Insurance Glossary
Additional Living Expense:
Fire damage or other covered loss could increase your living costs-you may be paying for a hotel, restaurant meals or Laundromat, for example. In a standard homeowner policy, Loss of Use (Coverage D) will reimburse you for any additional living expenses incurred by you in an attempt to maintain a normal standard of living if your home is made uninhabitable by a covered peril. See Loss of Use.
Appurtenant Structure:
In a property insurance policy, "appurtenant structures" are buildings on the same premises as the main, insured building. Appurtenant structures, like garages or barns on your property, are usually covered by a homeowner's insurance policy.
Arbitration Clause:
In your property insurance contract, the arbitration clause provides a means for settlement when you and your insurer cannot agree on an acceptable claim payment. Appraisers representing each party select a neutral arbitrator; a judgment by any two of these three constitutes a binding settlement.
Bodily Injury (BI):
An important type of liability coverage, Bodily Injury (BI) will pay legal damages awarded for injury or death for which you are held legally responsible.
Broad Theft Coverage:
Broad Theft Coverage is an endorsement to a dwelling policy which provides theft coverage for contents to a named insured, owner occupant.
Business Personal Property:
In a homeowner's policy, "Business Personal Property" refers to items or "contents" owned by your business or company - like the laptop you might bring home over the weekend. Coverage is usually limited to $2,500.
Coverage A:
This is called "Dwelling", this is the part of your home insurance policy that covers the home itself-frame, flooring and fixed objects. The amount of Coverage A is the cost to replace the structure of your home in the event of total loss. Other coverage amounts are usually based on a percentage of Coverage A.
Coverage B:
This part of your policy covers "Other Structures" - e.g., barns, sheds, garages.
Coverage C:
"Personal Property" covers your belongings automatically for 50% of Coverage A.
Coverage D:
"Loss of Use" takes into account expenses you will have if your home is uninhabitable because of a covered loss. It pays for temporary lodging and living expenses.
Coverage E:
"Personal Liability" covers you for your legal responsibility for injury caused to others whether on or away from your own property.
Coverage F:
"Medical Payments" pays medical costs if someone is injured on your property. A homeowner policy automatically covers $1,000. You can increase this coverage in $1,000 increments, up to $5,000. In order to collect more than this, the injured party must file for compensation under Coverage E.
Debris Removal Clause:
While most property policies cover only direct damages caused by an insured peril, the "debris removal clause" covers the cost of removing debris produced by the peril's occurrence. For example, if a hurricane sweeps through the state, a fallen tree will be removed only if it lands on your house. Debris Removal reimburses you for the cost of cleaning all the broken limbs and rubble.
Direct Loss:
This is a damage or loss resulting as a direct consequence of an insured peril. For example, a computer lost in a fire is a direct loss; the data destroyed inside the computer is considered an indirect loss.
Dwelling Forms:
These are polices which cover a residence dwelling or building and the personal property inside. You can buy dwelling forms which vary by the degree of coverage they offer.
Earthquake Endorsement:
Most homeowner policies exclude coverage for earthquake damage. People who are concerned about the risk of earthquakes may add an Earthquake Endorsement to cover damages.
Easement:
An "easement" entitles its holder to specific interests, such as a right of way, in land owned by someone else.
FAIR:
An acronym for "Fair Access to Insurance Requirements," FAIR offers insurance to people in high-risk areas who might otherwise be denied coverage. Reinsured by the United States government, FAIR is a pooling plan with policies for fire and allied perils.
Fire:
In property insurance, "fire" refers to the unintentional or "hostile" occurrences of flame and combustion. Damage caused by fire in your fireplace, for instance, is not covered under your homeowner policy. However, if your rug was ignited by a spark from that same fireplace, you would be covered.
Fire Resistive Construction:
This is building construction using fire-resistive materials in the roof, floors and exterior walls. Also, see Modified Fire-Resistive Construction.
