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.