There is no denying the fact that buying a house is the biggest personal investment you can make. To make sure you do not face any monetary losses due to different natural or man-made calamities, it is important to have a home insurance policy. While selecting the right policy, you will come across a lot of terms that may confuse you. This guide will provide an overview of the most common terms used in home insurance policies that will make it easier for you to understand the concept, terms and benefits.
- Home Insurance Policy: A formal contract that is signed between the insurer and buyer to provide financial support if any loss happens to the property, personal belongings or to a third party at or because of the insured property.
- Actual Cash Value: The cost associated with the repairing or replacing the damaged property with a property of similar kind and quality is known as Actual Cash Value. The price of the previously owned, the damaged property will depend on the physical condition of the property prior to the damage.
- Additional Coverage: It is a kind of rider to the original policy in which a higher amount of coverage is bought against the damage to the personal belongings such as jewelry. It provides additional protection above and beyond the sum assured in the home insurance policy.
- Additional Living Expense: If you have to shift to a temporary residence because of the damage caused to your home because of natural or man-made calamity, the insurance policy will cover the cost of stay, meals and other expenses.
- Adjuster: The representative of the insurance company who determines the extent of the liability of the company for the loss when you file a claim.
- Agency: The insurance company that provides your home insurance plan.
- Agent: The representative of the insurance company who has a license provided by the insurance regulator to provide you with information about the insurance plan you can opt from.
- Catastrophe: A single or a series of related incidents that cause damage to the property.
- Claim: A demand made by the insured party for the payment of benefits provided under the insurance policy.
- Coverage: The scope of protection that can be provided under a home insurance policy.
- Depreciation: The decreased value of any property or personal belongings over the period considering wear and tear.
- Emergency cover: Those repairs that are done to protect the insured property from any further loss.
- Exclusion: Specific items, conditions and circumstances that are not covered under the Home Insurance Plan. Some of these exclusions can be brought under the policy coverage with the help of riders.
- Independent Agent or aggregator: An agent or a company that represent several insurance companies at the same time.
- Insurance Fraud: Intentional lying by the policyholders to obtain payment from an insurance company against the home insurance policy.
- Insured: The party that is covered by the agreement or contract signed between the insurer and the policyholder.
- Third-party liability: The responsibility of the individual for causing any loss, damage or injury to another person or property belonging to another person.
- Market Value: Price of the property or personal belongings at which they will sell in the market in the present time.
- Package Policy: A single insurance policy that provides features of multiple policies that the policyholder may have to buy separately. It saves money and processing time.
- Policy: A written contract between the insurance company and the policyholder that defines the details of the cover that the insurance company will provide in case of any natural or man-made calamity to the insured property.
- Premium: The amount of money that the policyholder pays to the insurance company on a yearly basis.
- Regulations: Terms and conditions specified by the state or federal government in connection to the insurance policies.
- Renters Insurance: It is a form of home insurance policy that provides cover for personal property and liability, but it does not cover any damage to the real property.
- Rider: Also known as add-ons, these are additional benefits that you can buy to include those properties or conditions that are generally excluded under the policy contract.
Always stay updated with the terms
Countless possibilities may cause damage to your home or personal belongings. Varying from earthquake, fire, and tornado to burglary, riots and arsenal, there are so many possibilities that can result in financial loss. Also, even if you are extra careful, there is no way to control what can happen to a third party at your premises. For example, your friend can fall from stairs and break his leg or a tree on your premises can fall on the neighbor car and damage. Keeping all these aspects in mind, you should get a home insurance policy. While buying a policy, the terms mentioned above will help you in understanding the documentation.