When it comes to insurance, there are so many words and terms that may seem foreign to people who don’t actually work in the industry. We are here to help with that. We’ve compiled a simple glossary of terms that you might see when shopping around for home insurance, to help you better understand exactly what your home insurance policy is talking about.
Actual cash value (ACV): the cost to replace an item at the time of a loss with an item of like kind and quality, less depreciation
Actuary: someone who assesses risks and their likelihood of occurring to determine how much an insurance premium should be
Additional living expenses: coverage for reasonable and necessary purchases if you are unable to live in your home while it is being repaired (including hotels, food, toiletries, etc.)
All risk: insurance policy that covers all accidental causes of loss or damage except for those that are excluded
Appraisal: process of determining how much something is worth
Binder: written confirmation that insurance coverage is in effect until final policy documents are issued
Contents insurance: protects your personal belongings, including furniture, appliances, clothing, jewelry, antiques, etc. You can purchase additional coverage under this section to cover specific items like art or jewelry
Deductible: the amount that you are responsible for if you file a claim. Usually between $500-$2,500. The higher the deductible the lower your premium, and vice versa
Endorsement: an amendment made to your insurance policy that alters the provisions of the contract (typically to add or remove coverage, or to increase the limits of coverage)
Exclusions: perils or hazards that are not included in your insurance policy, like mold damage or wear and tear
Extended water damage: extra insurance coverage that protects you from water damage due to sewer backup or flooding
Extensions of coverage: provide additional coverage to an insurance policy for specific property or circumstances
Floater: provides additional coverage beyond what is provided in a habitational policy for items that are moveable or float from location to location
Guaranteed Replacement Cost (GRC): a claims-settlement option where the insurer will pay the cost of repair or replacement to a dwelling building even if it exceeds the limit of insurance on the policy, subject to stated conditions
Indemnity: the amount the insurer will pay to repair or replace damaged property
Insured peril: risks (perils) that could cause damage or result in losses to your property. Includes events like windstorm, hail, lightening, fire, theft, etc.
Liability: protects you if someone is injured or killed on your property
Loss of use: protects you if you are unable to live in your home while it is being repaired
Mortgagee: entity who lends money to someone (usually a bank)
Mortgagor: a person who takes a loan from a lender (typically a homeowner)
Named Perils: a type of coverage that insures your property against named perils such as fire, wind, lightening, water damage, and theft
Peril: an event that causes a loss
Policy period: period that your policy is in effect, usually one year
Policy: contractual document with details about the terms and conditions of your insurance coverage
Premium: price of insurance for a risk for a specified period of time
Replacement cost: also known as Actual Replacement Value, this is the total cost to repair or replace your home and personal property with similar kind and quality, without any depreciation
Risk: probability of loss, damage, liability, or bodily injury
We hope that this glossary helps you to better understand the terms and conditions of your home insurance policy.
If you have any questions about home insurance, feel free to reach out to one of brokers in Sundre, Sylvan Lake, Lacombe, Stettler, or Lacombe.