Homeowner Insurance Definitions | Attorney Gordon Feener

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The following homeowner insurance definitions* are to be used as a guide, definitions in your state and in your insurance policy may be different.

Actual Cash Value: replacement cost less depreciation, considering the age and condition of your property.
Additional Living Expenses: pays expenses over and above your normal living costs (motel rooms, restaurant meals, and laundry service) while your home is being repaired or rebuilt after damage from an insured loss.
Agent: a representative who sells insurance for one or more companies.
Application: a signed request for insurance, giving information about the prospective policyholder.
Appraisal: an evaluation of your property.
Binder: a temporary or preliminary agreement, which provides coverage until a policy can be written or delivered.
Broker: a licensed person or organization you can pay to shop for insurance on your behalf.
Builders Risk: coverage for a home under construction. Claim payments are based on the percentage completed at time of loss. This coverage must be changed to a homeowners policy upon completion of the building.
Cancellation: termination of a policy before its normal expiration date.
Claim: your request for the insurance company to pay you an amount under the terms of your policy.
Claims Adjuster: a person an insurance company hires to settle claims. The adjuster could either be a company employee or under contract with the company.
Coinsurance Clause: an agreement with the insurance company in which you agree to carry insurance on your property in an amount equal to a certain percentage of its actual cash value.
Covered Expenses: the expenses the policy will pay for, and generally the insurance policy requires that the amount be actually expended before it is reimbursed.
Deductible: the dollar amount you must pay out-of-pocket for each claim before the insurance company begins paying.
Depreciation: decrease in home or property value due to age or wear and tear.
Earthquake Insurance: a type of catastrophic coverage available for an additional premium to repair or replace your property/personal belongings when damaged by an earthquake. Standard home insurance policies do not cover earthquake insurance.
Endorsement: amendment to the policy used to add, change, or delete covered. Also referred to as “rider”.
Exclusions: specific situations or circumstances listed in your policy describing when benefits will not be paid. Typical homeowners insurance exclusions are earthquake, sewer backup/sump pump failure, ordinance or law, or intentional loss.
Floater: additional coverage for personal property such as jewelry, artwork, or antiques not otherwise included in the homeowners policy, or included for a nominal coverage amount. The coverage “floats” or moves with the property. Also called “Scheduled Personal Property Endorsement”.
Flood Insurance: a type of catastrophic coverage available for an additional premium to repair or replace your property/personal belongings when damaged by rising water. Standard home insurance policies do not cover flood insurance. If your property is located on a flood plain, your lender may require you to purchase flood insurance.
Full Replacement Policy: a homeowners policy that pays the full replacement cost (up to the policy maximum) to repair or restore damaged property.
Guaranteed Replacement Cost Coverage: endorsement that lets you replace your home without subtracting for depreciation, even if it costs for than the policy limit. Most companies limit the guaranteed replacement cost to 125%.
HO Forms: homeowners insurance policies are sometimes referred to by the kind of form used and the specific perils they cover. Examples are HO2, HO3, HO4, HO5, HO6, and HO8.
Home Inventory: a detailed list of personal possessions and any information (including pictures or videos) that could help identify lost or destroyed items.
Inflation Guard Endorsement: a special endorsement that increases the fact amount of a homeowners policy on a regular basis to compensate for the increasing costs of home construction.
Inspection Report: a report filed by an individual employed by the insurance company or credit agency, giving general information on the physical condition of the property.
Insured: the policyholder or person(s) protected in case of a loss/claim.
Insurer: the insurance company.
Lapsed Policy: a policy that has terminated for non-payment of premiums.
Liability Coverage: insurance protection that pays for claims or judgments brought against the insured.
Market Value: a real estate term for the current value of your home if you were to sell it. Market value includes the price of land, and is not generally used when settling insurance claims.
Massachusetts FAIR (Fair Access to Insurance Requirements) Plan: a not-for-profit property insurance association that offers insurance to individuals who have been refused coverage by at least three insurance companies.
Non-Bound Application: there is no coverage involved and you pay no money. The insurance agent submits the application to the company to find out whether or not you will be accepted.
Non-Renewal: a notice of the insurance company’s refusal to renew your policy prior to the end of the policy term.
Peril: event causing damage to your property (for example: fire, tornado, theft, or vandalism).
Personal Property: personal belongings such as furniture, appliances, clothes, jewelry, and bicycles.
Private Mortgage Insurance (PMI): insurance that provides financial protection to your lender if you default on your mortgage payment. By purchasing PMI, a home buyer may be able to obtain a mortgage with little or no down payment.
Policy: a contract form issued by the company to explain coverage provided. It is a legal document.
Premium: the price charged for insurance.
Public Adjuster: the person you can hire to help settle a claim with an insurance company. A public adjuster may be hired to handle a complex or difficult loss negotiation. Generally, the public adjuster receives a percentage of the settlement reached. In Massachusetts, a public adjuster must be licensed with the Division of Insurance.
Real Property: property considered to be immovable, such as land and things affixed to it.
Reference: generally refers to a procedure which allows three individuals to determine the amount of damage in dispute. Generally the insured selects one individual, the insurance company selects a second individual, the two selected individuals agree upon a third and these three people listen to evidence and make a decision as to the amount of damage. In Massachusetts, it is provided for by MGL Chapter 175 Section 99 and subsequent sections
Replacement Cost: a determination of the cost to replace contents, rebuild your home, or repair damages with materials of like kind and quality, without subtracting for depreciation.
Settlement: after negotiating, the amount you accept from the insurance company as full payment for your loss.
Sewer Back-up and Sump Pump Overflow Coverage: coverage available for an additional premium to your homeowners insurance policy that pays for damage caused by sump pump failure or sewer back up. Water seepage is not covered.
Special Investigation Unit (SIU): generally insurance company personnel that focuses on the investigation of a claim. If your claim has been referred to a special investigation unit you should consult an attorney concerning your rights.
Title Insurance: protection against any defect in the title to your property. Title insurance can be paid for by either the buyer or seller and is usually paid for when the home is purchased.
Umbrella Liability Insurance: a policy that “floats” above your coverage. You must carry a certain amount of underlying liability coverage before you may be an umbrella policy. This coverage kicks in if you are sued for an amount greater than the limits of your homeowners policy.
Watercraft Endorsement: applies to small motorboats and sailboats and broadens your personal liability and medical payments coverage on them. If your watercraft exceeds a specified length, you will need a separate boat owners or yacht policy.

For more information, contact Attorney Gordon E. Feener at 617-420-7700

The above definitions are to be used as a guide and are not intended to replace the definitions as set forth by your insurance policy or as interpreted by Massachusetts Law.

*taken in part from insurance.illinois.gov