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Terms and Definitions

What is liability?
Liability is a common insurance word that means "responsibility." For example, if you were walking your dog and it bit someone, you would be liable for paying the person's medical bills because the law considers you responsible. Home insurance, fortunately, comes with liability protection, which means that your insurance company would pay for the person's medical bills from the dog bite.

What is a deductible?
If something happens that requires you to use your insurance (for example, a fire), you have to pay a certain amount of money yourself, before your insurance company will begin to pay for your damages. This amount is called "a deductible." Here's an example of how this would work if a small fire destroyed $2,000 worth of your property and you had a deductible of $500.
Example of a deductible

Cost to replace property: $2,000
Deductible: $500
 
You pay: $500
Insurance company pays: $1,500

What is the difference between "replacement cost" and "actual cash value" coverage?
Replacement cost insurance will provide you with enough money to replace whatever you lost. Actual cash value will only give you as much money as your property was worth at the time it was lost. This difference is important because as your property gets older, it is usually considered to be worth less money.

For example, a new big screen television might cost you $500, but after three years the same TV might only be worth $200. If a television like that was stolen and you had replacement cost insurance, the insurance company would buy you a new television that is the same quality as the one you lost. But if you have "actual cash value" insurance you will only get $200 for a new television (in both cases, minus your deductible).

What is an exclusion?
An exclusion is something that is not covered by your insurance policy. For example, in almost all home insurance policies, floods and earthquakes are "excluded." This means that you won't get any money from the insurance company if a flood destroys your home (unless, of course, you buy special flood insurance) . It's very important to read your insurance policy carefully and to talk to you insurance agent, so you know what exclusions are in your policy.

What's the difference between "all risk" and "named" coverage?
If you have all risk insurance (which is also called "all perils"), you are covered for any disaster that happens, except those that are specifically excluded in your policy. If you have named coverage, however, you are only covered against disasters that are specifically mentioned in your policy. In other words, if it is not in your policy, you are out of luck. For this reason, all risk is better coverage

What is an endorsement?
An endorsement is an addition or change to your insurance policy. For example, if you buy extra insurance to cover an expensive stereo, this additional coverage would usually be written as an endorsement to your policy.

What is a public adjuster?
A public adjuster is someone you hire if you need to file a claim and you're worried you won't be treated fairly by the insurance company. The public adjuster will make their own estimate of your damages, fill out all of the paperwork and negotiate with the insurance company if there is a dispute. Public adjusters are paid by taking a percentage of whatever you get from the insurance company.
Learn more about public adjusters and if and when you should consider hiring them.

What is the difference between cancellation and non-renewal?
Cancellation and non-renewal both leave you without insurance. Cancellation stops a policy before the end of its term. This can happen if you don't pay your premium or if the policy was based on false information you provided. Non-renewal happens when the policy term is over and the company decides it will not allow you to continue your policy into a new term.

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