With all kinds of different coverages for all kinds of different needs, insurance can sometimes be confusing. And to make it even more challenging, at times it probably seems like insurance websites and policy documents are written in a completely foreign language.
We're always here to help you understand all the confusing terms and documents but we wanted to give you a few terms to stick in your back pocket!
General Insurance Terms
- Actual Cash Value: This type of coverage pays according to what an item was worth the time it was damaged - it takes the depreciation and wear and tear into account. For example, if you could have sold your couch for about $200 just before it was damaged, that's actual cash value, even if a similar new couch would cost $1,000.
- Replacement Cost: This pays the amount it would cost to replace a damaged item with a new one (such as the $1,000 couch above). It does not factor in depreciation or wear and tear.
- Declarations Page: This is usually the first pages of your policy. This breaks down who owns the policy, what property is covered and for how much, etc.
- Endorsement: This is a change to your insurance policy's coverage such as adding a vehicle, a driver or changing your mailing address, etc.
- Med Pay (Medical Payments): This pays for medical expenses for those covered by your policy in the event of an auto accident, regardless of fault. It also covers medical expenses for guests if they are injured on your property, but unless it is a car accident, it usually does not cover injuries someone suffers on their own property.
- Umbrella: A policy that provides additional liability coverage. It kicks in right after your other insurance policies have reached their limits.
- Underwriting: The evaluation process insurance companies use to determine if they will provide coverage to a customer.
Auto Insurance Terms
- Bodily Injury: Covers expenses for physical injuries, such as hospital bills or medical care.
- Collision Coverage: This pays for damage to a vehicle caused by you or someone else covered by your policy.
- Comprehensive Coverage: If your vehicle is damaged by something you could not control, such as a fire or a tree falling, comprehensive coverage applies.
- PIP (Personal Injury Protection): This pays medical expenses for a policyholder or additional insured, and their passengers, if they are hurt in an auto accident, regardless of fault.
- Uninsured/Underinsured Motorist Coverage: Pays for damages and expenses if another driver is at fault in an accident but does not have enough insurance to cover your costs.
Homeowners Insurance Terms
- Additional Living Expenses: Coverage for expenses above your usual living expenses, such as if you have to stay in a hotel because you can't live in your damaged home.
- Flood Insurance: Typically, standard homeowners' policies do not provide coverage for flooding - it must be purchased separately.
- Peril: A specifically defined risk, such as hail, flooding, wind, etc.
- Scheduled Personal Property: Separate coverage for high-value items such as expensive jewelry, that exceeds the limits of your policy or are otherwise excluded.
We hope these terms help you! If something isn't clear when buying insurance, don't be afraid to ask questions. That's what we are here for!
Like we always say around here, the more you know about your coverage, the better off you are!