Top Home Insurance Phrases You Should Know
When you’ve bought your first home, you’ll know that you need to purchase home insurance to protect it. While you’ve just navigated the world of real estate, now you have to face the home insurance industry. Like real estate, the insurance world can be full of phrases that you don’t understand. To help you start your home insurance search with confidence, take a look at these top phrases to know as a first-time home insurance buyer.
Actual cash value – Value of property before it was destroyed or damaged, minus depreciation. For example, if a 5-year-old television was destroyed, the insurance would pay an amount equal to the depreciated value of the old television.
Replacement cost coverage – Coverage that pays to replace damaged or destroyed belongings with new items. For the situation above, replacement cost coverage would pay the cost of buying a new TV to replace the old one.
Additional living expenses – An insurance policy provision that pays for extra living expenses a policyholder faces while a home is undergoing reconstruction following a fire, storm or other covered peril. Covered expenses may include costs for moving, rent, hotel accommodations, restaurant meals, and laundry expenses.
Deductible – The deductible is what you pay out-of-pocket when you file a claim. Once you pay the deductible, which is a set amount of money, your insurance will kick in to help. Usually, a higher deductible means the homeowner pays lower monthly premiums but has a higher out-of-pocket responsibility in the event of a claim.
Endorsement – A document added to an insurance policy to add, change or restrict coverage. An endorsement can be added to a home insurance policy to increase coverage for other structures, valuables, personal liability or a variety of other needs.
Liability coverage – Insurance coverage that pays for damage or injuries a policyholder accidentally causes to others.
Home inventory – A record of personal possessions for home, condo or renter’s insurance purposes.