Terms and definitions to help your better understand your homeowners policy.

Many homeowners policies are endorsed by carriers to expand, diminish or clarify coverage. It is important to read and understand your policy.

Actual Cash Value
An amount payable to you as a result of a covered loss. It is calculated by taking the current replacement cost of the item and subtracting an amount for wear and tear and/or depreciation.

Agent
An individual who sells and services insurance products. An independent agent may represent more that one licensed insurer.

Cancellation
The decision made by the insurer or insured to discontinue a policy.

Deductible
The amount of a covered loss covered by the insured (policyholder). Higher deductibles lower the cost of your policy.

Dwelling
This "coverage" applies to the house and structures attached to the house, such as, a garage,breezeway or porch. Items permanent to the home such as built-in applicances, built-in cupboards and wall-to-wall carpeting are also included. Land is not included.

Endorsement
A written agreement attached to a homeowners policy that adds or removes insurance coverages.

Extended Coverage
Protection against loses that are due to windstorm, smoke, hail, riot, explosion, civil commotion, etc.

Homeowners-3/HO-3/Special Form Policy
This is the standard homeowners policy and covers your home for all risks of physical loss except those that are specifically excluded. Some of these exclusions are nuclear acccident, war, flood and earthquake.

Insured
The person entitled to benefits under the terms of the policy. This generally includes any relative or dependent person in your care if they are residents of your household.

Liability Coverage
Liability coverage provided by a homeowners insurance policy protects you in the event another person is injured on your property due to your negligence and if you damage someone else's property due to your negligence.

Medical Payments
Pays for the medical expenses of others due to an accident at your home regardless of who is at fault. It does not cover your medical expenses or thoses of relatives who live with you.

Other Structures
Structures that are separated from your house. A detached garage, shed, pool fence, patio, deck, etc.

Peril
The cause of a loss. Fire, windstorm, burglaries and other accidents can all be considered perils.

Personal Property
The contents of your home. Examples of personal property include furniture, clothing, groceries, televisions and stereo equipment. Pets, automobiles and boats are some exclusions.

Policyholder
Also referred to as the "named insured" is the person or persons whose name appears on the policy.

Premium
The amount that is paid to the insurer for coverage.

Property Coverage
Protects you from losses for covered perils, to your home and personal possessions, including fire, theft, windstorm and vandalism.

Replacement Cost VS Actual Cash Value
Consider that you purchased several rooms of furniture for your home ten years ago, or even five years ago. If you had to do it again, in the event of a loss, for the same money, could you purchase the same quality? Would you spend two times or even three times as much nowadays? Very likely. With a replacement cost coverage endorsement on your homeowners policy you will be paid the cost to replace the lost items for like merchandise at todays price. You won't have to worry about the depreciation of your personal property or how inflation has affected your ability to replace your items. With an Actual Cash Value policy, depreciation is applied to each item. Consider a leather recliner that you paid $800 for ten years ago...this same item may cost you $1000 to $1200. With depreciation, it is likely worth only $200 or $300, which would mean that you would need to pay the difference or settle for a chair of less quality. A replacement cost endorsement would allow you the $1000 or $1200 to replace it with a like chair.

The same goes for your home. In fact if your home is insured for less than 80 percent of it's replacement value, partial losses will not be paid in full. A replacement cost endorsement is usually available for a small additional premium. Your agent can assist you in completing a replacement cost estimator to help determine what the replacement cost of your home and personal property would be. Once you have this coverage in place be certain to purchase an inflation rider that will help keep pace with the escalating value of your home.