Property Insurance 101

To the novice, insurance documents may as well be written in Greek. The language and the way in which it is used can be completely bewildering to the insurance newbie even though new laws and regulations require insurance companies to write these documents so that Joe Average can read them, it’s a good idea for you, as an insured, to understand the basic terms used in property insurance.

Dwelling: When you see the word “dwelling” in an insurance policy, it refers to the physical structure and any other structures which may be attached to the house including a garage. This may also refer to your porch or patio.

Other Structures: This term refers to those structures which “live” on your property but are detached from your home. Examples of other structures are detached garage, tool sheds and shops and barns.

Personal Property: This is the “stuff” you would pack and re-locate to your new home if you were moving. It includes your clothing, furniture, books, dishes and appliances.

Loss: The total amount of costs incurred in conjunction with a claim.

Perils: These are the specific events which may cause damage to your property and include things like fire, theft, wind and flood. Your homeowner’s policy will detail which perils are covered by your policy and which are not.

Limit: The most your insurance company will pay as part of a claim – the upper limit of your coverage.

Deductible: As with car insurance, a deductible is the amount of money you must pay before the insurance company kicks in with their share. If you have, for example, a $2,000 loss and a $500.00 deductible, the insurance company would pay $1,500.

Conditions: This section of your insurance policy outlines and defines your contractual duties and responsibilities as well as those of the insurance company.

Exclusions: This is the section of your insurance policy which outlines what is specifically NOT covered by your policy. Naturally, this is something to which you want to pay a good bit of attention. For example, flood insurance is usually not covered by standard policies therefore, you should see it listed in this section of your policy.

Actual Cash Value: This is a very important part of your insurance policy since it tells you how much your insurance company will pay in the event of a loss. If you have an ACV policy, it means that your insurance company will only pay the value of the item lost as it is today. In other words, if you bought a big-screen television for a thousand dollars three months ago, it may be only worth $250.00 today due to depreciation.

Replacement Cost: A policy which pays replacement cost for your belongings, on the other hand, pays you what it will cost to go out today and replace the items you had. This may cost you a bit more, but it is usually a better way to go because of the wear and tear insurance companies will claim if you have an ACV policy.

Liability: As in auto policies, this coverage is meant to protect you from your own negligence. If somebody is visiting your property and trips and falls over a loose brick on the front steps, you could be held liable for that individual’s injuries. This part of the policy also provides you with legal defense if you are sued.

This is by no means a comprehensive list of insurance terms, but it is a beginning. Knowing these few terms will help you to better understand the ins and outs of your property insurance policy and help you to protect yourself and your family from loss.

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