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Homeowners Insurance Glossary

Warner and Company explains some of the most common homeowners insurance terms in this online insurance glossary.

Glossary

Actual Cash Value

The basis of loss settlement in property insurance policies, which takes into consideration factors such as replacement value less depreciation, market value, rental value, the use of the building, the area in which it is located, obsolescence, assessed valuation, and any other factor that would have an effect upon the value. A working rule-of-thumb definition is "replacement cost new at the time of loss, less depreciation."

Deductible

The amount which must first be subtracted from the total damage incurred before determining the insurance company's liability. Deductibles can be a set dollar amount or a percentage of the dwelling value. Two deductibles can apply on a single policy. Some policies may have one deductible that applies to wind and hail damage and another for all other losses. If this is the case, the wind and hail deductible is usually much larger than the deductible for all other losses.

Dwelling

A dwelling is a house in which people live, as distinguished from a garage, storage building or any other building.

Homeowners/Condo/Renters Optional Coverages

There are literally 100 or more options to provide coverage or increase the coverage provided by the standard homeowners policy. While it may seem simple to properly insure your home and its contents at first, a review with your agent of the limitations and exclusions of the policy often reveal a number of modifications that should be made to provide the coverage you desire. The most common areas needing modification are: Replacement cost coverage on both home and personal property (contents)
Broadened contents coverage
Sewer and water backup
Jewelry, silver, musical instruments, and some types of sports equipment
Fine arts, china and crystal
Guns
Cash
In-home businesses of all types, including part-time or seasonal "hobby" businesses
The addition of watercraft, recreational vehicles
Extension of liability coverages to farmland or other property owned by the policyholder
Special computer hardware or software coverage or electronic equipment
Increased limits for other buildings or structures on the premises
Condominium and renters - additions and alterations coverage, Loss Assessment Personal Umbrella policies are the most cost-effective and popular method of obtaining the coverage needed when higher limits of liability than available on home and auto policies are needed.

Let your agent know about any situations or property you own that is slightly different or unique so you can discuss how your insurance would apply.

Liability Insurance

Protection that pays sums the insured is legally obligated to pay, or that the insurer has agreed to pay, as damages to others as a result of the insured's negligence. Usually provides coverage arising from alleged bodily injury or property damage to others.

Loss of Use Coverage

Loss of Use Coverage compensates the policyholder for the inability to use property that was damaged or destroyed by an insured peril. For example, if a home is damaged by fire, the Loss of Use helps meet the increased costs of living such as hotel bills, or a rental home, eating out or other living expenses while the home is being repaired.

Medical Payments Coverage

Reimburses for the necessary expenses for medical, hospital and funeral costs for persons other than the "insured" or employees of the insured, who are injured while on the insured's premises. The coverage is available whether the policyholder is liable or not.

Other Structures (detached garage, gazebos, etc.)

Other structures on a homeowner's policy refer to structures other than the dwelling and are separated from the dwelling by clear space. This would typically include detached garages, storage sheds, gazebos, fences, etc.

Personal Property

Property other than land and buildings often referred to as "contents." Also includes the contents found in other structures. Certain types of property have specific dollar limits or are subject to exclusions.

Replacement Cost

When used in property insurance contracts, this is the amount it would take to replace the property with like property of the same quality and construction. No deduction is made for depreciation or obsolescence.