We know it can be difficult to understand insurance lingo. That is why we hope you find the following terms and definitions simple and easy to understand. Read the entire page or skip to a specific area you would like to learn a little more about.
HomeIn general, homeowner’s policies cover contents in your home for their actual cash value (ACV) less depreciation, generally limited to a certain percentage of coverage on your home. Replacement cost coverage provides for the cost of replacing an item without subtracting depreciation. Documenting your personal property with photos, receipts, and video footage can help ensure you have an accurate inventory of your personal property should you need to file a claim. Be aware that the contents portion of all homeowner’s policies generally has specific limitations on items such as money, computers, jewelry, furs, silverware, artwork, and securities.
DWELLING POLICY: Protects your house and any structures attached to your home, like the garage and screened porch. If you have materials on your property that are being used to expand or repair the house - the lumber being used to add another wing, for example - the building materials would also be covered.
BASIC FORM (HO-1): Covers the house, its contents, shrubs, trees, and other outside structures such as a tool shed or garage, and insures the same against ten major hazards such as fire and theft. It has been withdrawn from use in some states because it offers such limited coverage.
BROAD FORM (HO-2): Adds seven more hazards common enough to consider: hot water system leaks; plumbing; heating; air conditioning; freezing pipes; faulty electric wiring; falling objects; weight of ice, snow, or sleet; or collapse of the building.
SPECIAL FORM (HO-3): The most common type of coverage and it provides extensive protection to the house, excluding only specific disasters such as floods.
Auto
COLLISION COVERAGE: provides protection against loss or damage to a covered auto resulting from the impact with another vehicle or object. Collision losses are paid regardless of fault.
COMPREHENSIVE COVERAGE: provides protection against loss or damage to a covered auto resulting from loss other than a collision or upset. This coverage also provides for supplemental payments for transportation expenses in the event of total theft of a covered auto. Coverage begins forty-eight hours after the theft.
LIABILITY COVERAGE: provides protection against legal liability arising out of the ownership, maintenance, or use of any insured automobile. The insurer agrees to pay damages for bodily injury or property damage for which the insured is legally responsible because of an automobile accident with a covered auto of the insured. The insuring agreement also states that in addition to the payment of damages for which the insured is legally liable, the insurer also agrees to defend the insured for all legal defense costs. The defense costs are in addition to the policy limits.
MEDICAL PAYMENTS COVERAGE: the insuring agreement states that the insurer will pay all reasonable and necessary medical and funeral expenses incurred by the insured because of bodily injury caused by an accident. The insured is the named insured or the named insured's employees or guests or any other person occupying a covered auto. These payments are made without regard to fault.
RENTAL REIMBURSEMENT: Rental reimbursement pays the cost of renting a substitute auto for replacement of any covered auto that has suffered a covered loss. The daily and maximum limit for this coverage varies amoung insurers.
SPECIFIED CAUSE OF LOSS: provides coverage against loss from fire, lightning, explosion, theft, windstorm, hail, earthquake, flood, mischief, or vandalism, and from the sinking, burning, collision or derailment of a conveyance transporting the covered auto.
TOWING AND LABOR: when this coverage is added, the insurer pays up to a stated amount for towing and labor costs each time a covered auto or non-owned auto is disabled.
UNINSURED MOTORIST: pays for bodily injury to an insured injured by an uninsured motorist, a hit-and-run driver, or a driver whose insurer becomes insolvent. These benefits are paid under the named insured's policy.
UNDERINSURED MOTORIST: this coverage is added to supplement the Uninsured Motorist Coverage. The coverage applies only when the other driver has liability limits at the time of an accident which may be insufficient to pay for damages for which that other driver is responsible. This is when the insured's underinsured motorist coverage would apply and payment for the difference could be made. The two coverages are mutually exclusive and do not overlap or duplicate each other.
PERSONAL INJURY PROTECTION (PIP): adds no-fault benefits. In applicable states, n the event of an automobile accident, each party collects from his or her own insurer regardless of fault. The PIP endorsement is only available in certain states with No-Fault Laws.
UmbrellaUMBRELLA LIABILITY: provides excess liability coverage over several of the insured's primary liability policies. Most umbrella liability policies provide coverage that is broader than the insured's primary policies. An excess liability policy may be what is called a following form policy, which means it is subject to the same terms as the underlying policies; it may be a self-contained policy, which means it is subject to its own terms only; or it may be a combination of these two types of excess policies. Umbrella policies have three functions: (1) To provide additional limits above the each occurrence limit of the insured's primary policies; (2) To take the place of primary insurance when primary aggregate limits are reduced or exhausted; and (3) To provide broader coverage for some claims that would not be covered by the insured's primary insurance policies, which would be subject to the policy retention. Most umbrella liability policies contain one comprehensive insuring agreement. The agreement usually states it will pay the ultimate net loss, which is the total amount in excess of the primary limit for which the insured becomes legally obligated to pay for damages of bodily injury, property damage, personal injury, and advertising injury.
LIMITS OF INSURANCE: all umbrella liability policies contain an each occurrence limit of insurance. Some umbrella liability policies may have a separate limit that applies to all personal and advertising injury for one person or for the organization. Also, some policies are written with aggregate limits for only one type of loss. Other policies may have one or more aggregates for all losses. Umbrella policies can be written with several different variations of the aggregate limits. There are no standard umbrella policies.
PAY ON BEHALF: promises to make direct payment on behalf of the insured for those sums of money the insured becomes legally obligated to pay because of liability imposed upon the insured by law, or assumed under contract.
INDEMNITY: the insurer will indemnify or reimburse the insured for those sums of money the insured becomes obligated to pay by reason of liability imposed upon the insured by law, or assumed under contract.
SELF INSURED RETENTION: the amount of the loss an insured must pay before the umbrella policy would be required to respond. The self insured retention would only apply when a loss is excluded from coverage under the primary policy, but not excluded under the umbrella policy.
REQUIRED UNDERLYING LIMITS: requires the insured to have certain types and amounts of primary insurance before the umbrella policy can be written.
Scheduled ItemsThe contents portion of all homeowner’s policies generally has specific limitations on items such as money, computers, jewelry, furs, silverware, artwork, and securities. Jewelry, silverware, furs, fine arts, cameras, coin collections and some other items may be specifically insured to provide the coverage needed due to limitations on the homeowner policy or the higher value of such items.
