7 Definitions to Know Before Buying Home Insurance
Sometimes relatively simple subjects can be made more confusing or complex by terminology. This happens frequently in law and it happens when it comes to homeowners insurance. Knowing the following ten definitions, however, can help make things a bit clearer.
Liability
As a property owner, you are responsible for providing a safe environment for guests, visitors, and vendors. Should someone sustain an injury while on your property, you could be held liable for financial damages associated with that injury. The liability coverage portion of your home insurance can cover legal costs and judgements or settlements involving such a claim.
Actual Cash Value
ACV is the value placed on an item at the time of its loss. A $2,000 sofa, for example, may only have an actual cash value of $500 after a few years of use. Using ACV, insurance would value that sofa at its depreciated value of $500.
Replacement Value
Replacement value would cover property based on what it would cost to replace it. If your home were to be destroyed by a fire, for example, the replacement value would cover the cost of replacing it.
Deductible
A policy’s deductible is the amount the insured pays out of pocket before policy benefits are paid. If you have a $10,000 claim with a $1,000 deductible, you would pay the first $1,000 and your home insurance would cover the $9,000 balance.
Exclusion or Exception
These are terms used to describe specific perils that are not covered under the homeowners’ insurance policy. It is important to note these exclusions so you are aware of areas where you are unprotected.
Policy Limits
This is the maximum amount a policy will pay under certain categories and overall.
Premiums
Premiums are simply the amount paid for homeowners’ insurance. These premiums could be paid monthly, quarterly, semi-annually, or annually.
While definitions are the same, not all home insurance policies are equal. You can discover what is and isn’t covered by your present policy and how you can best fill in the gaps by contacting one of our independent insurance agents. If it has been years since you’ve had a home insurance policy review and price quote, the time to act is now. We look forward to assisting you.
