Frequently Asked Questions (FAQ)
Below are some definitions for frequently used terms in the insurance industry. If you have specific questions please contact us and we would be more than willing to help. Click on this link if you want more information regarding any particular types of insurance.
Actuary: An expert that appraises, assesses and administers statistical data in order to establish rates and rating methods and determine the risks related with policies.
Act of God: This is an accident or event that is unpreventable and is the result of natural causes such as lightning or floods.
Actual Cash Value (ACV): This is the replacement cost of your damaged or lost property at the time of the loss minus the depreciation.
Additional Living Expense (ALE): Increases in your living expenses caused by the accident for which you are making an insurance claim in order to maintain a normal standard of living.
Adjuster: An expert employed by the insurance companies to evaluate the losses of their policy holders and settle claims.
Agent: A person who sells insurance – you can have an agent that represents only one insurance company or many.
Applicant: The person who is applying for insurance.
Application: The written statement given to the potential policy holder that provides the information that will determine the home owner insurance policy to be written.
Appraisal: An inspection on your property or business that determines the insurable value or the amount of damage done to your property.
Arbitration: A decision by a third party for the insurance company and the insured to agree on.
Arson: The purposeful setting of a fire.
Basic limits: The lowest possible coverage amount by law or by company.
Binder: Temporary insurance coverage that is granted before the actual auto insurance policy is written.
Broker: A professional person that is the go between for the customer and the insurance company.
Business income coverage: A form of insurance coverage that replaces business income lost as a result of an event that interrupts the operations of the business, such as fire or a natural disaster.
Cancellation: Ending the insurance policy, can be either by insured or insurer.
Catastrophe: A severe disaster that causes a major or total loss unexpectedly and suddenly.
Claim: Demanding payment for a loss incurred under your insurance contract.
Collision insurance: An auto insurance policy that insures and covers damage to the policy holder’s vehicle that was sustained in a car accident with another vehicle or property.
Comprehensive insurance: An auto insurance policy that covers damage to the policy holder’s vehicle that was not sustained in a motor vehicle collision, such as acts of God, impacts with an animal, fire, theft or other damage.
Compulsory insurance: The law requires that you have a minimum level of insurance. This is true throughout the United States and Canada.
Conditions: The provisions listed in the insurance policy that includes the rights, duties and responsibilities of the insured and the insurer.
Damages: The payment that a party is legally required to pay to someone as compensation for an injury or loss.
Deductible: The amount the policy holder will pay when they make a claim on their insurance policy.
Depreciation: The decrease in value of any property over a period of time.
Effective date: The date that your homeowner’s insurance policy begins.
Endorsement: An amendment to your standard insurance policy that covers unique items or adds, deletes or changes coverage.
Exclusion: The perils, people, property or locations that are NOT covered with your insurance policy. Usually these are specifically listed.
Fire insurance: Part of your insurance policy that insures against losses due to fire, lightning and other causes defined in the contract.
Flood insurance: Coverage for your possessions and property that are caused by rising and flooding of bodies of water. Flood insurance is separate from home insurance and most commercial insurance. This is usually written on its own individual policy.
Fraud: Obtaining payment from the insurance company by lying about the cause of the claim.
Inland marine insurance: Inland marine insurance protects your property when it is being transported or your property that is easily transported, such as a contractor's equipment.Liability insurance: The part of your insurance policy that pays for the damages done to other people and their property. This extends to cover medical expenses, death benefits in the event of a fatality and reparation costs on vehicles and buildings as well as other property.
Limits: This is the maximum dollar amount that your insurance company will pay out in a year for your insurance coverage.
Loss: The reduction in the value of your property that is caused by a peril covered by your homeowners insurance.
Loss of use: Insurance that enables you to have a rental car or rent another dwelling while yours is being repaired or replaced.
Medical payments coverage: This type of coverage provides payments for medical treatments for bodily injury due to a covered peril and up to the coverage limit. It is generally for the people in your vehicle or guests at your home and has no deductible.
No-fault insurance: A policy that pays for each driver's injuries regardless of who is at fault in the collision. This insurance varies from state to state. Iowa is currently not a no-fault state.
Non-renewal: An insurance policy that is not continued by the insurer after it has expired.
Partial loss: Loss that does not completely destroy the insured property that is covered by the policy.
Peril: The cause of the accident, claim or loss.
Premium: The amount of money that you pay for your insurance.
Total loss/Totaled: The absolute destroying of a vehicle, home or other property so that it is not drivable, fixable or useable. An adjuster will generally consider a vehicle a total loss if the cost to repair it exceeds 60 per cent of the vehicle’s value. The percentage listed can vary from insurance company to insurance company – some have higher percentages while others use a lower percentage. Homes and businesses total loss values will vary between different companies and different policies.
Void: This is when your insurance policy is free from being legally binding. You can have your insurance voided or canceled for many reasons, including non-payment or fraud.
These definitions are provided for educational purposes only and are in no way binding. For actual definitions under your insurance please review the specific policy.
