What does my policy mean?

General Insurance Terms

Deductible

• Description: The amount you pay out of pocket before your insurance starts paying for a claim. For example, if your deductible is $500 and you have a $1,000 claim, you pay $500, and the insurance covers the rest.
• How It Can Be Misunderstood: Many think the deductible is the most they’ll pay for a claim, but it’s actually the minimum you pay before insurance helps.

Premium

• Description: The cost you pay for your insurance policy, usually monthly or yearly, to keep it active.
• How It Can Be Misunderstood: Some assume a higher premium means better coverage, but it depends on the policy details, not just the price.

Coverage Limit

• Description: The maximum amount your insurance will pay for a covered loss. If your limit is $100,000 and your claim is $120,000, you’re responsible for the extra $20,000.
• How It Can Be Misunderstood: People might think their insurance has no limits, but every policy caps what it will pay.

Exclusion

• Description: Things your insurance won’t cover, like flood damage in a standard home policy. These are listed in your policy.
• How It Can Be Misunderstood: Many assume everything is covered, but exclusions mean some risks require separate policies or aren’t covered at all.

Underwriting

• Description: The process insurers use to decide if they’ll cover you and at what price, based on your risk (like driving record or home location).
• How It Can Be Misunderstood: People might think it’s just a formality, but it’s why premiums vary or coverage gets denied—your risk profile matters.

Declarations Page

• Description: The front page of your policy summarizing your coverage, limits, deductibles, and premiums—it’s your quick snapshot of what you’ve got.
• How It Can Be Misunderstood: People might think it’s the whole policy, but it’s just an overview; the full details (and exclusions) are in the fine print.

Umbrella Insurance Policy

• Description: Extra liability coverage beyond your auto or home policy limits, kicking in when big claims exceed standard protection.
• How It Can Be Misunderstood: Thought to cover everything (like property), but it’s only for liability—think lawsuits, not your car repair.

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Home Insurance Terms

Dwelling Coverage

• Description: This pays to repair or rebuild your home if it’s damaged by a covered event, like a fire or storm.
• How It Can Be Misunderstood: Some think it covers all damage, but things like floods or earthquakes are often excluded.

Personal Property Coverage

• Description: This covers your belongings inside the home—like furniture or clothes—if they’re damaged or stolen.
• How It Can Be Misunderstood: People might think it covers items outside the home, but it’s usually limited to stuff inside, with caps on valuable items like jewelry.

Loss of Use/Additional Living Expenses

• Description: This pays for temporary housing and extra costs if you can’t live in your home due to a covered loss, like a fire.
• How It Can Be Misunderstood: Some assume it covers any move, but it only applies to losses covered by your policy.

Peril

• Description: A peril is a specific risk, like fire, theft, or hail, that your policy may cover. Check your policy for the list.
• How It Can Be Misunderstood: Many think all risks are covered, but only the perils listed in your policy apply.

Named Perils vs. Open Perils

• Description: Named perils policies cover only specific risks listed, while open perils (or all-risk) cover everything except what’s excluded.
• How It Can Be Misunderstood: People might assume “all-risk” means total coverage, but exclusions can still leave gaps.

Actual Cash Value (ACV) vs. Replacement Cost

• Description: ACV pays what your damaged property is worth now (after depreciation); Replacement Cost pays to replace it new, without deducting wear and tear.
• How It Can Be Misunderstood: Many expect full replacement value, but ACV policies leave you short if your stuff’s old, since depreciation cuts the payout.

Bundling

• Description: Combining multiple policies (like home and auto) with the same insurer for a discount—saves money if you’re loyal.
• How It Can Be Misunderstood: Some think it always means better coverage, but it’s just a cost perk—check each policy’s terms separately.

Flood Insurance

• Description: A separate policy covering water damage from floods, since standard home insurance excludes it. Often tied to federal programs like FEMA.
• How It Can Be Misunderstood: People assume their home policy covers all water damage, but floods (rising water) need this extra step.

Personal Liability Coverage

• Description: Pays for injuries or damage you cause to others on your property, like if a guest trips and sues you. Part of most home policies.
• How It Can Be Misunderstood: Confused with property damage coverage— it’s about lawsuits from people, not fixing your house.

Private Mortgage Insurance (PMI)

• Description: Insurance your lender requires if your down payment is less than 20%, protecting them if you default—not you or your home.
• How It Can Be Misunderstood: Many think it protects their investment, but it’s for the bank—your home insurance is what covers the house.

Rider/Endorsement

• Description: An add-on to your policy for extra coverage, like insuring a pricey ring or adding earthquake protection.
• How It Can Be Misunderstood: Some see it as optional fluff, but without it, high-value items or special risks might not be covered.

Attractive Nuisance

• Description: Something on your property (like a pool or trampoline) that draws kids and could hurt them, making you liable if it does.
• How It Can Be Misunderstood: Homeowners might not realize they’re responsible for trespassers’ injuries—your liability coverage kicks in here.

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Auto Insurance Terms

Collision Coverage

• Description: Pays for damage to your car if you hit something, like another car or a pole, no matter who’s at fault.
• How It Can Be Misunderstood: People think it covers all car damage, but it’s only for collisions—not theft, weather, or breakdowns.

Comprehensive Coverage

• Description: Covers damage to your car from non-collision events, like theft, vandalism, or a tree falling on it.
• How It Can Be Misunderstood: Some assume it’s all-inclusive, but it doesn’t cover accidents with other vehicles—that’s collision coverage.

Bodily Injury Liability (BI)

• Description: Pays for injuries you cause to others in an accident, like medical bills or lost wages. It’s usually required by law.
• How It Can Be Misunderstood: Many think it covers their own injuries, but it’s only for the other party—you need separate coverage for yourself.

Uninsured/Underinsured Motorist Coverage (UM/UIM)

• Description: Protects you if you’re hit by a driver with no insurance or not enough to cover your damages.
• How It Can Be Misunderstood: People might skip it thinking it’s rare, but uninsured drivers are common, and this saves you from footing the bill.

At-fault Accident

• Description: An accident where you’re the one who caused it, like rear-ending someone because you didn’t brake in time. It can raise your premiums or affect claims.
• How It Can Be Misunderstood: Some think “at-fault” only applies if they admit guilt, but insurers decide based on evidence, even if you disagree.

Personal Injury Protection (PIP)

• Description: Pays for your medical bills, lost wages, or funeral costs after an accident, no matter who’s at fault. Common in no-fault states.
• How It Can Be Misunderstood: Some think it’s optional everywhere, but in no-fault states, it’s mandatory—and it doesn’t cover the other driver.

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