Common Insurance Terms and What They Mean to You
Our team of professionals deals with insurance day in and day out. We live and breathe insurance. While this makes us all the better at our jobs, we often forget that you, a policyholder, aren’t familiar with insurance buzzwords and terms. Because of this, we’ve compiled common terms that often crop up in policies, along with their definition. Hopefully, this will help you to better understand your coverage.
Actual Cash Value (ACV) – The value of your property, based on the current cost to replace it minus depreciation. This contrasts to “replacement cost.”
Additional living expenses (ALE) – Reimburses the policyholder for the cost of temporary housing, food, and other essential living expenses if the home is damaged by a covered peril that makes the home temporarily uninhabitable.
Deductible – The amount the insured must pay in a loss before any payment is due from the company.
Endorsement – An amendment or rider to a policy adjusting the coverages and taking precedence over the general contract.
Liability – Responsibility to another for one’s negligence that results in injury or damage.
Liability limits – The maximum amount your liability policy will pay. There are certain liability limits that must be met on some insurance coverages, for example, auto insurance.
Loss of use – A provision in homeowners and renters insurance policies that reimburses policyholders for the additional costs (housing, food, and other essentials) of having to live elsewhere while the home is being restored following a disaster.
Premium – The amount paid by an insured to an insurance company to obtain or maintain an insurance policy.
Replacement cost – Insurance coverage that pays the dollar amount needed to replace the structure or damaged personal property without deducting for depreciation, but limited by the policy’s maximum dollar amount.
Rider – A written agreement attached to the policy expanding or limiting the benefits otherwise payable under the policy. Also called an “endorsement.”
Need help finding the right insurance for your finances and needs? Contact Chambers & Company Insurance Brokers and our specialists can ensure you secure and understand reliable coverage.