7 Terms To Know When Purchasing Home Insurance
Need to purchase home insurance, but feeling confused about all the terms being thrown at you? Continue reading to learn what some of these commonly used terms mean.
Premium
A premium is what you pay to have a home insurance policy. It's nothing more than a fancy way of telling you what you owe for the coverage period.
Deductible
The deductible is what you pay prior to insurance covering the rest of the repair bill. Your home insurance deductible may be a flat dollar amount, such as $1,000, or based on a percentage of your home's value. You must have the cash on hand to pay that deductible before you can use your insurance.
Perils
There are various situations where you can experience a loss related to your home such as fires, tornadoes, or some other natural disaster. Approved perils are those situations where you will have coverage and can use your home insurance.
Exclusions
Situations that are not covered under your insurance policy will be listed as exclusions. A common exclusion includes flood insurance or sewage backup insurance, which are not covered by a typical insurance policy.
Umbrella Policy
An umbrella policy has nothing to do with water, as the name may imply. An umbrella policy is designed to give you additional coverage that is not provided under your standard home insurance limitations. Many people get an umbrella policy to purchase additional liability coverage to protect themselves from a lawsuit.
ACV
ACV stands for actual cash value, and it is the term used to describe your home's value and your personal property prior to your loss. Your home's actual cash value is what insurance is designed to replace, with depreciation not being factored into the value. For example, if you had a refrigerator that was damaged in a house fire, insurance would pay to replace the refrigerator with a similar one that you would buy new today. You wouldn't get the reduced value of the refrigerator based on its worth after depreciation.
Scheduled Property
Your personal property limits will cover the vast majority of items that are found in your home. However, you may have certain items that qualify as scheduled property. These are high-value items that typically require additional coverage, such as firearms, jewelry, or artwork. Always make sure you let your insurance agent know about these things so they can ensure you have coverage for them.
Now that you know the definition of these terms, don't hesitate to contact an insurance company today.
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