Insurance Terms Made Easy!

We work with a lot of clients who are either purchasing insurance for the first time or need to change their plans to include other forms of insurance they are unfamiliar with. We use so many insurance terms each day, and to us they are second nature, but we understand The Language of Insurance is foreign to a lot people.

That is why we are going to do a series of posts that explain the most commonly used insurance terms. Think of these posts as your glossary -- when you need a clear, concise explanation of a term, this is your guide! After learning a few of these terms, you'll feel much more confident discussing your insurance plans with your First Advantage agent.

These terms come from Safeco Insurance, one of the providers First Advantage Insurance uses. We'll go through the terminology a few at a time because they can be confusing, and as always, please call or drop in if you have any questions. We are here to help!

Accident forgiveness

Applies to: auto, classic car and RV insurance.

If you have an auto, classic car or RV policy with no at-fault collision or traffic violations in a set number of years, you may qualify for accident forgiveness. If you do have an accident while accident forgiveness is in effect, we’ll forgive you. Your accident won’t be used to recalculate how much you pay for your insurance. In other words, we won’t raise your rate and you won’t have to pay more for your coverage. Accident forgiveness applies only to your first accident while the reward is in effect.

Actual cash value

Applies to: auto, home, condo, renters, landlord protection, motorcycle, and RV insurance.

Actual cash value is determined by calculating the cost of repairing or replacing damaged property, less depreciation and the effects of wear and tear over time. If an item is damaged beyond repair, actual cash value reflects the market value of the item before the damage took place, less depreciation and the effects of wear and tear over time.

If your couch was worth about $200 dollars in a yard sale before it became damaged, but would currently cost $1000 to replace with a new couch of similar size and style, the actual cash value of your couch would probably be around $200, not $1000. Actual cash value is calculated by subtracting the effects of wear and tear over time, and depreciation, from the actual replacement cost.

Actual replacement cost

Applies to: home, condo, renters, landlord protection and motorcycle insurance.

Actual replacement cost is the amount of money it would cost to replace a damaged item with a new one at the time of the claim. Actual replacement cost does not factor in an item’s age and depreciation, or the effects of wear and tear over time.

If your couch was worth about $200 dollars in a yard sale before it became damaged, but would currently cost $1000 to replace with a new couch of similar size and style, the actual replacement cost of your couch would be around $1000.

Additional fishing equipment

Applies to: boat insurance.

Additional fishing equipment coverage is available in most states if you need more coverage than what is provided automatically for fishing equipment with personal effects coverage.

Additional living expenses

Applies to: home, condo and renters insurance.

If you’re unable to live in your home while it’s being repaired or rebuilt after a covered loss, additional living expenses helps pay the cost of temporary housing and living expenses, for up to 24 months.

Agreed value

Applies to: boat and classic car insurance.

When you take out or renew your insurance policy, we agree on a value your boat, personal watercraft or classic car is worth. If we agree your boat is worth $10,000 and it is declared a total loss after an accident or theft, we’ll pay you $10,000. There’s no complicated formula involving the effects of age, wear and tear that will make a total loss payment less than the agreed value. It’s simple.

Bodily injury liability

Applies to: auto, motorcycle and umbrella insurance.

Helps pay for bodily injury expenses, like hospital bills and medical care, that you may be held responsible to pay if you cause an accident that injures someone else.

Broad form liability

Applies to: boat insurance.

Helps pay for expenses related to injuries or property in a covered loss involving your boat or personal watercraft. Broad form liability also covers some accidental watercraft fuel spills and wreckage removal.

C.L.U.E.

Applies to: home, condo, landlord protection and motorcycle insurance.

C.L.U.E. (Comprehensive Loss Underwriting Exchange) is a claims history database that contains up to five years of personal auto or personal property claims history. It’s used by insurance companies, like us, to research the claims history of a property they’re considering underwriting or rating for an insurance policy. If you’re a prospective home buyer, you can request a copy from the seller of a home you’re interested in buying.

