Glossary of Homeowner Insurance Terms

Actual Cash Value (ACV): Replacement cost less depreciation, considering the age and condition of your property.

Additional Living Expenses: Pays expenses over and above your normal living costs (motel rooms, restaurant meals, and laundry service) while your home is being repaired or rebuilt after damage from an insured loss.

Agent: A representative who sells insurance for one or more companies.

Application: A signed request for insurance, giving information about the individual requesting insurance.

Appraisal: A survey of property made to determine its insurable value.

Arbitration: Referral to impartial but knowledgeable parties when the company and the claimant cannot agree on the value of a claim. The arbitrator's decision is binding on both parties.

Binder: A temporary or preliminary agreement, which provides coverage until a policy can be written or delivered.

Broker: A licensed person or organization you can pay to shop for insurance on your behalf.

Builders Risk: Coverage for a home under construction. Claim payments are based on the percentage completed at time of loss. This coverage must be changed to a homeowner's policy upon completion of the building.

Cancellation: Termination of a policy before its normal expiration date.

Claim: Your request for the insurance company to pay you an amount under the terms of your policy.

Claims Adjuster: A person an insurance company hires to settle claims. The adjuster could either be a company employee or under contract with the company.

Coinsurance Clause: An agreement with the insurance company in which you agree to carry insurance on your property in an amount equal to a certain percentage of its actual cash value.

Covered Expenses: The losses or conditions the policy will pay for.

Debris removal: Coverage for the cost of removing debris resulting from damage caused by an insured peril.

Deductible: The dollar amount you must pay out-of-pocket for each claim before the insurance company begins paying.

Depreciation: Decrease in home or property value due to age or wear and tear.

Dwelling: An insured's home.

Earthquake Insurance: A type of catastrophic coverage available for an additional premium to repair or replace your property/personal belongings when damaged by an earthquake. Standard home insurance policies do not cover earthquake insurance.

Endorsement: Amendment to the policy used to add, change, or delete coverage. Also referred to as a "rider."

Exclusions: Specific situations or circumstances listed in your policy describing when benefits will not be paid. Typical homeowners insurance exclusions are earthquake, sewer backup/sump pump failure, ordinance or law, and intentional loss.

Floater: Additional coverage for personal property such as jewelry, artwork, or antiques not otherwise included in the homeowners policy, or included for a nominal coverage amount. The coverage "floats" or moves with the property. Also called "Scheduled Personal Property Endorsement."

Flood Insurance: A type of catastrophic coverage available for an additional premium to repair or replace your property/personal belongings when damaged by rising water. Standard home insurance policies do not cover flood insurance. If your property is located on a flood plain, your lender may require you to purchase flood insurance.

Full Replacement Policy: A homeowner's policy that pays the full replacement cost, up to the policy maximum, to repair or restore damaged property.

Guaranteed Replacement Cost Coverage: Endorsement that lets you replace your home without subtracting for depreciation, even if it costs more than the policy limit. Most companies limit the guaranteed replacement cost to 125%.

HO Forms: Homeowners insurance polices are sometimes referred to by the kind of form used and the specific perils they cover. Examples are HO2, HO3, HO4, HO5, HO6, and HO8.

Home Inventory: A detailed list of personal possessions and any information, including pictures or videos, that could help identify lost or destroyed items.

Inflation guard endorsement: An endorsement to a homeowner policy that automatically increases the amount of insurance every three months.

Inspection Report: A report filed by an individual employed by the insurance company or credit agency, giving general information on the physical condition of the property.

Insurance to value: An amount of insurance at, or close to, the value of the property insured.

Insured: The policyholder or person(s) protected in case of a loss/claim.

Insurer: The insurance company.

Lapse: When premium payments are in default, an insurance contract is cancelled and is said to have "lapsed."

Liability coverage: This coverage pays for damages you cause to other people and their property.

Named perils: Specific events covered by a policy, such as fire, windstorm, and theft.

Market Value: A real estate term for the current value of your home if you were to sell it. Market value includes the price of land, and is not generally used when settling insurance claims.

Non-Bound Application: There is no coverage involved and you pay no money. The insurance agent submits the application to the company to find out whether or not you will be accepted.

Non-renewal: A notice of the insurance company's refusal to renew your policy prior to the end of the policy term.

Peril: An event causing damage to your property, for example: fire, windstorm, theft, or vandalism.

Personal property: An insured's personal belongings, such as clothing, jewelry, appliances and furniture.

Premium: The price charged for insurance.

Private Mortgage Insurance (PMI): Insurance that provides financial protection to your lender if you default on your mortgage payment. By purchasing PMI, a homebuyer may be able to obtain a mortgage with little or no down payment.

Policy: The contract form issued by the company to explain the coverage provided. It is a legal document.

Proof of loss: A formal statement made by a homeowner that identifies specific damages.

Public Adjuster: A person you can hire to help settle a claim with an insurance company. A public adjuster may be hired to handle a complex or difficult loss negotiation. Generally, the public adjuster receives a percentage of the settlement reached. In Utah, a public adjuster must be licensed with the Utah Insurance Department.

Real property: A dwelling or home is often referred to as real property.

Replacement Cost: A determination of the cost to replace contents, rebuild your home, or repair damages with materials of like kind and quality, without subtracting for depreciation.

Scheduled items: Articles such as jewelry, furs, stamps, coins, guns, computers, antiques, and other items that may exceed normal policy limits in your regular homeowner policy.

Settlement: After negotiating, the amount you accept from the insurance company as full payment for your loss.

Sewer Back-up and Sump Pump Overflow Coverage: Coverage available for an additional premium to your homeowners insurance policy that pays for damage caused by sump pump failure or sewer back-up. Water seepage is not covered.

Umbrella Liability Insurance: A policy that "floats" above your other coverage. You must carry a certain amount of underlying liability coverage before you may buy an umbrella policy. This coverage kicks in if you are sued for an amount greater than the limits of your homeowner's policy.

Watercraft Endorsement: Applies to small motorboats and sailboats and broadens your personal liability and medical payments coverage on them. If your watercraft exceeds a specified length, you will need a separate boat owners or yacht policy.