What are the basic ideas behind home insurance?
We’re here to help you feel confident in finding the right home hail insurance solution to meet your needs. Scroll through the terms below for a quick summary that can help you be more comfortable speaking to your insurance agent, insurance provider representatives, or contractors and other home repair professionals.
Home Insurance Terms to Know
Claims - Claims are the processes that policyholders use to request an assessment of damage to their property, ideally leading to a payout in the amount of the limit written into their insurance policy. Claims may be submitted through an app, a form on a website, or through direct contact with your insurance agent, with a phone call or an email being the most common channels.
Deductibles - The portion of your insurance payout that is deducted and left for you to cover before the remainder of the payout will be released to cover the needed repairs. The deductible will be set in the policy at the time of purchase, and can be calculated in multiple ways, with the following two being the most common.
Flat-rate Deductibles - This type of deductible is set at a flat rate that the policyholder will owe for any claim filed. The flat-rate deductible is often set at $500, $1,000, or $2,000.
Percentage-based Deductibles - These deductibles are more commonly used as risk levels continue to rise across the United States. The deductible owed is calculated as a percentage of the total insured value of the home. If your policy included a 3% deductible for a $400,000 home, you would owe $12,000.
Premiums - The premium is the amount you pay to secure insurance coverage from a provider. Premiums are the bill that is typically paid on a monthly or yearly basis. In some cases, insurance providers may provide a discount or other incentives for customers who pay annually, meaning less administrative work on the part of the provider.
ACV - Actual Cash Value coverage is a popular level of insurance that provides a lesser amount of coverage for a lower price. The ‘actual’ value that ACV covers is a depreciated percentage of the replacement cost of a property that is calculated by considering the age and amount of wear on the asset.
RCV - Replacement Cost Value coverage is ‘full’ replacement insurance for a home. The payout from an RCV policy will be sufficient to replace the damaged property at current-day prices.
Deductible Buyback / Deductible Buy-down - This is a type of add-on insurance policy that provides a set amount payout to help cover the policyholder’s primary policy deductible. The owner makes a claim on the deductible buyback policy along with their claim on their homeowners policy. The buyback payout is for use only as a payment against the primary deductible. A claim on a deductible buyback policy can only be made in conjunction with a claim on a home policy, and the payout must be used for this one purpose.
C.L.U.E. Report - The Comprehensive Loss Underwriting Exchange is a database of insurance claims details that is maintained by the LexisNexis company and made available to insurance providers, agents, and other insurance professionals who may need access to that information for customer evaluation purposes. Individuals and properties can both have a CLUE Report insurance history.
Reinsurance - Reinsurance is the insurance that insurers need to cover their losses. It is ‘insurance for insurance’.
Endorsement - An endorsement in the insurance context is another name for an add-on or supplemental piece of insurance coverage. These are also called ‘riders’ in some cases. Endorsements may be available at the time of purchase of the policy, or can sometimes be added on at a later date.
Non-renewal - This is the practice of refusing to renew a customer’s policy that insurance providers sometimes use to ‘fire’ customers who carry too much risk or have made too many claims on a given policy.
Standalone policy - An insurance policy that is independent of the policyholder’s primary (homeowners, for example) policy, purchased separately, with its own billing cycle and cost.
Gray is the Senior Content Specialist at Sola Insurance, working with the Sales and Marketing teams to provide helpful, valuable content for homeowners and agents. Gray has worked previously in finance, logistics, and advertising.
