to properly protect your home and property form storm damage.

Actual cash value (ACV)
What it would cost to replace storm damaged property less depreciation.

Additional living expenses (ALE)
Money paid to you by your insurance company if your home is damaged by a storm to cover temporary housing, food, and other essential living expenses.

Adjuster
The person from your insurance company that assesses damage and settles your claim.

Agent
The person that sells you your insurance policy. They may work for a specific insurance company or be an independent agent or broker.

Application
A form you fill out with information about you that an insurance company will use to decide whether to issue you a policy and how much to charge.

Appraisal
An assessment by an authorized representative to determine property value or damaged property value as it relates to a storm damage insurance claim.

Binder
A temporary document that provides proof of your insurance coverage until you receive a permanent policy.

Cancellation
Termination of an insurance policy by the company or insured before the renewal date.

Claim
Your request for money to repair or replace storm damage to your home or its contents.

Claimant
The person who makes an insurance claim under an existing home insurance policy.

Company profile
An overview of an insurance company’s history and track record.

Complaint
Filing a grievance against an insurance company or agent.

Contract
Your insurance policy is a contract between you and the insurance company.

Declarations page
The section of your insurance policy that includes the name and address of your insurer, the length of time your policy is in force, the amount of your premium, and the amount of coverage.

Deductible
How much you have to pay for storm damage before the insurance company will begin paying you.

Depreciation
The decrease in the value of property over time due to use or wear and tear.

Earned Premium
This is the amount of your premium that has been “earned” by the insurance company. If you have a twelve - month policy and you paid the entire premium at the outset, three months into the policy, there would be three months of earned premium. The remaining nine months of premium is termed “unearned premium.”

Effective Date
The date on which an insurance policy becomes effective.

Endorsement
Sometimes called a “rider,” and endorsement is an agreement attached to your insurance policy that extends or limits the standard coverage.

Escrow
Money held by a third party until a specified time or specific set of conditions are met.

Exclusion
Language in your homeowners insurance that eliminates coverage for specific perils, people, property, or locations.

Expiration date
The date when your current term ends and your insurance policy expires.

First-party claim
When you file a claim against your own insurance policy.

Grace period
The period of time between when your premium is due but not paid while your insurance remains in force. You typically have a 31 day grace period to pay your premium before your insurance coverage expires.

Independent adjuster
An independent expert that insurance companies pay to adjust the company’s claim.

Inflation protection
A policy option or rider that automatically adjusts policy limits for increases in the costs to repair or rebuild your property.

Insurable interest
In order to purchase storm damage insurance, a person must have an insurable interest in the property they seek to insure. In the case of homeowners insurance, you must have a financial interest in the property to have an insurable interest the ability to purchase insurance.

Insured
Your, the policyholder - the person(s) protected in case of storm damage.

Insurer
The insurance company.

Lapse
If your premium is not paid by the end of your grace period, your policy is said to terminate or “lapse” and you no longer have insurance coverage for storm damage.

Liability Coverage
The liability coverage typically included in home insurance policies protects you if you are found liable for personal injury or property damage due to an accident or negligence.

Loss
Also called damages, loss refers to the amount of money an insurance company pays on your claim.

Loss of Use
If storm damage renders your house unlivable, the loss of use provision in your policy will reimburse you for the costs associated with reasonable living expenses you incur while your property is being repaired (including housing, food, and other necessities).

Loss History
Your loss history is a record of all the claims you have filed against your policy in the past and indicates how likely you are to file a claim in the future. Please note that while you cannot be singled out for a rate increase for making a storm damage claim, insurance companies may consider loss history when underwriting a new policy or considering a policy renewal.

Market Value
The current value of your home, including the value of land.

Material Misrepresentation
A significant misstatement of fact such that the company may not have accepted your application if it had known the truth.

Non-renewal
When an insurance company decides to not renew your policy for continued coverage.

Peril
A specific risk covered by an insurance policy, such as a fire, windstorm, flood, or theft. A named-peril policy covers the policyholder only for the risks named in the policy. An all-risk policy covers all causes of damage except those specifically excluded. For more information, see What Does My Home Insurance Cover?

Personal Property
In insurance policies, personal property refers to the contents in your home that are either temporary or movable in some way, such as tables, ear rings, or TVs.

Policy
The contract issued to you by your insurance company.

Policy Owner
The person or party who owns an individual insurance policy. This person may be the insured, the beneficiary, or another person. The policy owner usually is the one who pays the premium and is the only person who may make changes to a policy.

Policy Period
The length of time your policy is in effect.

Premium
The amount you pay to your insurance company to maintain your home insurance coverage.

Property Damage
Property damage refers to physical damage to your property from violent storms or other perils covered by your insurance policy.

Public Insurance Adjuster
An expert that you can use to negotiate your claim with your insurance company. Public insurance adjusters are typically free to consumers and receive payment only for a pre-determined percentage of the amount of damages they secure for you.

Refund
Money returned to you if you over pay your premium or if you are due an unearned premium after cancellation of the policy.

Reinstatement
The process by which an insurance company puts your policy back in effect after it lapsed due to nonpayment of premiums.

Renewal
Continuation of a policy after its expiration date.

Renters Insurance
A form of insurance that covers a policyholder’s belongings against perils. It also provides personal liability coverage and additional living expenses. Possessions can be covered for their replacement cost or the actual cash value, which includes depreciation.

Replacement Cost
While limited to the maximum dollar amount stated in your insurance policy, replacement cost insurance pays you the amount of money needed to fully replace or repair storm damaged property without deducting for depreciation.

Return Premium
If you cancel or change a policy after you have already paid a premium, you may receive the premium back.

Rider
A written agreement attached to the policy expanding or limiting the benefits otherwise payable under the policy. Also called an “endorsement.”

Staff Adjuster
Employee of the insurance company’s claims department.

Surcharge
An additional charge added to your premium by an insurance company.

Third-Party Claim
A claim filed against another person’s insurance policy.

Underwriter
The underwriter is the person that reviews insurance applications to determine acceptance or denial and appropriate premium rates.

Underwriting
The process an insurance company uses to decide whether to accept or decline your application for homeowners insurance and if accepted, what the premium will be.

Unearned Premium
The amount of a pre-paid premium that has not yet been used to buy coverage. For instance, if you paid in advance for a six-month premium, but then cancel the policy after two months, the company must refund the remaining four months of “unearned” premium to you.

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