Fire Wall:
A Fire Wall is designed to contain or seal off fires in a building.
Fireproof:
Unfortunately, no one can make a building completely undamageable by fire. Today, insurers use the term "fire-resistive" to describe buildings which are practically resistant to most fire damage.
Flood:
A flood is a temporary submersion, partial or complete, of ordinarily dry land by water or mud. Floods are typically caused by an overflow of waters, whether inland, tidal or from any accumulated runoff from any source. Flood is excluded under a typical homeowner insurance policy.
Flood Insurance:
A Flood Insurance Policy covers property owners from losses caused by floods or flooding and is usually offered in conjunction with a Government Flood Insurance Plan.
Frame Construction:
This is the most common form of housing construction. Frame buildings are made primarily of wood frames and joists.
Guaranteed Replacement Cost:
Guaranteed Replacement Cost coverage on homeowner's insurance means that your home will be repaired to its value at the time of loss, regardless of the amount of coverage carried. For example, you estimate your home to have a full replacement value of $162,000. On your homeowner policy, you carry $162,000 coverage for the structure. If you have guaranteed replacement cost endorsement on your policy and the home is lost in a fire and the house costs $168,000 to rebuild, the policy will pay $168,000.
Homeowners Policy:
A Homeowners Policy is combined property and liability insurance that covers homeowners and renters for damage to or theft of their property as well as liability, in case they are responsible for injury to another person.
Increased Cost of Construction Insurance:
This is commonly added as an endorsement to homeowner's policies. "Increased Cost of Construction Insurance" covers the additional costs of building repair or reconstruction when you rebuild with more expensive services, materials and techniques required by local ordinances.
Increased Hazard:
Property insurance terms are tailored to the nature and use of the property as it exists when the policy is written. Should you introduce dangerous materials or activities into the property, such as making fireworks, you will have added an increased hazard whose liabilities would not be covered by your policy.
Indirect Loss:
This is also known as consequential loss or damage. Indirect Loss results from, but is not caused directly by, a peril. If your business property burned down, for instance, the property itself is a direct loss, while the lost business revenues would be considered an indirect loss.
Inflation Guard Coverage:
Inflation Guard Coverage provides automatic periodic increases on the building's property insurance to reflect the effects of inflation on building replacement expenses.
Inherent Vice:
Inherent Vice is a property flaw or fault which causes its own destruction. Damages from inherent vices are usually not covered through insurance.
Insurance:
Insurance is the act, system, or business of insuring property, life, one's person, etc. against loss or harm arising in specified contingencies such as fire, accident, death, or disablement, in consideration of a payment proportionate to the risk involved.
Liberalization Clause:
If policies or endorsement forms are broadened through legislation or rating authority rulings-and do not require premium increases-the "liberalization clause" automatically includes the broadened coverage in similar, existing policies.
Loss of Use Coverage:
If your home becomes uninhabitable because of an insured peril, Loss of Use (Coverage D) provides compensation for additional living expenses incurred in an attempt to maintain a normal standard of living. Loss of Use is automatically included as 20% of the Replacement Cost amount you carry in Coverage A. If your home were covered for $200,000, for example, Loss of Use coverage would provide up to $40,000 for additional living expenses. See Additional Living Expenses.
Loss Payable Clause:
To protect lenders or lien holders, this clause extends coverage to parties with an insurable interest in your property, most often the institution holding your mortgage.
Masonry Noncombustible Construction:
Masonry Noncombustible Construction refers to buildings constructed from noncombustible materials such as masonry walls of brick, cinder block, stone, tile, or other similar materials, and floors and roofs made of metal or other noncombustible materials.
Mobile Home Policy:
A homeowner policy for a permanently situated mobile home.
Modified Fire-Resistive Construction:
This means building construction featuring exterior walls, floors and roofs made of fire-resistive materials such as masonry or metal.
Mortgage Clause:
In policies covering mortgaged property, the "mortgage clause" protects the interests of the mortgagee for loss reimbursement and other rights of recovery, regardless of any acts or neglect by the insured.
