Thursday, February 26, 2015

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: autoclassic 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: autohomecondorenters, landlord protectionmotorcycle, 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: homecondo 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.


Applies to: home, condolandlord 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.


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!

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