Personal Insurance Terms Glossary
A
ACTUAL CASH VALUE
A form of insurance that pays damages equal to the replacement value of damaged property minus depreciation. (See Replacement cost )
ADDITIONAL LIVING EXPENSES
Extra charges covered by homeowners policies over and above the policyholder's customary living expenses. They kick in when the insured requires temporary shelter due to damage by a covered peril that makes the home temporarily uninhabitable.
APPRAISAL
A survey to determine a property's insurable value, or the amount of a loss.
ASSETS
Property owned, in this case by an insurance company, including stocks, bonds and real estate. Insurance accounting is concerned with solvency and the ability to pay claims. State insurance laws therefore require a conservative valuation of assets, prohibiting insurance companies from listing assets on their balance sheets whose values are uncertain, such as furniture, fixtures, debit balances and accounts receivable that are more than 90 days past due. (See Admitted assets )
AUTO INSURANCE POLICY
There are basically six different types of coverages. Some may be required by law. Others are optional. They are: 1.Bodily injury liability, for injuries the policyholder causes to someone else. 2.Medical payments or Personal Injury Protection (PIP) for treatment of injuries to the driver and passengers of the policyholder's car. 3.Property damage liability, for damage the policyholder causes to someone else's property. 4.Collision, for damage to the policyholder's car from a collision. 5.Comprehensive, for damage to the policyholder's car not involving a collision with another car (including damage from fire, explosions, earthquakes, floods, and riots), and theft. 6.Uninsured motorists coverage, for costs resulting from an accident involving a hit-and-run driver or a driver who does not have insurance.
AUTO INSURANCE PREMIUM
The price an insurance company charges for coverage, based on the frequency and cost of potential accidents, theft and other losses. Prices vary from company to company, as with any product or service.<br /><br />Premiums also vary depending on the amount and type of coverage purchased; the make and model of the car; and the insured's driving record, years of driving and the number of miles the car is driven per year. Other factors taken into account include the driver's age and gender, where the car is most likely to be driven and the times of day—rush hour in an urban neighborhood or leisure time driving in rural areas, for example. Some insurance companies may also use credit history related information. (See Insurance score )
B
BODILY INJURY LIABILITY COVERAGE
Portion of an auto insurance policy that covers injuries the policyholder causes to someone else.
BURGLARY AND THEFT INSURANCE
Insurance for the loss of property due to burglary, robbery or larceny. It is provided in a standard homeowners policy and in a business multiple peril policy.
C
COINSURANCE
In property insurance, requires the policyholder to carry insurance equal to a specified percentage of the value of property to receive full payment on a loss. For health insurance, it is a percentage of each claim above the deductible paid by the policyholder. For a 20 percent health insurance coinsurance clause, the policyholder pays for the deductible plus 20 percent of his covered losses. After paying 80 percent of losses up to a specified ceiling, the insurer starts paying 100 percent of losses
COLLISION COVERAGE
Portion of an auto insurance policy that covers the damage to the policyholder's car from a collision.
COMPREHENSIVE COVERAGE
Portion of an auto insurance policy that covers damage to the policyholder's car not involving a collision with another car (including damage from fire, explosions, earthquakes, floods and riots), and theft.
D
DECLARATION
Part of a property or liability insurance policy that states the name and address of policyholder, property insured, its location and description, the policy period, premiums and supplemental information. Referred to as the “dec page.”
DEDUCTIBLE
The amount of loss paid by the policyholder. Either a specified dollar amount, a percentage of the claim amount, or a specified amount of time that must elapse before benefits are paid. The bigger the deductible, the lower the premium charged for the same coverage.
E
EARNED PREMIUM
The portion of premium that applies to the expired part of the policy period. Insurance premiums are payable in advance but the insurance company does not fully earn them until the policy period expires.
EARTHQUAKE INSURANCE
Covers a building and its contents, but includes a large percentage deductible on each. A special policy or endorsement exists because earthquakes are not covered by standard homeowners or most business policies.
