understanding your insurance policy

Six Home Insurance Terms Every Homeowner Should Know

8 October 2019 by Tuĝba Van Den Heijkant

Are you shopping for a home insurance policy and are clueless about all of the new terms that you have been reading? If so, it will help to know what the following terms and phrases mean.

Umbrella Insurance

The term umbrella insurance is used to define additional coverage beyond what is outlined in the home insurance policy. Some people get an umbrella policy to cover liability coverage if they own a swimming pool or personal property insurance to cover items that are part of a home business. 

Lapsed Insurance

Having lapsed insurance is a fancy way of saying that you have been unable to pay your insurance premium and the grace period has expired. You will no longer have insurance coverage after the insurance policy has officially lapsed. 

Depreciation

Depreciation is used as a way to determine an item's value due to its age. It is often used if you have decided not to replace an item that has been damaged, since you will be given the option to replace the item or receive a percentage of what the item cost to buy it new. It is common for an item to depreciate a fixed percentage for each year that has passed since you purchased the item, with a limit for how much an item is allowed to depreciate. 

Actual Cash Value

The final value of an item after depreciation is factored in is known as the actual cash value. For example, if you have a $100 item and it has depreciated 40%, it would have an actual cash value of $60.

Floater Insurance

It is common for insurance policies to have limits on how much a certain category of items will be covered. This is common for high-value items such as jewelry or artwork. It is possible to buy floater insurance, which will give these categories additional coverage so that everything is protected. 

Deductible

Your deductible is how much money you must pay before insurance will start paying for damages. A deductible can be a fixed dollar amount based on a percentage of the value of your home. A more expensive deductible will result in a lower insurance premium that must be paid, which can save you money over the years.

These are just a few terms that are helpful to know in order to understand your home insurance policy. Reach out to a local home insurance agent if you have more questions about unfamiliar terms, or visit sites like thesanfordgroup.net. 

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