Collision coverage

Applies to: auto, classic car, motorcycle and RV insurance.

Pays to repair damage to your vehicle that is caused by an accident involving other vehicles and objects like guard rails, sign posts, trees and buildings. It does not cover damage to another driver’s vehicle.

Comprehensive coverage

Applies to: auto, classic car, motorcycle and RV insurance.

Pays to repair or replace your vehicle if it is stolen, vandalized or damaged in some way other than in a collision. Includes loss or damage from fire, flood, falling objects, wind, hail and collision with an animal.

Compulsory coverage

Applies to: auto, classic car, motorcycle and RV insurance.

Compulsory coverage is any insurance required by state law. Requirements for different types and amounts of insurance coverage vary from state to state.

Custom parts and equipment coverage

Applies to: motorcycle insurance.

Helps pay for repairs or replacement of your motorcycle’s aftermarket parts and accessories.

Deductible

Applies to: auto, home, condo, renters, boat, classic car, motorcycle, RV, landlord protection and umbrella insurance.

The amount of money you agree to pay out-of-pocket for a claim is called your deductible. The deductible you choose often affects how much you pay for your insurance. A higher deductible usually means a lower insurance bill. In the case of a covered loss, you’ll only be required to pay your deductible, and the insurance company will cover the excess, up to the amount specified in your policy.

For example, if the total cost to repair your boat is $1,000 and you have a $500 deductible on your boat insurance policy, you’ll need to pay $500 of the $1,000.

Not too difficult, right? Check back next week for a few more important insurance terms. In the meantime, enjoy your week!

Your Guide for Choosing Homeowners Insurance

Our home is regarded as the largest asset most of us will ever own, and therefore it requires adequate insurance coverage against loss. Most lenders require a mortgagee to carry replacement-value home insurance at all times. Coverage that is not sufficient can result in a large financial hit in the event of an accident or damage. Finding the best home insurance rates must follow a process, and homeowners should certainly educate themselves and do some research with a certified insurance agent to find the best fit. Also keep in mind, cheap home insurance is not the same as affordable home insurance. 

Every so often we find reading material that we just have to share with out clients. Take a look at this fantastic article we found on www.moneychoice.org that gives a great overview of what Home Insurance is and how to go about choosing the best policy for your home and family. Once you read the article and gain a better understanding of what you need, you'll feel more prepared to talk with one of our agents at First Advantage Insurance.

What is Home Insurance?

A homeowner’s policy will alleviate the risk of loss from theft, fire or storm damage to a degree. Standard home insurance does not cover losses sustained from floods or earthquakes. Everyone in the same insurance class will pay comparable annual insurance premiums based on the perceived risk of loss. A given geographical area might present higher risks from damaging storms or wild fires, which can result in higher rates. Thousands of homeowners pay insurance premiums that are collected by the insurance company and used to pay claims when losses are sustained. Significant losses will be offset by increased premiums in subsequent policy years. An individual policyholder cannot incur higher rates because of filing claims against the homeowner’s policy.

Within the homeowner’s insurance policy, various components comprise the types of coverage.

• Main structure – A designated amount of money in this category will pay to repair or replace the structure. Insurance companies are recommending additional coverage through riders to ensure sufficient replacement value insurance exists when labor and material costs exceed the base policy.

• Additional structures – Outbuildings, decks and other structures fall into this category. New structures must be added to the policy to be covered following a loss.

• Contents – Personal belongings inside the home will fall under this component. Standard policies do not cover expensive belongings, such as jewelry and collectibles. Homeowners are wise to list expensive belongings under insurance riders to provide coverage and reduce the premium.

• Liability – Damage sustained to someone else’s property is covered here up to the stated policy limits.

• Loss of use – A home that is damaged beyond repair will require another dwelling for the family while repairs are made. The homeowner is reimbursed from this component.

