Homeowner's insurance has a language all its own, and knowing the lingo can help you get the best deal on a policy. Here are some of the terms you'll come across.
Actual cost value - This refers to the amount of money that property is currently worth, with depreciation subtracted from the original price paid at purchase. Insurance policies that reimburse claims based on actual cost value tend to have lower prices than the option of getting damaged or stolen property replaced or reimbursed with enough money to buy a new item. Some insurers use the word "cash" instead of "cost," but the concept still means the same thing.
Actuary - An insurance mathematician who uses mathematical formulas to calculate monthly prices for policies and deductibles, along with corresponding maximum settlement amounts. This is called actuarial math or actuarial science.
Adjuster - This individual strives to alter the amount of an insurance claim. Adjusters employed by insurers typically try to find ways to lower the amount. Policyholders usually employ public adjusters after a claim is at least partially denied, and ask the individual to help negotiate a settlement.
Appraisal - You might recall from your home-buying experience that one of the definitions of "appraisal" refers to the professional evaluation of real estate required by mortgage lenders. Insurers use the term "appraisal" to refer to the assessment of loss to damaged property or review of a claim to determine whether and how much to reimburse the claimant.
Apreciation - The increase in valuation of property over time.
Claim - A policyholder's request for reimbursement of a loss covered by an insurance policy.
Claims adjuster - See adjuster
Conditions - The section of a policy that explains the responsibility of the insured and insurer under the terms of the insurance contract.
Credit insurance - As one of the most well-known insurance agencies nationwide, Met Life has a strong reputation to maintain. Waiting on hold for service at Met Life may be slightly longer than waiting for service with other companies, but in the end, you'll receive helpful answers and quality service. Additionally, Met Life's prices are generally a bit higher than those for comparable plans with other companies, but you may be able to negotiate a better deal once you've received the original price quote.
Declarations - This is a summary usually printed on the first page of a policy, listing the name and address of the insured, dollar amount of coverage, description of the property insured, premiums and related costs, name of the insurance company and its contact information.
Deductible - The portion of a claim that isn't covered by an insurer. This applies to the first claim filed and any subsequent claims until the deductible amount is met. Most deductibles reset on an annual basis.
Depreciation - Loss of value over time due to basic wear and tear.
Liability coverage - This aspect of homeowner's insurance protects you from the risk of getting sued. If anyone gets hurt on your property, the cost of medical care is taken care of. If you need to hire a lawyer, the legal fees are also covered. The word liability refers to legal responsibility or fault.
Endorsement - See rider
Exclusion - Refers to clauses or conditions listed in a policy that aren't included in coverage and that would require an additional insurance purchase in order to be covered.
Grace period - An amount of time after a premium due date during which the policy remains in effect and there's no penalty for late payment.
Group policy - A policy sold through an employer, association or special insurance trust, which provides the documents of coverage to the individuals covered.
Guaranteed replacement cost policy - This type of insurance offers to protect a policyholder from inadvertently underinsuring their property. These policies often involve increases in premiums and coverage limits upon renewal or at otherwise specified intervals.
Homeowner's insurance - Financial protection from disasters that impact one's home, along with the comfort and security of family and guests.
Independent insurance agent - A salesperson who offers policies from more than one insurer. The word "agent" is interchangeable with "broker" or "producer."
Inflation protection - This option in a policy would increase benefits or reimbursements to reflect anticipated increases in the cost to repair property.
Lapse - Termination of a policy because of nonpayment or underpayment of premiums.
Liability - Legal responsibility, or culpability, used in the context of both accident prevention and dealing with the aftermath of an unfortunate incident. Liability coverage refers to insurance that protects a policyholder's legal responsibilities.
Market value - Refers to the price your home and its associated land might fetch if sold today.
Misquote - An incorrect estimate of an insurance premium, either due to a miscalculation or limited data.
Nonrenew - An insurance company's decision not to extend coverage beyond the current policy's term, which needs to be disclosed to the policyholder in writing.
Ordinance and law coverage - This refers to insurance that reimburses policyholders for expenses related to compliance with changes in building codes.
Peril - Something that might incur a loss.
Policy - The written contract outlining insurance provided by an insurer to a policyholder.
Premium - The amount of money charged by an insurer to provide coverage for a specified period of time.
Private mortgage insurance - If you make a down payment of less than 20 percent of a property's value, you're usually required to buy private mortgage insurance, which protects the lender in the event that you default on the loan.
Pro-rata cancellation - This term refers to an insurer cancelling a policy before the expiration date.
Public adjuster - See adjuster
Quote - An initial cost estimate for an insurance policy, based on preliminary data supplied by the prospective customer.
Real property - Also referred to as tangible property, this is the legal term for land and anything permanently attached to, embedded in or growing on land.
Replacement cost - This refers to replacing damaged or stolen property with a brand new item instead of providing reimbursement of the current value, which factors in depreciation. Insurance that reimburses claims based on replacement cost usually have higher prices than policies that reimburse based on actual cost value.
Return premium - The amount of money that an insurer refunds if a policy is canceled before the expiration date, by either the insurance company or the policyholder, assuming there's an outstanding balance. Sometimes the return premium has a 10 percent penalty deducted if the policyholder cancels the policy instead of the insurer.
Rider - Supplemental insurance added to a basic policy, either to increase the total maximum amount of a possible settlement or to expand the coverage to include more types of risk scenarios. Also known as an endorsement in some states, the rider can describe other ways in which a policy has been customized for the individual, including removal of specific coverage that would otherwise be included.
Risk - The threat of loss, often described in terms of how much the potential loss might cost under different cause and effect scenarios. Credit scores are a common measurement of risk. Insurance is the business of distributing risk across a group of people, which is a form of risk management.
Settlement - A cash delivery fulfilling a request for reimbursement of a claim on an insurance policy.
Short-rate cancellation - When the policyholder cancels the insurance policy before the expiration date.
Tangible property - See real property
Underinsured - Generally speaking, this refers to not owning enough insurance coverage to reimburse the full cost of replacing a home. Being underinsured increases the amount of money a policyholder may have to pay out of pocket for repair or replacement of property. Some insurers have a defined threshold for determining whether a home is underinsured, typically around 80 percent of the cost to replace the entire property.
Underwriting - This describes the financing of insurance and evaluation of applicants for policies to determine whether to grant them coverage and at what prices.
Title insurance - This type of policy requires a single premium payment and protects either or both the property owner and mortgage lender against future claims related to defects in the title to the property that were unknown at the time of sale of the real estate.
Value at risk - This refers to an insurer's calculation of the maximum amount of loss a property might incur.