June, 2021 | Boizelle Insurance Partnership

Insurance Terms Everyone Should Know

We’ve all come across something we don’t fully understand while reading. This may be especially true when it comes to the subject of insurance. Although insurance may seem like a painfully dry, uninteresting topic, understanding - it and how it works - is essential and extremely helpful in leading a stress-free life. The following are essential terms with which you should become familiar.

Actual Cash Value (ACV) – As soon as you drive your brand new car off the lot, its value decreases quite significantly. This is called depreciation.

Replacement Cost – Depreciation = Actual Cash Value (ACV)

Adjuster – If you ever have to file a claim with your insurance company, that company will obtain an adjuster: a person tasked with the responsibility of determining if a loss is covered by an insurance policy, and, oftentimes, write a check to the insured party.

Agent – an individual who sells insurance policies on behalf of a particular insurance carrier. One individual may work for a privately owned insurance business that works with one or multiple insurance carriers.

Assured – another term for the person being insured on the policy.

At-fault – the party who is liable for damages sustained by another party. In the case of an auto accident, “at-fault” would mean the person responsible for the auto collision.

Bodily Injury – this refers to an injury a person sustains. In terms of auto insurance, bodily injury liability coverage is specifically designed to cover the costs resulting from such an injury.

Carrier – another way of referring to your insurance company. Ex: Erie Insurance, Travelers Insurance, Progressive Insurance

Claim – a claim is a formal request made by the insured to restore themselves to their previous state before the time of the loss.

Claimant – any individual or entity that is requesting payment from an insurance company.

Coverage – specific protections or benefits that are usually outlined in your insurance policy. Coverages can be found on the Declarations Page.

Damage – Monies the at-fault party is required by law the pay to the injured party.

Declarations Page – the page in your insurance policy that lists all of the important, essential information i.e. name, address, policy number, coverages, limits, premiums, deductibles, and dates of coverage.

Deductible – in the event that you file a claim with your insurance company, your deductible is the pre-set, agreed upon amount of money you pay out of pocket before your insurance company covers your claim up to your policy’s limit. In case you suffer damages totaling $6,000 and you have a $500 deductible, you would first pay the $500 and your insurance company would cover the remainder, up to your policy’s limit.

Estimate – the amount of money predicted, usually by an adjuster, to be made in order to repair or replace the covered property that is damaged.

Insured – the person or organization for which the insurance company is providing coverage. The insured’s name is typically listed on the declarations page.

Insurer – the company or organization tasked with providing insurance policies to the insured.

Liability – the legal obligation an at-fault party has to pay for damages sustained by the affected party. For example, if you are hit by a driver of another vehicle, the driver of the other car is liable for damages to your car and, possibly, your person.

Limits – an agreed upon dollar amount that the insurance company pays for a specific coverage for a particular claim. If the limits on the policy are exhausted, the insured party would be responsible to pay for any outstanding balances.

Loss – damage caused an insured piece of property. A “covered loss” refers to any damage or injury an insurance policy provides protection for. For instance, damage caused by a wind storm is covered. Damage caused by flood is not covered under a typical home insurance policy. Rather, the insured would need to obtain flood insurance separately through FEMA.

Named Insured – the person or entity for which the insurance coverage is being provided. This person or entity is typically listed on the declarations page of the insurance policy. In terms of business insurance, the named insured is the business, while its employees are insured only while performing their specific duties for the company.

Policyholder – Similar to “insured”, this term refers to the person or entity being covered by the insurance policy. Again, this name would appear on the declarations page.

Premium – An agreed upon amount that the insured pays the insurance company in order to be provided coverage.

Replacement Cost Coverage – Unlike with Actual Cash Value, this type of coverage refers to the cost of replacing property while not factoring in depreciation due to normal use or wear and tear over time.

Insurance Myths

Believe it or not, there are many common misconceptions about insurance. A popular one is the idea that, if you drive a red car, you pay more for your auto insurance than someone who drives a car of a different color. The truth is, the color of your car has absolutely no affect on the cost of your auto insurance. What does determine how insurance premium (what you pay) is the age of the vehicle, the make, and the model. Additional factors may be your credit history and where you live.

If your car suffers damage in an auto accident, your insurance will automatically provide you with a rental car.

Rental Reimbursement is an optional coverage apart from your standard auto policy. It must be purchased separately and added as an endorsement to your auto policy.

If your car is deemed a total loss in an accident (when it costs more to restore your vehicle to its pre-accident state than the actual value of the vehicle), you are no longer required to make your car payments.

We have both good news and bad news in a situation like this. The bad news is that your car’s value depreciates as soon as your drive it off the lot. As a result, if you are involved in an accident, it’s possible that the value of the car is less than the cost to restore it to its original state. Ask one of our insurance agents about how gap coverage can help you in paying off a balance you may still owe on your car.

Your landlord’s insurance policy covers your personal belongings.

Typically speaking, your landlord’s insurance policy will only cover the structure in which you live. Your personal belongings must be protected by your own renters insurance policy. To ensure that you get as much money as possible to recover your lost or damaged items, seriously consider doing an inventory that states, in detail, what each item is worth. In order for your insurance company to reimburse you properly, it’s best to have this inventory completed before the time of the loss.

Homeowner’s insurance only needs to cover the market value of your home.

The easiest way to avoid having to think about construction and labor costs in case your home is destroyed, talk to one of our agents about Guaranteed Replacement Cost. It’s the best kind of coverage when it comes to rebuilding your home back to its original state.

Floods are covered under a homeowner’s insurance policy.

False. Flood Insurance is handled by FEMA. If you either live in a flood zone or have a mortgage on your home, you are required to have flood insurance.

If your belongings are destroyed, your insurance will buy you all new stuff.

If your personal belongings are destroyed in a disaster such as a fire, you are going to need new stuff. When it comes to replacing your lost items from a covered claim, make sure that you have Replacement Cost Value Coverage on your policy because it’s the only way you’ll be able to have your insurance cover the cost of a new television. If you have Actual Cash Value instead, it means that your insurance will give you the value of what it deems to be the cash value of your television at the time of the loss. For instance, if you have a television that is ten years old, obviously, that television’s value is going to be less now than it was when you first bought it ten years ago. Don’t put yourself in a position where you’ll get Actual Cash Value for your loss.

You will always be paid the stated value for your “scheduled” items.

If you have items “scheduled” on your insurance policy, there’s a chance they may only be covered by the current Replacement Cost Value up to your stated limit on your policy. Ask one of our agents about your options when it comes to coverage limits.

You don’t need an insurance agent.

When it comes to covering your most valuable possessions like your home, your cars, your business, and even your life, it’s probably a better idea to let an experienced insurance agent give you the guidance you respectfully deserve rather than relying solely on yourself. Call us today! 301-948-2010 We’re here for you!