Mortgagee:
A mortgagee is a lender or creditor, typically a bank, who holds the mortgage and lends money secured by the value of the mortgaged property.
Mortgagor:
The mortgagor is usually the homeowner who, as debtor, receives money in return for a property mortgage granted as a security for the loan.
Named Perils:
Named Perils Insurance covers specific perils listed in a policy, as opposed to an "all-risk insurance" covering all losses except the ones excluded by name in the policy.
National Flood Insurance Program:
(NFIP) NFIP is a program backed by the United States government to provide flood insurance for fixed property. The NFIP writes policies directly and offers reimbursement to private carriers offering flood insurance.
Occupancy:
Occupancy refers to the use or intended use of a building or part thereof for the shelter or support of persons, animals or property. A closely-related meaning is the number of units in a building that are rented or leased, or otherwise in-use. Property insurance rates reflect the way the property is used. In general, "owner occupied" homeowner policies are less expensive than "non-owner occupied" policies.
Off Premises:
This is coverage you may obtain for personal property or "contents" which are away from the principle, insured property. In most cases, the amount of this coverage is limited to a percentage of the property's total coverage.
Other Structures:
Generally other structures are detached structures, such as a garage or tool shed, sharing property with the insured dwelling. Under a homeowner policy, "other structures" are automatically covered for 10% of the limit chosen for Coverage A.
Personal Property:
Personal Property is any of your property, such as furniture, clothing and consumer electronics, other than real estate property. Your homeowner policy covers the personal property of you and your family members.
Physical Damage:
Physical Damage is the actual damage to your property.
Red-Lining:
The unfair discrimination against a risk based solely on its location is referred to as "Red-Lining." For example, the denial of property insurance to the owner of a building located in a depressed area.
Rental Value:
Rental value is the insurance protection against loss of rental value or actual rent should the owner's insured property suffer damages prohibiting property use or tenant occupation.
Replacement Cost:
Replacement Cost is coverage for the cost of replacing damaged property at the time of loss with that of similar kind and quality. If you carry replacement cost coverage and have a loss, the insurer pays for the cost of a new replacement, minus any policy deductible.
Residence Premises:
Where you, the insured, live. In homeowner insurance, this includes the dwelling, grounds and other structures, or that part of any other building in which you live.
Riot:
A riot is the violent activity by more than one person. The number of persons it takes to constitute a riot varies by state. Your policy may cover riots through extended coverage or direct reference.
Scheduled Personal Property:
Personal belongings that are worth more than the limits of liability set in your policy can be insured by adding this endorsement.
Sinkhole Collapse:
A special form of earth movement, covered by some homeowner insurance, referring to the sudden collapse or sinking of land into empty, underground spaces eroded by water. Most other forms of earth movement remain excluded from ordinary policies.
Smoke Damage:
As opposed to fire damage caused by combustion, heat or burning, this is damage attributable to the smoke itself.
Stated Amount:
In your policy, you may choose to cover certain items for a specific amount. In the event of loss, the insurer pays the stated amount regardless of the property's actual value. If, for example, you insured a painting for a stated amount of $15,000, in the event of theft, you would recover the $15,000 (minus your deductible), even if the painting had accrued value after the policy had been signed.
Unoccupied:
Unoccupied is property without people occupying or living within it. As opposed to vacant property, unoccupied property may hold furnishings. Unoccupancy beyond a specified period of time is prohibited by the standard homeowner policy. See Vacant.
Vacant:
The tern "vacant" means a building with nothing in it. While an "unoccupied" building is defined by not having people in it, a "vacant" building is also devoid of furnishings and other items. Vacancy beyond a specified period of time is prohibited by the standard homeowner policy. See Unoccupied.
Vandalism and Malicious Mischief (V&MM or VMM):
Your homeowner policy should automatically cover you for willful destruction or damage performed by others to your property.
