Homeowners Insurance Terminology

Replacement Cost. Homeowners insurance is based on the replacement cost of your home, not the market value. Those are two very different things. Many times it would cost much more to replace your home as it stands today, than you could get for it if you were to sell it. Replacement cost is the amount it would cost to rebuild your home as it stands today, in today’s marketplace, at today’s prices. Insurance companies use a program to determine this, but it is based on the overall square footage of your home, along with any unique features, multiplied by the cost to rebuild per square foot in your area.

Actual Cash Value. This is a different method to insure you property. ACV is the replacement cost of your dwelling minus the depreciation. This method does not pay to rebuild you home, rather pays you the depreciated value. On a partial loss, an insured may receive less than what the repair costs are if you insure by this method. It is not a recommended method to insure homes.

Replacement Cost on Contents. This is a coverage that pays to replace your personal belongings after a loss, with new for old. There is no depreciation taken into account. Example; you purchased a TV 5 years ago for $800. After 5 years it may have a value of $100. This type of coverage will replace your TV with similar kind and quality at today’s prices (less any deductible)

Guaranteed Replacement Cost. This coverage will allow you to replace your home even if it costs more than the amount of coverage you have on your home. If for some reason building prices climb during your policy, this coverage allows for replacement of the home at increased prices.

Scheduled Property. A standard homeowner’s policy has limited coverage against theft and disappearance. Jewelry, Silverware, Guns, and any other valuables or items that can increase in value, need to be insured and listed on the policy separately in order to have the proper coverage.

Protective Devices. Protective devices are items you have that could help to decrease your insurance cost. Companies give a small discount for having smoke detectors, fire extinguishers and dead bolt locks. They give larger credits for Central Station fire and burglar alarm systems.

Water Backup Coverage. Most  Insurance Companies no longer include damage due to backup of sewers and drains. This coverage is different than Flood Insurance and can be purchased as part of any policy. Limits usually start at $5000 and increase in $5000 increments.

Flood Insurance. A coverage that is excluded under all homeowners policies. This must be purchased separately and is a separate policy. IT would protect you against the possibility of Flooding. On many new homeowner purchases near water, banks and mortgagee companies require this.

Identity Theft. Identity Theft is a growing issue in America today. This is where someone gets access to your personal information and steals it to use your identity. Usually the thief obtains credit cards and buys merchandise in your name. While in most cases you may not end up being responsible for the purchases, it can cause problems with your credit score. Many insurance companies offer Identity theft coverage that will help you restore your credit and remove items from your credit report that are there due to the theft of your identity.

Automobile Insurance Terminology

Comprehensive Coverage. This is a coverage that covers your vehicle against damage by theft, fire, vandalism and any other type of non collision coverage. This coverage is also known as other than collision coverage and includes all window breakage, as well as accidents with animals. Comprehensive losses are not surcharged

Collision Coverage. This is a coverage that covers your vehicle in the event of an accident wither with another person, or another object (other than an animal). It pays to repair your vehicle.

Surcharge. Also referred to as points by some people. This is an additional premium charge a company legally charges due to having chargeable accidents (those where you are at fault and result in more than $1000 in damage)

Property Damage. This is coverage on your policy that pays for damage to someone else’s car or property that you are found liable for due to an accident.

No Fault. This is a situation where it is determined that each party in an accident will collect for their damages under their own policy.

Personal Injury Protection. This coverage pays medical expenses, loss of wages and rehabilitation expenses after an accident. This coverage will not pay if the accident was alcohol or drug related.