RCU Insurance Services

Insuring Your Assets

Glossary of Homeowners Insurance Terms

The terms used throughout the insurance industry can be unfamiliar. As you shop for insurance it's important that you understand your options and know what you're paying for. Find a list of terms and definitions here.

Actual Cash Value (ACV)
Unless otherwise defined in the policy, Actual Cash Value is defined in California as fair market value. The fair market value of an item is the amount at which a knowledgeable buyer (under no unusual pressure) would be willing to buy, and a knowledgeable seller (under no unusual pressure) would be willing to sell.

Additional Cash Value
Extra coverage that can be purchased to provide protection above and beyond that provided in the homeowners policy (e.g., a higher amount of coverage against the theft of jewelry). When such additional coverage is purchased, it becomes an Endorsement or Rider to the original policy.

Additional Living Expense
The part of homeowners insurance that provides reimbursement for motel rooms, meals and other expenses when loss of property by a covered peril forces you to maintain temporary residence elsewhere. Also called loss of use coverage.

Adjuster
An insurance company representative who seeks to determine the extent of the insurer's liability for loss when a claim is submitted.

Agent
A person authorized, by and on behalf of an insurer, to sell and service insurance policies.

Binder
A temporary or preliminary agreement which provides coverage until a policy can be issued/delivered.

Broker
A person who for payment of a fee (paid by you) procures insurance on your behalf.

Cancellation
The termination of an insurance policy before its normal expiration date.

Claim
A demand made by an insured, or an insured's beneficiary, for payment of benefits provided by an insurance policy.

Catastrophe
To insurers, a catastrophe is a single incident, or series of related incidents, causing insured property losses totaling more than $25 million. Insurance actuaries calculate the probability of catastrophic loss on a state-by-state basis, using a formula based on the total number of catastrophes in each state over a 40-year period. This catastrophe factor, calculated annually, is included in the price of insurance.

Commission
That portion of the premium paid to the agent as compensation for his or her services.

Commissioner of Insurance
The title of the head of most state insurance departments. In some states, the Director or Superintendent of Insurance is used instead.

Coverage
The scope of protection provided under an insurance contract.

Declarations (Dec) Page
The front page of your policy is called the Declarations page. It contains useful information such as:

• the exact name of your insurance company
• the policy number
• your coverages and premiums
• your deductibles, if applicable
• the limits of insurance
• any applicable lienholder information.

Deductible
The amount of the loss which the insured is responsible to pay before benefits from the insurance policy are payable. You may choose a higher deductible to lower your premium.

Depreciation
A decrease in the value of property over a period of time resulting from use, obsolescence or wear and tear.

Dwelling Policy
Though similar in personal property and structural coverage to a homeowners policy, a dwelling policy excludes liability coverage.

Emergency Measures
Those repairs or other actions taken to protect the insured and the insured's property from further loss when damaged or destroyed by a covered peril.

Endorsement
An attachment to an insurance policy that amends and alters the coverage provided in the policy. Also called a Rider.

Exclusion
A contractual provision in an insurance policy that denies coverage for certain perils, persons, property, or locations.

Floater
Property insurance for items that are moved from location to location, covering losses wherever they occur. It is typically bought to cover jewelry, furs, and other items whose full value may not be covered in standard homeowners policies.

Homeowners Insurance
A "package" policy providing coverage against property and liability perils facing homeowner.

Insured
The person(s) entitled to coverage in case of an accident or loss.

Insurer
The insurance company providing the insurance.

Liability
Individual responsibility for causing, through negligence, injury to another person or damage to another person's property. Also called Personal Liability.

Liability Insurance
Insurance that pays and renders services on behalf of a policyholder who is unintentionally, but legally responsible for bodily injury or property damage that is caused to another person and covered in the policy.

Limits
The maximum amount of benefits the insurance company agrees to pay in the event of a loss.

Market Value
The price for which something would sell under current market condition.

Nonrenewal
The termination of an insurance policy at its normal expiration date.

Ordinance or Law Exclusion
Homeowners policies may exclude situations where repair or replacement of damaged property must be done in conformance with building codes requiring upgraded materials. A standard homeowners policy may cover only the cost of replacing or repairing with the original grade of materials. The difference in cost between the old materials and the new materials required by ordinance or law is excluded or limited, unless the homeowner has purchased additional coverage.

Package Policy
A single insurance policy that combines several coverages available separately. For example, homeowners insurance is a package policy, combining property, liability and theft coverages.

Peril
A property insurance term referring to the possible cause of loss such as a fire or a windstorm. Exposure to the risk of death, loss or destruction.

Personal Property
All tangible property not classified as real property.

Premium
The money paid for an insurance policy based upon the coverage provided. Typical homeowners insurance premiums are charged annually.

Premium Finance Company
A lending institution that finances insurance premiums for a fee

Policy
Written contract of insurance.

Producer
A term applied to an agent, solicitor or other person who sells insurance.

Property Coverages
Insurance that covers damage to or loss of the policyholder's property.

Quote
An estimate of the cost of insurance based on information supplied to the insurance company.

Real Property
Land and most things attached to the land such as buildings and vegetation.

Renters Insurance
A form of homeowners insurance offering coverage for personal property and liability, but excluding real property.

Replacement Cost
Replacement cost is the cost of replacing lost or damaged property with new property of like kind and quality, in the local market, without deducting for depreciation.

For more information or to receive a no-cost, no-obligation insurance quote please get an online quote here or call us today: toll free (866) 477-4225 or local (707) 545-2110.