Homeowners Insurance Terms and Definitions

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The homeowners insurance terms and definitions listed below will help you understand what you're buying when you shop for homeowners insurance, condo insurance or renters insurance.

Appraisal
An evaluation of a home insurance property claim by an authorized person to determine property value or damaged property value.
Cancellation
The termination of a home insurance policy during the policy term. An insurance company can only cancel a home insurance policy for reasons stated in the policy and permitted under the law of the state in which the policyholder resides.
Claim
A policyholder's request for reimbursement from an insurance company under a home insurance policy for a loss to property.
Deductible
The amount a home insurance policyholder must pay out of pocket for a covered claim.
Depreciation
The estimated decrease in property value over time due to wear and tear, aging and other related factors.
Endorsement
A provision or document added to a home insurance policy that changes the original coverage offered in the policy.
Exclusion
Certain property, persons or circumstances noted in a policy as not covered by a home insurance policy.
Group Policy
A home insurance policy sold through an employment-based group, association or special group insurance trust in which members are included under one master policy. Individuals receive certificates of coverage from the group policy.
Independent Agent or Producer
An insurance agent or producer who represents more than one insurer.
Individual Policy
A home insurance policy sold directly to an individual, often through direct mail or phone solicitation. Individual policies do not require people to be members of an employment-based group, association or special group insurance trust.
Inflation Protection
Automatically adjusts your home insurance policy limits to account for increases in costs to repair property.
Insurance
A contract in which a policyholder pays a set amount to an insurance company for protection against specified losses or perils.
Lapse
Occurs when a policyholder does not pay or pays less than the agreed amount for a home insurance policy premium. Often, termination of the policy results from a lapse.
Liability Coverage
Covers losses that an insured person is legally liable for due to negligence or other situations outlined in a home insurance policy.
Market Value
The current value of your home, including the price of land.
Nonrenew Insurance
An insurance company's decision not to renew a home insurance policy after the current term ends. Companies must appropriately notify policyholders prior to nonrenewing coverage.
Peril
The exposure to or cause of a possible loss, such as an injury, destroyed or lost property, etc.
Personal Property
All tangible property (other than land) that is either temporary or movable in some way, such as furniture, jewelry, electronics, etc.
Policy
A written contract for insurance between an insurer and a policyholder.
Premium
The price a home insurance company charges for a specified risk over a specified period of time.
Property Coverage Insurance
Protects personal property and land against loss or damage, as outlined in a home insurance policy.
Real or Tangible Property
Land, as well as anything permanently attached to, embedded in or growing on it.
Replacement Cost Coverage (on Dwelling)
Pays for the cost to replace damaged property or structures without factoring in deductions for depreciation, but payment is limited to a maximum dollar amount.
Replacement Cost Coverage (on Contents)
Pays for the cost to replace damaged personal property or items at current costs without factoring in deductions for depreciation.
Sub-limit
A specified amount that is less than the maximum limits on a home insurance policy. Sub-limits are noted for specified coverages or types of property.
Underwriting
The process an insurance company uses to determine if someone is eligible for insurance and, if so, how much that person should pay for insurance.

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