Tag Archives: understanding your policy

Silhouette-question-markEveryone should be at least semi-familiar with the terms of their insurance policies. After you make a claim (and that claim is possibly denied) is too late to fully understand your coverage. While many insurance terms are used across different policies, some are unique to particular coverages.

Take homeowners insurance for example. There are a few industry/legal terms that apply to that coverage pretty much exclusively. To help you better understand your homeowners policy, here are a few core common ones:

Additional living expenses (ALE) – Reimburses the policyholder for the cost of temporary housing, food, and other essential living expenses, if the home is damaged by a covered peril that makes the home temporarily uninhabitable. Some policies cap the amount of ALE payable to 20 percent of the policy’s dwelling coverage.

Exclusion – A provision in an insurance policy that denies coverage for certain perils, people, property, or locations.

Liability coverage – Covers losses that an insured is legally liable. For homeowners insurance, liability coverage protects you against financial loss if you are sued and found legally responsible for someone else’s injury or property damage.

Loss of use – A provision in homeowners and renters insurance policies that reimburses policyholders for the additional costs (housing, food, and other essentials) of having to live elsewhere while the home is being restored following a disaster.

Peril – A specific risk or cause of loss covered by an insurance policy, such as a fire, windstorm, flood, or theft. A named-peril policy covers the policyholder only for the risks named in the policy. An all-risk policy covers all causes of loss except those specifically excluded.

Personal property – All tangible property (other than land) that is either temporary or movable in some way, such as furniture, jewelry, electronics, etc.

Replacement cost – Pays the dollar amount needed to replace the structure or damaged personal property without deducting for depreciation but limited by the policy’s maximum dollar amount.

The beginning of the year is a perfect time to sit down with your insurance professional to discuss all of your insurance policies and determine if you need any additional coverage. At the very least, you can be sure you understand everything about the policies you currently have.