Insurance Glossary:
Key Terms Explained
Understanding insurance terminology is crucial when navigating the claims process. This glossary provides simple explanations for common terms you might encounter in your homeowner's policy or during a claim.
Actual Cash Value
The replacement cost of an item minus the depreciation. For instance, if an item costs $100 to replace, and it has lost 30% of its value ($30), the Actual Cash Value is $70 ($100 - $30 = $70). To put it another way, if an item costs $100 to replace and it has 70% of its useful life expectancy remaining, the Actual Cash Value is $70 ($100 x 70% = $70)
Additional Living Expenses
Costs incurred above your normal living expenses when you're displaced from your home due to covered damage.
Examples include:
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Rent for temporary housing
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Restaurant meals (minus typical grocery costs)
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Other necessary expenses beyond your usual budget
For instance, if a $100 restaurant meal replaces a $10 home-cooked meal, the additional living expense would be $90.
Depreciation
The decrease in an item's value due to age, wear and tear, or obsolescence.
Dwelling and Other Buildings
The Dwelling is the structure in which a homeowner resides. Other Buildings are structures permanently attached to the ground, such as fences, swimming pools, driveways and sidewalks.
Insured
The policyholder or person(s) covered by the insurance policy. The homeowner is commonly referred to as the Insured.
Personal Property
Your belongings that aren't permanently attached to your home, such as furniture, clothing, and electronics.
Replacement Cost
The amount it would cost to repair or replace the Dwelling, Other Buildings and Personal Property.
