General Insurance Terms and Definitions
Insurance Policy: An insurance policy is a contract between the insurance company and the insured, known as the policyholder. This contract determines the rights and responsibilities of the insurer and the insured. In exchange for payment, known as the premium, the insurer pays for damages to the insured which are caused by covered perils under the policy language.
Building Insurance: Building insurance policies are generally in two parts: Property and Personal Liability. The property part covers the building and often personal property. Personal Liability protects the Insured if someone is injured by the Insured, his family or his/her building.
Peril: A peril is what an insurance company labels a risk, which may cause a loss or damage. Not all perils, or risks, are covered under all insurance policies.
Premium: The premium is the amount of money you pay for insurance coverage. This is often broken down into monthly payments, making it easier to pay for the average person.
Covered Loss: A covered loss is a peril that your insurance provider is contractually obligated to cover.
Insurance Adjuster: An adjuster estimates the amount of damage in dollars for a covered loss. There are three kinds of insurance adjusters for building insurance.
Staff adjuster: This is an employee of the insurance company and they represent the interests of that insurance company, not yours!
Independent adjuster: This person is an independent contractor who also works for the insurance company and again, represents the insurance company’s interests, not yours!
Public adjuster: This person is hired by you, normally costs you nothing out of your pocket and represents YOUR interests.
Indemnify: To be brought back to pre-existing condition before the loss occurred.
Aggregate: The total amount that will be paid. This can be limited by time, occurrence, dollar amount, something else within your policy or any combination your carrier decides, added together to reach the “aggregate” number.
Depreciation: A reduction in the value of an asset with the passage of time, due in particular to wear and tear, provided as a percentage per year. Here’s a link for a Depreciation Table: http://www.claimspages.com/tools/depreciation
RCV: Replacement Cost Value – the dollar amount it would cost to replace the damaged or destroyed item today.
ACV: Actual Cash Value – ACV = RCV minus Depreciation.
GRC: Guaranteed Replacement Cost – This is the best coverage you can get. In the event of Total Loss, you will receive all funds you need in order to rebuild or replace even if the cost exceeds the limit of liability provided for in your insurance policy.
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