How to Find the Best Homeowners Insurance

A savvy insurance shopper will compare home insurance quotes offered from multiple insurance providers. The cheapest home insurance is rarely the best choice. Adequate coverage is important since the risk of loss can mean long-term financial hardship for the homeowner. Sources of homeowners insurance quotes include online research, personal referrals, and print information.

We feel that it is best to meet with a qualified insurance agent to help you determine your best home insurance policy -- we are here to help!

How to Find Affordable Home Insurance

Standard home insurance policies will not differ in price significantly. Home insurance providers offer discounts to encourage homeowners to install security devices, fire suppression systems and remove high-risk features from the property. A savvy home insurance shopper will pursue every possible discount. The money invested in the recommended risk-reducing measures will save thousands of dollars in insurance premiums over the coming years. Staying with the same insurance company is important since loyalty is often rewarded through multi-policy discounts on auto and life insurance policies.

The liability insurance limits are being raised because insurance companies know that litigation against the homeowner is possible. Umbrella liability insurance policies are being underwritten to accompany the home owners insurance policy. This approach provides additional coverage in the event of a major lawsuit. The livelihood and property are protected against loss.

What Are the Important Factors in a Home Insurance Quote?

Every home insurance quote will provide a list of coverage components that must be evaluated between every company. Different amounts will yield invalid results in the comparison process. Other considerations will affect the homeowner’s satisfaction with the policy.

1. Company reputation – A.M. Best Company offers third-party ratings for every insurance company that underwrites homeowner’s policies in the United States. High ratings are based on actual company performance in important categories, including claim handling. Low ratings indicate a significant number of customer complaints filed with the state insurance commissions.

2. Customer service model – Central customer service offers basic support for the homeowner. This model is acceptable to some policyholders. Local agents offer guidance throughout the term of the policy and make recommendations to change coverage when events cause concern.

3. Claims process – Rapid response following loss is essential for the homeowner. Experienced claims adjusters provide sufficient estimates to cover necessary repairs to the property. The claims record is in important consideration to prevent legal battles with the insurance company.

4. Deductible – High deductibles will reduce the annual premium paid for home insurance. Anyone who cannot afford to pay thousands of dollars in a deductible amount should set the deductible at, or below, $1,000. Different deductibles will influence the annual premium significantly.

The Final Choice

Underinsured homeowners are unable to rebuild following complete losses. The savvy home insurance shopper will refuse to save a few dollars each year while risking financial ruin. Reputable insurance companies work with homeowners to underwrite comprehensive home insurance policies that will mitigate the risks of loss. High-risk areas where severe weather and risk of wild fire exist will dictate additional coverage from other sources. The wise insurance shopper will listen to the recommendations offered and pursue sufficient insurance. Reasonable home insurance rates are available to the patient shopper who is persistent.

Welcome! We hope you'll get to know us.

Welcome to The Coverage Connection! We hope you'll join us each week as we share insurance information, local news, company stories, and much more. We decided to begin this blog because we want to connect with you -- our clients -- past, present, and future.

We know that going through the process of purchasing insurance plans can be complicated and highly personal. That is why it is so important to us as a company to ensure we know our clients and offer them the highest level of customer service. We strive to develop long-term relationships with clients that allow us to serve them throughout each chapter of their lives.

It is also our goal to educate our clients as we determine which plans suit their needs. We take the time to explain the plan options and really listen to them and their questions so they are clear on what they're investing in. We aim to reduce confusion and increase understanding on what each policy does to protect a client's home, car, family, or business.

We are happy to talk to clients over the phone or in person, and our experienced staff take special interest in each family we serve. This individualized attention is where we feel our value shines.  These consultations will allow agents and clients to get to know each other and build trust, setting up open communication for years to come.

These are the values our staff hold in high regard. We look forward to not only providing insurance information, but practical safety tips, home maintenance checks, and the financial gains associated with appropriate coverage.

We also welcome your suggestions and input on our topics. What would you like to learn more about in the world of insurance? 

Tune in again next week!